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Handheld Corporation – PDA Sim

The strategy I will use throughout the simulation is the following. I will continue to sell all the three products, but will focus on promoting Handheld X6 and X7 more, since their market saturation is lower. I will keep the prices of X5 and X6 the same, since X5 makes satisfactory profits and customers do not care about the price of X6. On the other hand, I will gradually increase the price of X7 until it makes profits as well, but only until a level that still guarantees high level of sales.

To sum up, I will focus on the quantity sold of X5 and X7 at relatively lower price, while selling relatively less pieces of X6 but at a high price. In my opinion, the combination of these two strategies will enable the company to maximize its cumulative profits. The ratios I have considered while forming my strategy were the ratios of unit price, unit cost, average revenue per unit (ARPU), break even and gross profit margin rate. Unit price describes the individual price of each product that it is sold for on the market.

In this case, it is $250 for X5, $400 for X6 and $200 for X7. Unit cost means the cost associated with the all the operations of one piece of product. For X5, X6 and X7 they are $193, $296 and $235 respectively. ARPU shows how much each product contributes to the revenue, which, in this case, is equal to the unit price of all the three products. According to the task, the company is to maximize cumulative profit, so this ratio is mildly relevant.

The break even ratio is associated with the break even point, which is reached when all the costs of the company are covered by the volume of sales generated. This point would be reached if Handheld Corporation sold exactly 1,117,564 pieces of X5; 672,564 pieces of X6 and 286,703 pieces of X7. The gross profit margin rate is equal to the gross profit margin compared to sales, which is 0. 23 for X5, 0. 26 for X6 and -0. 17 for X7. This means that in each dollar that comes from sales, the company has 23 cents, 26 cents and -17 cents to cover costs, respectively.

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