TATA SIMULATION Case Solution
Apart from this, the point at which the patent expires is called as patent cliff and at this point there are several options available for Quasar Computers to maintain some of its competitive advantage in the market. For instance, if the company wants to produce a patented product, then they will have to reduce the price. Another option is to reduce the production before the company reaches the patent cliff. Finally, the companyâ€™s marketing campaigns and the effects of patent expiry are not significant if the customer loyalty for the company is strong(Lemley, 2005).
In an oligopoly firms try to avoid competing on prices, and probably try to avoid competing in other aspects to the marketing mix (products, promotion, placing). Is this possible in this market?
Â Â Â Â Â Â Â Â Â Â Â In the year 2006, the patent of Quasar Computers came to an end and the company began to operate in an oligopolistic market with Orion Technologies. Since Orion has developed a similar product therefore, both the companies now share 50:50 market share. In this market, the key decision made by Quasar Computers will have a huge impact on Orion Technologies. Any changes in the pricing strategy will be adopted by the competitor also (Porter, 2004).
In this market, Quasar Computer cannot compete on the basis of product, promotion or placement because the products of both the firms are similar with similar features. Therefore, Quasar Computers will have to compete and maintain its competitive edge by reducing its price to $ 1,950 to yield revenue of $1,178 million and a profit of $325 million with the same market shares of 50%.
At this pricing level, the company will make optimum profit and it is also predicted that Orion will also reduce its price to $ 1,950 after this move, because the lower price will create loss for Orion. At this price level, it will have the same revenue but its profit would be just $91 million (McConnell, 2005). This is due to the proactive and early move of Quasar Computers which will give a company advantage to outperform Orion Technologies as shown in exhibit 2 in the appendix.
In a monopoly scenario, the firm does not need to worry about generic strategies. However, as firms move through successively more competitive market structures, they need to consider which type of generic strategy to implement. Comment on which strategy you recommend depending on the oligopoly, monopolistic competition, and perfect competition scenarios. Be sure to justify your recommendations.
Â Â Â Â Â Â Â Â Â Â Â Since the company has moved out of the Monopoly market and has not entered the perfect competition therefore, this means that the monopoly competition production of the company is still not taking place at the minimum cost possible. As the company moves ahead and several competitor products are launched against the company, then the company would enter into a Monopolistic Competition market.
In this market, there are two different options available to the company for optimizing its profits. The first strategy for the company is to adopt a differentiation strategy and a new variant notebook should be introduced targeted at the publishing industry, which would be called as Ceres, and this would be sold at a premium due to its additional features. New customers would be attracted by the company and the value chain of the company would be enhanced because of the brand value established by the company (Porter, 2004). The same strategy could be adopted for the oligopoly market as well……………..
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