Week 5 Discussions and Required Resources
Two-part assignment – All parts must be at least 300 words unless otherwise noted. Please read all attachments and follow ALL instructions.
Part 1: Good Will in Price Bidding
Sometimes, a bidder on a work contract may bid lower than what would maximize his/her profit from the contract and the reason for that is to create goodwill (to increase expected future business from the buyer). How would you value the goodwill that is obtained in this way?
Guided Response: Think about an example that pertains to you. If there is expected goodwill would you be prepared to bid lower to get a contract? Explain your reasons. In 300 words or more, please, provide your response to the above discussion question.
Part 2: New Production Introduction
Bayer Schering Pharma AG, Germany owns Alka-Seltzer, which was launched in 1931 and was meant for relief of minor aches, pains, inflammation, fever, headache, heartburn, sour stomach, indigestion, and hangovers. Alka-Seltzer Plus was a spin-off of the original medicine, meant to relieve colds and flu.
The company has recently introduced a new and improved Alka-Seltzer Plus, as described in this TV ad (Links to an external site.).
The ad shows that Alka-Seltzer Plus can fight congestion, unlike NyQuil.
Explain how Alka-Seltzer Plus has been quality and price-positioned in an existing market. In your opinion, has Bayer positioned their product appropriately in the market for cold and flu symptoms relief products? Would you advise Bayer to use a skimming or a penetration pricing strategy? Explain your reasoning.
How do you think Proctor and Gamble, the company who produces Vicks NyQuil, would respond to the ad?
Guided Response: In 300 words or more, please, provide your response to the above discussion question. If Bayer is currently making normal profits on most of the products in its product line, but is making pure profits on its new Alka-Seltzer Plus with decongestant, what should Bayer do to increase its profits?
Please read the following chapters in: Managerial Economics:
Douglas, E. (2012). Managerial Economics (1st ed.) [Electronic version]. Retrieved from https://content.ashford.edu/
· Chapter 9: New Product Pricing and Pricing in New Markets.
· Chapter 10: Competitive Bids and Price Quotes
· FeelVibe10. (2014, May 14). Alka Seltzer Plus cold and cough TV commercial, ‘library’ (Links to an external site.) [Video file]. Retrieved from https://www.ispot.tv/ad/767d/alka-seltzer-plus-cold-and-cough-library
· Bloomberg (Links to an external site.). (http://www.bloomberg.com)
· Cable News Network (Links to an external site.). (http://www.cnn.com)
· The Economist (Links to an external site.). (http://www.economist.com)
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