Your firm has a 20% market share in a high growth market [25% annual growth] where the major competi
Your firm has a 20% market share in a high growth market [25% annual growth] where the major competitor [50% market share] is pursuing a conservative financial policy of only growing using internal financial resources. Your firm on the other hand has unlimited access to external debt funding at 5.5%, scenario nine. Assume that your firm decides to price below lead competitor at $22.
Market Growth [Units]: 25%
Market Growth [$]: 20% [This assumes lead competitor lowers prices to $24 as costs decline to gain market share directly through market expansion and competitive pressures on 10% firms.] That is it prices at prospective cost of 10% producers.
Market Size [units]: 350K
Market Size [$]: $10.5 million [initial price is $30 per unit or cost 10% producers]
Elasticity Demand: elastic and price elasticity equals 2 [1% change price leads 2% rise quantity]
Elasticity Supply: elastic
Industry Accumulated Experience: 350K
Cost Reduction Each Doubling Experience: 20%
Annual Production Of Lead Firm: 175K
Market Share [units]: 50%
FirmAcâ‚¬?cs Market Share [units]: 20% [others 10% each]
Asset Turnover: A??1
Depreciation Assets: 10%
a. Based on this information indicate FirmAcâ‚¬?cs Competitive Position? Dog, $, ?, *
b. Competitive Strategy [Grow, Maintain or Divest]?
c. Gain, Hold or Reduce Market Share?
d. Costs per unit?
e. Pricing Strategy?
f. Market Share at end of 1st and 2d years?
g. Margin at the end of the first and second years?
h. EBIT at end 1st and 2d years?
j. Sustainable Growth?
k. EFN year 1 and 2?
l. D/E at end 1st and 2d years?