1. Before introducing its inkjet printers, did HP have to estimate the demand curve for them? Why or why not? Yes, because by estimating demand HP would have an insight whether their upcoming products were consumable in the market or not. It will also give highlight the shortcomings of existing products in the entire printer family. The presence of competition will be a very important factor for the launch of their inkjet printers as they would have a competitive edge in the market.
2. When studying Epson before going after the Japanese-dominated dot matrix market, did HP try to determine which factors would have an important influence on the demand curve for its product? If so, what factors seemed to be particularly important. Yes. The factors that seemed important were –
Price of the goods (P) – The inkjet printer has to cheaper than other types of printers such as dot-matrix and laser, which would increase the demand of the product
Price of related goods (PR) – Dot-matrix and laser printers were expensive Taste Pattern of consumers (T) – Consumers had no option other than using available products (dot-matrix or laser printer) which had serious flaws such as poor print quality and color. By taking this into consideration, HP will have a competitive edge by introducing ink-jet printers
Expected price of the good in some future period (Pe) – With mass production and cost cuts, economies of scale could be achieved thereby decreasing the price of the product in the near future Other than the above mentioned factors the presence of almost no competitors, expected declining prices of PCs as well as declining consumer acceptance towards dot-matrix and laser printers gave HP an important insight while determining the demand curve for its inkjet printers.
3. HP cut the price of its b/w printer from $995 to $365. If the quantity of such printers that it sold per year increased tenfold, does this mean that the (arc) price elasticity of demand for this product was about 1.8? Why or why not?
4. Can the data in the graph on page 70 be used to determine the trend in HP’s printer market share? What are the limitations of these data for such purposes? Yes, the graph can be used to determine the trend of HP’s printer market share. From 1984 to 1989 the market share grew at an average of 30-50% due to new product launches and consistent upgradation and variations in its entire printer portfolio. From 1989 to 1992 the growth was sluggish between 5-10%. But in the year 1993 the growth rate was between 5060% due to changing consumer preferences, price of related goods, consumers income and expected future price of the same product.
5. If you were hired by HP to forecast how many inkjet printers it would sell next year, how would you go about doing it? What data would you need? What techniques would you use? How accurate do you think your forecast would be? I as a manager would use the method of regression analysis to forecast sale. The data would be the Co-efficient for each factor effecting demand, testing of hypothesis and level of confidence which would be more than 95%.
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