Interpretation of Financial Statements and Performance Management - Case Study Example

Download file to see previous pages Cleanup Limited has initiated the discussion on a new product that has been designed by the director of the production division. But the discussion on the new product was premised on the recent analysis that the market share of the company, while steady for a number of years at 12 per cent, is now becoming under serious threat from competitors and a maturing market. Hence, the main challenge is how to secure the hold of the company on the 12 per cent market share. The company should come up with fresh strategies that would allow it to hold on to the 12 per cent market share, and if the company would be aggressive enough, it should even aspire for an increase in its share of the pie.
How can Cleenup defend or increase its market share? Several strategies include market creation for a new product, market penetration for a current product, product differentiation for the current market. According to Kotler (1994, p.383), market share can be expended by continuously searching for “new users, new uses, and more usage” for the product. Defending market share, on the other hand, would simply require a management mentality of “continuous innovation” (Kotler, 1994, p.385). Firms should avoid the temptation to be complacent, and Kotler advised not to be content with “the way things are, and (the firms) leads the industry in developing new products and customer services, distribution efficiency, and cost-cutting” (Kotler, 1994, p.385).
This brings the discussion to the new product design developed by the director of the production division. After investing on research and development to the tune of ₤350 thousand, and securing a patent for the design of the product at a cost of ₤275 thousand, the directors are to determine which course of action to take next, realizing the financial rewards and requirements of each option available.
Vis-à-vis the financial considerations, the directors of Cleenup are considering three options: sell the patent, develop a prototype and sell the right to manufacture, and manufacture the product itself.   ...Download file to see next pagesRead More