Ignore for now the cost of manufacturing and determine how APC should price the BP and IP products (services) so that it maximizes revenues. Provide reasons in support of your answer. As stated above assume for now that there is no manufacturing cost (we will change this in the next question). Your answer should include the following 3 items:

1) Price per carton (box) of BP =

2) Price per carton of IP =

3) Reasons

Q2. IoT in Intelligent Products & Services American Packing Corp (APC from hereon) is a large North American company that is in the business of producing packaging materials. They face fierce competition from lower cost rivals based in Asia and Africa. Their competitors have far lower labor costs. APC has advance engineering capabilities when it comes to using the Internet of Things (IoT) to create value- added services. They can build loT services into their offerings. Their lower cost rivals do not have these capabilities yet. It is estimated that by the time these rivals develop an IoT-based product or service, APC would have widened the capability gap even more. APC is targeting the companies that ship medical supplies and products in the Republic of Ivarrona (a large developing economy). APC offers two services Basic Packaging (BP from hereon) and Intelligent Packaging (IP from hereon). For BP customers APC offers sturdy cartons (boxes) into which medical supplies can be placed, sealed and shipped. For IP customers APC offers the same carton with embedded sensors. These sensors can constantly measure the temperature, the extent of moisture, amount of dust particles, etc., inside the packaging carton (box). If the conditions inside can cause the contents of the carton to go bad, the sensors will alert the shippers. The sensors can also transmit the precise location of the carton. For now, ignore the costs of transmission and telecommunication related issues. The IP product is based on proprietary technology fully owned by APC. The companies that ship medical supplies are of two kinds in terms of their willingness to pay (or value they place on the products). The first kind that we call as Spenders Corp (SC from hereon) consists of cash rich companies and the second kind, that we call as Frugal Corp (FC from hereon) consists of companies strapped for cash and operating on a tight budget. The SCS value the BP carton at $30 per carton (box) and the IP carton at $80 per carton. The FCs value the BP service at $20.00 per carton (box) and the IP Service at $30.00 per carton. If the price of the carton exceeds the value of the carton, then the buyer (company) will not buy the carton. Assume for simplicity, that a company - whether it is SC or FC - will buy exactly one carton (if the price is right). It will buy either the BP Carton or the IP carton, but not both. There are three times as many FCs in the market as there are SCs. See table below for details. Basic Packaging Intelligent Packaging VALUE to Spenders Corp-SC (Willingness To Pay) $30.00 $80.00 VALUE to Frugal Corp - FC (Willingness To Pay) $20.00 $30.00 Unfortunately for APC it has no way of telling which company is a SC and which is a FC. It has to price its products without knowing this information. It has to announce a single price for each kind of carton (box). The regulations in Ivarrona do not allow companies to restrict a product or a service to one group of companies. In other words, if a company is willing to pay the price for a product or a service, the seller has to sell the product or service to that company (or companies). Q2. IoT in Intelligent Products & Services American Packing Corp (APC from hereon) is a large North American company that is in the business of producing packaging materials. They face fierce competition from lower cost rivals based in Asia and Africa. Their competitors have far lower labor costs. APC has advance engineering capabilities when it comes to using the Internet of Things (IoT) to create value- added services. They can build loT services into their offerings. Their lower cost rivals do not have these capabilities yet. It is estimated that by the time these rivals develop an IoT-based product or service, APC would have widened the capability gap even more. APC is targeting the companies that ship medical supplies and products in the Republic of Ivarrona (a large developing economy). APC offers two services Basic Packaging (BP from hereon) and Intelligent Packaging (IP from hereon). For BP customers APC offers sturdy cartons (boxes) into which medical supplies can be placed, sealed and shipped. For IP customers APC offers the same carton with embedded sensors. These sensors can constantly measure the temperature, the extent of moisture, amount of dust particles, etc., inside the packaging carton (box). If the conditions inside can cause the contents of the carton to go bad, the sensors will alert the shippers. The sensors can also transmit the precise location of the carton. For now, ignore the costs of transmission and telecommunication related issues. The IP product is based on proprietary technology fully owned by APC. The companies that ship medical supplies are of two kinds in terms of their willingness to pay (or value they place on the products). The first kind that we call as Spenders Corp (SC from hereon) consists of cash rich companies and the second kind, that we call as Frugal Corp (FC from hereon) consists of companies strapped for cash and operating on a tight budget. The SCS value the BP carton at $30 per carton (box) and the IP carton at $80 per carton. The FCs value the BP service at $20.00 per carton (box) and the IP Service at $30.00 per carton. If the price of the carton exceeds the value of the carton, then the buyer (company) will not buy the carton. Assume for simplicity, that a company - whether it is SC or FC - will buy exactly one carton (if the price is right). It will buy either the BP Carton or the IP carton, but not both. There are three times as many FCs in the market as there are SCs. See table below for details. Basic Packaging Intelligent Packaging VALUE to Spenders Corp-SC (Willingness To Pay) $30.00 $80.00 VALUE to Frugal Corp - FC (Willingness To Pay) $20.00 $30.00 Unfortunately for APC it has no way of telling which company is a SC and which is a FC. It has to price its products without knowing this information. It has to announce a single price for each kind of carton (box). The regulations in Ivarrona do not allow companies to restrict a product or a service to one group of companies. In other words, if a company is willing to pay the price for a product or a service, the seller has to sell the product or service to that company (or companies)