Scenario: 1

Apples dominance in the Tablet market is so established now that rivals are adopting aggressive Pricing strategies to counter the iPad. Last week Hewlett-Packards Touchpad Tablet went for commercial flop to instant hit when company slashed the price to $99 from $399. Consumers rushed to grab these tablets prompting the company to do one more production run to keep customers happy despite losing money on those produced.

Forrester research suggested that Amazon could sell as many as 5 million tablets in one Quarter by undercutting iPads price drastically.

REQUIRED:

a) Describe what do you understand by the term Cost plus Pricing and highlight any limitations this may have. How does this differ from Target Costing pricing? 5 Marks

b) Based on the above scenario, evaluate the type of pricing policy being applied by Hewlett- Packard and Apple with regards to their Touchpad Tablet?