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Section 1: The following question is mandatory / compulsory. As the marketing manager of Sony in the US market, you have been asked to analyze

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Section 1: The following question is mandatory / compulsory. As the marketing manager of Sony in the US market, you have been asked to analyze the pricing strategy adopted by the mobile phone for its new product from the firm's internal perspective. Your major competitor, Samsung Galaxy is priced at $1100. Your retail price for the new phone in comparison stands at $920. Sony distributes its product to a regional wholesaler, who then distributes the product to a local wholesaler followed by the retailer that has a margin of 30 percent. The regional wholesaler earns $40 for each phone and the local wholesaler $75. The cost structure of the product is such that a direct cost of $90 per unit was incurred on procuring the components (raw materials) of the product. A cost of $45 towards labor was incurred for manufacturing each unit. Advertising campaigns to promote the product cost $3,000,000. Event / exhibitions related promotional expenses incurred per location were $400,000. Note that Sony identified major exhibitions and events (five of them) to market the product. Packaging each unit along with the accessories was $50. Administration and general expenses were $12,000,000. Managers were paid salaries which amounted to $10,000,000 which include sales staff related salaries. An incentive of $20 of the selling price was provided to the sales staff for selling each phone. Leasing space for product development costed $3,000,000 along with a utility expense of $1,000,000. Requirements (20 marks): Workings must be clear and shown while solving the problem. a. What are the breakeven volume (number of units) and sales (revenues) of the Sony mobile phone? Note: Include fixed and variable costs as well as contribution margin calculations. [9 marks) b. At what level of volume (number of units) and sales (revenues) will Sony achieve a profit objective of $ 200,000,000? Note: Workings should be clearly shown. (6 marks] c. Which pricing strategy would work best in the case of Sony, market-penetration pricing or market-skimming pricing? Why so? (5 marks]

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