Market share in high growth market

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Reference no: EM131083679

Your firm has a 20% market share in a high growth market [35% annual growth] where the major competitor [50% market share] is pursuing a conservative policy of only growing as fast the market. Your firm on the other hand has unlimited access to external debt funding at 5%. Assume the major competitor sets the price at $25 and that your firm decides to price below the lead competitor at $22 so you can grow twice as fast as the market. Market Growth [Units]: 35% Initial Market Size [units]: 350K Initial Market Size [$]: $8.75 million [price set by lead competitor is $25 per unit] Elasticity Demand: elastic Elasticity Supply: elastic Industry Accumulated Experience at beginning year one: 350K units Cost Reduction Each Doubling Experience: 20% Initial Annual Production Of Lead Firm: 175K Market Share [units]: 50% Firm’s Initial Market Share and production is 20% or 70 units Based on this information indicate Firm’s Competitive Position? Dog, $, ?, * Competitive Strategy [Grow, Maintain or Divest]? Pricing Strategy? Market Share at end of 1st and 2d years? Gain In Market Share at the end of one year, year two? Percentage reduction in cost per unit at end of 1, year 2? Assuming a one to one sales to assets ratio and that the firm finances the required increase in assets using debt how much debt will it add in year 1, year 2 and what are interest costs?

Reference no: EM131083679

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