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Moderate profit per machine

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Problem: In 1959, Xerox Corporation introduced the Xerox 914, a copying machine that used xerography, an alternative to electrofax technology. Xerography involves a more complex copying process and more costly machinery, but xerographic copies can be made in plain paper, while electrofax technology requires the use of expensive coated paper. Xerox produced copy machines for two different markets and adopted quite different pricing strategies.

  • Low-volume market (fewer than 5,000 copies per month). Xerox charged a relatively high price for its low-volume machines and earned a large profit per machine.
  • High-volume market Xerox charged a relatively low price for its high-volume machines and earned a moderate profit per machine.

Questions:

  1. Why did Xerox adopt such different pricing strategies in the two markets?
  2. Why did the company pick such a high price for the low-volume market?

Reference no: EM132417949

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