Reference no: EM132752677

Walker Ltd is a New Zealand manufacturer of sports shoes for men and women. It has sustained strong growth in the New Zealand market in recent years due to comfortability and quality of its shoes. Walker Ltd. Is considering extending its business in the Australian market, where identical shoes sell for an average of $85 wholesale price. Management has appointed a marketing consultant to obtain information about what features Australian consumers seek most in shoes. The marketing consultant conducted a market- research and provided Walker Ltd following information on the features and approximate cost of adding these features for Australian market:

Features Desired in              Cost to add ( in customer choice Rating

Australian market (5 is most important )
Colour fast material         $14.5                  1
Lighter weight               16.75                   3
Extra-soft inside              13.00                 2
Longer-wearing sole            15.5                4

• Walker Ltd is considering adding any of the features in entering the Australian market. The current average manufacturing cost of Walker's shoes is $50. Walker currently is making an average 20% profit margin per pair sold. Walker would like to maintain the same profit percentage in the Australian market. However, the firm recognizes that the Australian market requires an additional manufacturing cost of $5 per pair of shoes. Ignore the currency exchange rate.

Problem 1: Should there be any cost reduction target if Walker Ltd. is not considering any new feature for entering the Australian market? Justify your answer.