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Otto-Bred is a national furniture manufacturer. Otto-Bred products are Amish yet modern designed custom furniture pieces that are distributed globally mainly to commercial clients and corporations. When Otto-Bred decides to create a new product, product developers survey competitors to determine how much they charge for similar items and then select a target price that is 20% to 40% lower than competitors' prices.
Questions: Question 1: What challenges might managers at Otto-Bred encounter in achieving the target cost?
Question 2: How might they overcome target cost challenges? Question 3: How do you feel about Otto-Bred's approach to shipping and assembly costs? Are the costs beneficial or considered a non-cost factors in setting prices for the furniture? Is this a matter of gaining customers as an incentive or simply reducing costs overall for the company? Please explain your rationale.
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