BU2108 Lecture 9: Lecture 9 Pricing of service products
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FlashX company sells hi-end video games to consumers via the internet, each at a price of $75. It buys each game at a cost of $40, and it incurs another $5 per unit in distribution expenses. If FlashX incurs fixed overhead expenses per year of $2.1 million how many units does it need to sell in order to break even?
| 70,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 65,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 52,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 28,000 QUESTION 6 Why do retailers use the âmarkup on priceâ method of pricing, rather than the âmarkup on costâ method?
2 points QUESTION 7 What can a service marketer do to manage the issue of âperishability?â
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| (Please Summerize the work down below, thank you) | |
| Political | Economic |
| Growing political influences on healthcare advances | Cost of living increases |
| Global government influence on healthcare cost | Cost of insurance prices |
| Government control of Medicaid, Medicare funding | Rise of forecasted interest rates |
| Social/Cultural | Technical or Technology |
| Increase average age of population | Demand on new medical treatments |
| Patient expectations increase | Customize treatments |
| Demographics are in constant change | More advance service facilities |
| Environmental | Legal |
| Growing need for green business | Constant change of government drug Regulations |
| Environmental agenda and community awareness | Consumer laws |
| Health and safety regulations | |
| Porters 5 forces of business model | |
| Competitive Rivalry | |
| Growth opportunity for healthcare companies are expected to growing the next few years | |
| Increase in new revolutionary drugs both in and outside of the US | |
| Threat if New Entrants | |
| Strict government regulations | |
| Difficult to keep up due to constant change | |
| Huge startup cost | |
| Substitute Products | |
| Threat of other substituting product and service at lower cost | |
| Bargaining Power of Customers | |
| Generic drugs offered at large discount to consumer | |
| Larger less customized healthcare facility with lower housing costs | |
| Several facilities offering similar services. | |
| Bargaining power of supplier | |
| Medical suppliers have a large pricing power | |
| Bargaining power of physicians and nurses is huge because of large hospital benefits | |
Swot Analysis
Strengths
Highly trained and capable employees
Market experience
Strong leadership
High level of organizational efficiency
Excellent facilities
Strong commitment to bettering the community
Weaknesses
Increased cost of healthcare could lower our clientele
Limited staff resources
Limited cash flow to hire and train new employees
Lack of resources
Opportunities
| Fast growing technology opens new doors for using state of the art equipment to better serve the patients. Nursing and residential care is one of the fastest growing industries Aging population Threats Uncertainty in political and economic climate causes hesitation for receiving new patients. Funding constraints Highly competitive market Product or Service Analysis Our services will be used by patients who cannot afford experimental treatments and patients who have been abandoned by the system because hospitals can no longer provide medical assistance. At our facility, we will be able to work with the families and provide them with different payments options, such as low monthly payment plans. Our main goal is to be able to treat the patient at a very affordable cost; however, if any patient does not possess the means to pay for treatment, he or she would not be turned away; our facility will tap into government and private funding to cover treatment cost. The beauty of this service is that there isnât a charge of any kind to take part in our program because it is completely funded by government grants. Individuals that would take part would more than likely not have the means to pay a monthly deductible. Due to the nature of the business listed as a non-profit agency, there is no way to make a profit of any kind, as it would jeopardize the business in its entirety. Some of the market factors that create a demand for our services include the need of medical care after having maximized all resources, the number of low income families, and the number of patients facing health issues needed extended medical care. Opportunities that may derive from this business is the opportunity to expand and open multiple facilities, while extending a helping hand to many more in need. The risk, however, is the unstable funds deriving from grants. This can pose a huge treat to the business, as grants often times come and go and cannot be counted on as a constant income. After studying the healthcare system and current policies in place, data shows many individuals facing severe health issues usually go untreated and uncared for due to the outrageous cost of medical care. It is devastating to see how often people, especially the elderly, are sent home and forgotten for the mere reason that hospitals and doctors are not willing to care for patients without financial means. In fact, in 2009 Harvard news reported 45,000 annual deaths due to lack of health coverage in the U.S. alone, which is significantly higher than the 18,000 reported by USA Today in 2002. Financial Analysis Clermont will be a nonprofit organization, dedicated to help the most needed. To open the facility fully operational we must take in consideration some fixed expenses like the land acquisition, permits, interest, brokers, administration fees, professionals (facility setup), staff, reports (environmental, occupational, fire, FDA), electricity, water, phone, water & sewer , connections, taxes, insurance, management, security, advertising, accountants, food, lawn mowers, bank fees, etc. The facility will need have a total value of approximately three million dollars, but if we break the price of the land acquisition in to a thirty (30) year mortgage we can star up the business with an investment of approximately $ 233,944.61 USD to cover the first month of operation including all the startup permits and connections. After the first month the fixed expenses will be $184,444.00 USD with the exception of the months were taxes are due; taxes are around $ 43,000.00 USD paid quarterly will increase the tax month (depending on the facility fiscal year) for $ 10,750.00 USD approximately. We will fund all the costs with private and public funding, fundraiser, events, raffles, and most important with the help of the community. As we mentioned before, Clermont is a nonprofit organization and we will do everything in our power to give the relief to the families in need. No one will be rejected because they do not have the money or the insurance cannot help. No money will be required from patient and every single dollar received will be spent in the patients, and in improving our facility and our service every day. We believe our financial even breaking point will be a year after we begin operations, and be profitable soon after. There are many patients in need, and with the government and public grants each person will receive the treatment they need, and we will become the hope of many. |