Page 7 - MCS August Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

Compact system cameras (CSCs)

These products are in a growing market. They are aimed at people who want a relatively
sophisticated camera but who are not willing or able to pay the higher DSLR prices.

In a growing market, many companies will use price cuts to stimulate their sales. Given Montel’s
pricing strategy though, this could be unwise. While discounts would certainly stimulate demand,
Montel would have to be very careful to avoid high levels of discounts that would mean
customers see the product as being of lower value.

Monitoring of competitor prices and maintaining the policy of pricing above competing brands
would seem most appropriate for these products.

Bridge cameras

The market for bridge cameras is declining, although Montel is considering developing a new
range.

In declining markets it is usual to compete on price, with businesses trying to claim as much
market share of the declining market as possible, keeping their unit costs low for a longer time
and delaying the need for discontinuation of the product line.

At the moment there is enough demand to make the cameras viable, but if Montel maintains its
current price point while competitors reduce theirs it may find that demand drops sharply and the
product is no longer viable.

With very little money being spent on development for this product it would be difficult for
Montel to stimulate demand through innovation and may have to rely on price drops.

Compact cameras

The market for compact cameras is also declining. Montel’s spokesman seems to believe that
people shouldn’t want to switch to phones on their cameras because of the poor quality levels
compared to even compact cameras, but this doesn’t appear to be a viable theory.

However, it should also be noted that this type of camera brought in the highest gross profit of
any camera range in the past couple of years, so Montel shouldn’t write off this market just yet.

As long as customers are aware of the quality level of Montel’s compact cameras then the
company may not have to look to discount them just yet.

Financial manager

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