Classic Pen Company: Developing an Abc Model

ANALYSIS Background tuition The Classic Pen Company was a low-cost producer of traditional sinister and BLACK pens with profit margins over 20% of gross revenue. They then introduced RED pens at a 3% pension, and a year by and by they introduced PURPLE pens due to the 10% premium that they could command. However, they were disappointed with the nigh recent year RED and PURPLE pens were not obstetrical delivery in expected sales (still considering their high profit margin), and pitiful and BLACK pens favourableness was down.Issue(s) Identification There be cardinal main issues within this case -Profitability -Pricing ?Which involves labor time and effort per unit. -Should they introduce redden to a greater extent variety? Can they take hold up with demand and competition? Recommendations 1. draw off rid of RED pens They are the trickiest to profess their revenue is only $. 03 more than specimen pens. 2. trim the Price for BLACK pens, since they are the most simple t o make and train less command processing overhead time and direct labour. . Lower price of olive-drab pens- they are the most popular, but with the changing market prices essential be adjustable. 4. Invest in rising equipment (Therefore eliminating time to clean vats in coiffe to make tonic coloured pens). 5. instruction in only making BLUE and BLACK pens as specialty pens remnant My recommendation to Dempsey would be to invest in newfangled technology to lower the overhead costs (Set-ups, runs) in the future. With a free-enterprise(a) market it is important to adapt.The addition of new colours is crucial to their survival, but with the on-line(prenominal) machinery it may not be possible. cutting equipment would mean limited backlog (if any), more options in colour, and meeting customers demands. If investment of new machinery is not doable for the company, it would be stovepipe to try and cut cost, and focus on standard pens for future investments. BLACK and BLUE pen s bring in the most sales volumes and they could potentially cut back to two hundred% overhead once again.