Problem 1. When a product is in the sales decline stage of the product life cycle, new products will be introduced to replace the old. It sounds from your posting that the video recording machine may become obsolete. When this occurs, typically prices are lowered to clear out inventory.
In a competitive market, what strategy would you recommend to a company when they introduce a replacement product?
Problem 2. Most retailers and wholesalers set their prices by using a markup. A markup is added to the price of a product in order to cover operating expenses and make a profit. Markup can be a fixed amount or a percentage of the total cost or selling price.
What are some of the problems with having a markup set too high or too low?