A budget showing product launch expenses and a unit forecast by quarter for 3 years
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|Activities||Projected Costs in Million Dollars|
|First Year Quarterlies||Second Year Quarterlies||Third Year Quarterlies|
|Cost of Communications & Media||2||3||3||4||5||6||9||11||14||17||21||25|
|Research and development costs||1||2||2||3||4||6||7||9||11||13||16||19|
|Cost of goods sold||100||110||130||180||210||220||230||240||265||290||320||350|
The Exchange Rate
The exchange rates of the euro and pound to dollar have been fluctuating over the past five years across the world. The exchange rate of the euro to dollar varied from 0.62Euro/USD in 2008 and fluctuated to the highest rate of 0.83Euro/USD in 2010, and is currently stabilizing at 0.72Euro/USD. Therefore, the average exchange rate of euro to dollar in the past five years is 0.72Euro/USD.
Likewise, the exchange rate of pound to dollar fluctuated from 0.5GBP/USD in 2008, 0.72GBP/USD in 2011, and is currently at 0.58GBP/USD. According to International Monetary Fund (2012), the exchange rate of pound to dollar was lowest in 2008 due to the global economic crisis. During the last five years, the average exchange rate of pound to dollar is 0.6GBP/USD.
The target customers of e-cig in the Great Britain and Germany are the young adults who have the ages of 20 to 34 years. In the Great Britain, a significant number of people, particularly the youth smoke tobacco regularly. Action on Smoking and Health (2013) states that, “there are about 10 million adult smokers in Great Britain and about the same number of ex-smokers” (p. 2).
Hence, the target customers who are about 10 million in Great Britain alone provide enough market for the e-cig. In Germany, about 20 million smokers exist; a figure that doubles the number of smokers in Great Britain. The figures show that both the Great Britain and Germany provide potential markets for e-cig.
Evidently, the number of smokers is gradually rising due to the invention of new cigarettes like e-cig and enhancement of marketing strategies across Europe. Since e-cig is the best quality of cigarette and has minimal health impacts, a considerable number of customers prefer smoking it.
The average price of cigarettes in Great Britain and Germany is about $10 per packet. Since most customers prefer smoking manufactured cigarettes because of their quality and taste, e-cig provides the best alternative cigarette to the smokers. Thus, the best price for the Blu e-cig is $10 for it to be competitive and penetrate the European markets, which other brands of cigarettes have dominated.
The statistics show the number of smokers in the age bracket of 20 to 34 years is the highest when compared to other age groups (Action on Smoking and Health, 2013). Thus, the company needs to customize the price of Blu e-cig for it to fit into the socioeconomic status of the people within the age bracket of 20 to 34 years. Thus, the price of $10 per packet is not only competitive, but also profitable to the company.
Action on Smoking and Health (2013). Smoking Statistics: Who Smokes and How Much. Web.
International Monetary Fund (2012). World Economic Outlook, April 2012: Growth Resuming, Dangers Remain. New York: International Monetary Fund Publisher.