Zeus Opticals is a specialist manufacturer of optical instruments. Zeus has recently
expanded its core product market of binoculars into making eyepieces for microscopes /
telescopes, and screw-on lenses for digital SLR cameras. The firm believes that it makes
little money selling binoculars and that these new markets have great profit potential.
Somewhat to Zeus’s surprise, it finds it tough to make money with eyepieces. As of now,
the firm is selling the product at a negative profit margin. Yet, Zeus faces intense price
pressure in this segment, and thinks that it might have to lower prices by 5% or more to
stay competitive. The market for binoculars has been stable for several years, and Zeus
expects the trends to continue for the near future. Zeus is most excited about entering the
market for screw-on lenses for digital SLR cameras. Although current volumes are small
(relatively), Zeus believes that there is substantial market potential for this product.