Larry Miller, the general manager of Classic Software, must decide when to release the new version of Classic's spreadsheet package,
Development of Easyspread 2.0 is complete; however, the diskettes, compact discs, and user manuals have not yet
The product can be shipped starting July 1, 2011.
The major problem is that Classic has overstocked the previous
version of its spreadsheet package, Easyspread 1.0.
Miller knows that once Easyspread 2.0 is introduced, Classic will not be able to
sell any more units of Easyspread 1.0.
Rather than just throwing away the inventory of Easyspread 1.0, Miller is wondering if it might
be better to continue to sell Easyspread 1.0 for the next
3 months and introduce Easyspread 2.0 on October 1, 2011, when the
inventory of Easyspread 1.0 will be sold out.
The following information is available:
Variable cost per unit of diskettes, compact discs, user manuals
Development cost per unit
Marketing and administrative cost per unit
Total cost per unit
Operating income per unit
IF 2.0 IS SIGNIFICANTLY BETTER THAN 1.0 FOR ITS CUSTOMERS, A CUSTOMER-DRIVEN ORGANIZATION WOULD IMEDIATELY INTRODUCE IT.
CONSIDER AN IMMEDIATE RELEASE ONLY IF 2.0 PASSES ALL QUALITY TESTS AND CAN BE FULLY SUPPORTED BY THE SALES FORCE.
BEING THE MARKET LEADER GIVES AN ADVANTAGE IN CAPTURING A LARGE SHARE OF THE MARKET AND FORCES COMPETITORS TO PLAY CATCH UP.
DELAYING INTRODUCTION OF A NEW PRODUCT CAN HURT MORALE ESPECIALLY IF A COMPETITOR BEATS THE COMPANY.