1) What does it cost to make a blank cassette?
Having several cassette quality and length options means that the cost of each cassette type
would vary as well. Producing a standard quality tape would cost $0.2144 and producing a
professional quality tape would costs within the range of $0.3216 and $0.3752 (EXIHIBIT
1).
2) What price can Gillette get for a blank cassette?
Gillette should enter the market by offering standard tapes at a price of $1.80. These prices
are favorable and competitive within a price-oriented market, while still correlating with
the break-even amounts and margins later (EXIHIBIT 3).
3) How many units does Gillette have to sell to cover its fixed costs?
Providing a new product comes with some significant upfront costs and to ensure that the
company can cover its costs a significant amount of sales are required. In order to cover
the fixed costs which includes manufacturing costs sales force salary, and advertising
Gillette must produce and sale 6,109,980 units to cover its fixed costs. This amount of
sales, although high, can be easily achieved provided that an effective marketing mix is put
in place (EXIHIBIT 3).
4) What is your marketing plan for one type of cassette?
Gillette should only sell standard quality tape at $1.80 with a margin of 20% as it will
require only 21% of the market to breakeven. This plan includes manufacturing, salary,
and advertising expenses worth $3 million with a breakeven volume of 6,109,980 units
while targeting 40% of the $130 million market meant for young adults, business people
for dictation, and letter writing (EXIHIBIT 3). Compared to marketing budget cassettes or
