HARLEY DAVIDSON 5
Inc. is a renowned manufacturer of Dyna, Touring,Street and V-Road motorcycles. Due to its remarkability and prowessin fast growth and innovation, the firm has beenselected for analysis. The company has invested much researchand workforce in establishing motorcyclesthat are powered by solar energy (Dumas,2016). As such, these motorcycles are the epicenter of thediscussion being considered as theinnovative products for the firm. The recentyears have seen a massive increase in theuse of motorcycles, and thus their demandis directly proportional. This phenomenon has come about with thedemand in fueling these motorcycles.Moreover, environmentalists have advised about the global warming dueto increased release of carbon dioxide to the atmosphere. Again, fuelis a natural resource whose supply is limited (Dumas, 2016).
Cost Estimates and Pricing Suggestions
The solar power motorcycle manufacturing is commonly known asLiveWire project. It produces a torque of 52-pound feet and 74horsepower (Pfeiffer, Schiller, & Wagner, 2015). The battery ismade of lithium-ion sustaining 50-55 miles. Aluminum frameshouse all of these substances. These materialscan cost 10, 500 USD. The running gear such as tires, brakes,suspension pieces and wheels have an estimatedvalue of 2, 500 USD. In this view, everybike will cost around 12, 500 USD. However, we can factor theeconomies of scale as far as the total cost for a motorbike isconcerned. Therefore, every bike can roughly be estimated to cost10,500 USD to build. Considering the otherfuel-powered motorbikes and their pricing, the determinationof the selling price can be done by adding20% of the production cost. As such, one motorcyclecan be sold at 12, 600 USD (Pfeiffer,Schiller, & Wagner, 2015).
Selling Price Approach
The method utilized for the determinationof the selling price is the cost-basedpricing. The major issue about the design is the covering ofoverheads and the inclusion of the percentage of profits that thefirm desires. If the figure of overheads isinaccurate, there is a risk of enduring lower profits. The threemethods under this approach start with a cost subtotal. It alsoincludes operational costs that entail raw materials, advertising,wages, and transportation among others. The profit levels can be setbased on mark-up pricing, cost-pluspricing, and planned-profitpricing. Therefore, the set selling price shall be effective for thecompany. For instance, the cost of materials can be $ 10, 500, laborcosts to be $ 500, and the overheads to be $ 5,000. Therefore, thetotal cost is $16,000. The desired profit can beset at 20% of the sales being $3,200. As such, the determinedselling price is $22, 200 (Pfeiffer, Schiller, & Wagner, 2015).
Rationale for Cost-Based Pricing
The approach demands that the company calculates the productioncosts, as such, it can make an appropriate profit margin that helpsin the sustenance of its operations, and achieve the revenue that isdesired. Additionally, the approach issimple because the involved parameters are less engaging and direct.It only requires the addition of costs and the expectedprofits for the firm to make a good price for selling the product.Moreover, the approach is easily assessable because it only usesactivities from the Enterprise (Pfeiffer,Schiller, & Wagner, 2015).
Expectations of Growth and Profits
Based on the increased demand and the widespread excitement aboutsolar powered motorcycles, the firm is expected to expand. First,the pricing for the product is too low, andmany stakeholders will automatically tie to the project. Thisis because the Environmental Protection Agency (EPA), the UnitedNations Environmental Program (UNEP) among other NGOs have a softspot for prevention of the effects of greenhouse gassesand are heavily advocating for the use of green energy. Moreover, thebikes are liked by the youth, whoconstitute the majority of the worldpopulation. As such, profits will surge,and the firm’s economic prowess shall continue to skyrocket(Pfeiffer, Schiller, & Wagner, 2015).
Solar-powered motorcycles from HarleyDavidson are innovative products geared towards environmentalconservation. Cost-based pricing is the approach that has beenselected for discussion. It is straightforwardand clear for use in setting prices. Additionally, the product’sgrowth is guaranteed due to the positivemarket reception and diverse support from various organizations.
Dumas, R. (2016). EnHarley-Davidson. Médium, 46-47(1),224.
Pfeiffer, T., Schiller, U.,& Wagner, J. (2015). Cost Based Pricing. SSRNElectronic Journal.