Question 1


Currently,Nike competes based on non-price factors such as productdifferentiation, advertising, and branding. First, the Nike ‘swooshsymbol bears prestige and makes the brands easily recognizable.Moreover, Nike company invest heavily on product innovation in orderto remain competitive. To portray quality brand, the firm makeconstant improvements in their products. On the other hand, topromote their products the company hires top professional players,such as tiger woods. Therefore, the new product should use thisapproach since it will be hard for competitors to imitate.


Theprice elasticity of demand value is significant since it helpscompanies to forecast revenue changes due to market price variations.To measure the responsiveness of the demanded quantity of Nikesoccer shoes when price changes, it is crucial to have knowledge oftotal expenditure changes due to price variations. Therefore, tomeasure the elasticity of demand of Nike soccer shoes in this casewill require additional information.


Atbreak even point, the costs of the product will have to match exactlywith the volume of sales. Thus,at this point no profit or loss willhave been incurred from the sale of this product. Using variousprices, we can calculate the break even point of the new shoes. For example, if the fixed cost of Nike shoes is $ 80 each, and a total ofshoes that will be purchased is 300 units. The new shoes will be soldat $75 each. What is the break even point? First, the contributionmargin is the selling process which is $75. The contribution marginis calculated as variations between selling price and variable cost.In this case, the contribution margin will be equated to the sellingprice of $75.

Thebreak even point (units) = Totalfixed costs ($ 80* 300) = 320 shoescontributionmargin ($75)

Supposethe new shoes is sold at $ 80 each then the break even in unit willbe calculated as

Totalfixed costs ($ 50* 300)= 300 shoes

contributionmargin ($50)


Due to a number of factors, pricing decisions can be difficult. Thepricing of Nike soccer shoes should be affected by customerinterpretation and response. How will the customers respond to theprices of this product. The other factor that will affect the Nikeshoes is the competitor’s prices so that the prices can be adjustedaccordingly. For survival, matching the prices of competitors will bea significant strategy.