Group Assignment 3 Due by Tuesday (29th) 11 PM

PPT is preferred mode of submission

Question 1 of 2 (pricing versions)

Read Cambridge Software Case from Term 2 MKD1 course pack. To make pricing
recommendations use following updated Exhibit 1 with new willingness to pay estimates. Rest
of the information is same as per the original case. What pricing strategy would you propose
based on learning’s so far? Think of all strategic options available to you. Discuss your answer
briefly with reasoning and numbers like you are presenting your proposal to your seniors. (Help:
I have created and uploaded an excel sheets on LMS that might help you with calculations for the
cambridge software case. Feel free to ignore it if you find it confusing.)

Exhibit 1 : willingness to pay

Student Version Commercial Version Industrial Version
Large Corporations 350 1200 2500
University 250 900 1500
Consultants 100 500 600
Small Business 75 225 300
Students 50 60 100

Question 2 of 2 (pricing R&D)

The firm B is offering to buy firm A’s R&D for $25 million. Firm A’s has invested $40 million so far
in R&D. What would be your recommendation to firm A?
Additional Investment: Firm estimated that additional $12 million is required to complete
human trials before they can apply for FDA approval. They believe there is a 60% chance of
getting a FDA approval.
Cost Estimates: Manufacturing plant will cost $8 million and estimated variable cost of
production is $10/unit. Firm will need another $15 million for market development.
Demand Estimates: Market research informs that the estimated demand will be 3 million units
over its patent period at recommended $50.00 per unit price.
Market Scenario Analysis: There is a 50% chance that competing firm B may also get an FDA
approval for a similar kind of drug around the same time. In which case under duopoly
competition both firms will end up setting lower prices for its drug around $30.00 per unit and
will sell 2 million units each over its patent period. Firm B and A have similar production, R&D,
and marketing capabilities.