Item

Retail price
Dealer markup
Wholesale price
Production costs :
Engine frame parts
Assembly
Raw materials and components
Subtotal
R&D
Sales and distribution costs :
ocean freight
Packaging
Duty
Advertising
Other selling and distribution
Subtotal
Total costs
Profit contribution
Customer willingness to pay

NVT (from
Exhibit 7) (in
dollar)
2495
648
1847

484
121
606
1211
116
60
40
75
58
267
500
1827
20
reduce $5

HONDA motor (in

dollar)
2112

A typical NVT bike had a retail price of $2495 while a com

Honda dealers accept $120 lower markup (p. 5, 6th para)
Difference between retail and dealer markup

528
1584

349
118.22
437

(P4, 1st para), BCG estimated that accumulated experience

It is estimted that the average honda assembler could put
(P4, last para), Honda worked closely with its suppliers to
904.218
40.39

the Honda R&D Company employed 1300 people or 0.75 p

60
40
63.36
23.05
235.99
422.4
1367.01
216.99
raise upto $50

Assume to be same
Assume to be same
duties
on motorcycle totaled about 3% of the cycles reta
3)
Total number of units from advertising and promotion budg
Adjusted to make up the subtotal on next line
unit costs associated with selling and distribution should
1367

Is Honda really at a competitive disadvantage with respect

Total honda unit sold in

1975

433800

d a retail price of $2495 while a comparable Honda 750 was priced at $2112 (p. 3, 2nd para)
$120 lower markup (p. 5, 6th para)
tail and dealer markup

imated that accumulated experience might have reduced Honda's unit costs of engine and frame p
average honda assembler could put together 2.3 motorcycles in the time it took the average NVT a
worked closely with its suppliers to reduce working capital and to colocate production, take the ad

any employed 1300 people or 0.75 people per $1 million of corporate motorcycle sales. Each Hond

totaled about 3% of the cycles retail price (p. 5, para 2), i.e. 2112- 2112*3/100
rom advertising and promotion budgets of $10 million and $800000 respectively (p. 5, para 3) Tot
he subtotal on next line
with selling and distribution should fall as a companys overall sales volume in a market, its volum

mpetitive disadvantage with respect to NVT on price? What is reasonable price

3, 2nd para)

ngine and frame part production by 20% or even more

the average NVT assembler (P4, 5th para). For equal displacement the ratio was perhaps 1.5. salar
uction, take the advantage of technology and use high volume production technique

sales. Each Honda R&D employee, it was estimated, earned $17000 per year in 1975, and personn

(p. 5, para 3) Total number of units from

market, its volume per model, and its volume per dealer rose, and unit costs should rise as a comp

was perhaps 1.5. salary ratio shd also take into consideration. 8500 for honda and 5800 for NVT

in 1975, and personnel accounted for roughly half of total R&D expenses. (p. 3, para 4) 0.75 (peo

should rise as a company offered its dealers more extensive supporttotal selling and distribution

a and 5800 for NVT

p. 3, para 4) 0.75 (people per $m sales) x1548/1000000 (price $m/bike)x17000 $ per people)x2=40

elling and distribution costs were 20% of overall retail sales. (p. 5, last but one para) Subtotal=21

0 $ per people)x2=40

one para) Subtotal=2112*20/100.