Growth Dynamics in New Markets

FINANCIAL RESOURCES

5.1 Introduction

This chapter deals with NewTel’s revenues, costs, and profits: the accumulation of financial resources in general. It poses the questions: What drives revenues and costs? How do revenues and cost relate to the variables from the previous chapters?

You will explore how the sales price and the subscription rate, together with new customers and Current customers, influence NewTel’s revenues. You will also examine how customers evaluate the effective monthly price of purchasing and using mobile phones. It will turn out that the prices and the life cycle duration you set affect the effective monthly price and, hence, have an influence on the number of new customers. You will also consider the components of total costs and how process improvements spending can decrease service costs.

Overall, you will see that the simulation model you develop in this chapter now replicates your experience from the SellPhone simulator from Chapter 1. In other words, the model contains all relevant variables and links to fully describe the challenge you face in Plutonia. You can start using it to its fullest; you will be able to simulate the multiple simultaneous effects of changing one decision variable, allowing you to determine the variable’s optimal value.

5.2 The structure of revenues

5.2.1 The direct influence of prices on revenues

NewTel’s telephone service is appreciated by part of Plutonia’s population and, therefore, they are willing to pay for your ...