(A forward buying problem) A major pharmaceutical wholesaler buys brand drugs from a manufacturer at wholesale prices and sells them to pharmacies at retail prices. It estimates that the wholesale (W) price, the retail (R) priceand pharmacy sales for a blockbuster drug follow this trend: Month 123456W price($/unit)404555606570R price($/unit)8090110120130140Demand(in units)20 million30 million45 million60 million75 million95 million The inventory carrying cost for one unit for one month is $2. Assume enough storage capacity and zero initial inventory, how should the wholesaler take advantage of the price and demand fluctuation to maximize its profit?

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Answered: (A forward buying problem) A major…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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(A forward buying problem) A major pharmaceutical wholesaler buys brand drugs from a manufacturer at wholesale prices and sells them to pharmacies at retail prices. It estimates that the wholesale (W) price, the retail (R) priceand pharmacy sales for a blockbuster drug follow this trend:

	Month 1	2	3	4	5	6
W price($/unit)	40	45	55	60	65	70
R price($/unit)	80	90	110	120	130	140
Demand (in units)	20 million	30 million	45 million	60 million	75 million	95 million

The inventory carrying cost for one unit for one month is $2. Assume enough storage capacity and zero initial inventory, how should the wholesaler take advantage of the price and demand fluctuation to maximize its profit?

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