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Transcription of this question: 5.Sigma Productions (SP)Sigma Productions (SP), a market leader with a strong family brand name, develops and sellsonline computer games. The social, technological and competitive environment is changingrapidly. Product life cycles for online games are becoming much shorter. SP must keepinnovating, but this process is costly and time consuming. It can take at least three years todevelop and introduce a new computer game to the market.One online game, Sigma Starfighter 1, was a major financial success. Now SP is developinga new version, Sigma Starfighter 2, which will be released in 2016. Its release is causing greatexcitement. Sigma Starfighter 2 will be priced using penetration pricing. SPS main source offinance has been retained profits.SP is developing an application (app) for mobile phones. The app will allow users to accessinformation about the company and try new online games through limited free trials. The app willalso add value to the family brand. The app is expected to be launched before Sigma Starfighter 2is released and will be given away for free.However, SPS current cash flow position is weak. With high research and development (R&D)costs, SP needs additional capital to complete the development of the app and Sigma Starfighter 2.Four different banks have refused to provide finance. SPmust urgently attract new investors.(a)(b)(c)(d)Describe one reason for the importance of innovation for SP.Identify the first two stages of the product life cycle.Explain one benefit and one cost of family branding for SP.Analyse the appropriateness of penetration pricing for SP when they launchSigma Starfighter 2.Discuss two problems of financing research and development (R&D) for a businesssuch as SP.[2][2]

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