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Presented by :
Section D | Group 6
INTRODUCTION
a) Sanskrut Comfort Sytems Pvt. Ltd. manufactures Symphony room coolers since March 1988 as
an advancement over portable or table fans.
b) Also known that the demand for room coolers has been continuously increasing
c) Customers are price sensitive and it is an oligopolistic market
d) Organized sector offer high price cooler due to manufacturing taxes and other expenses.
Therefore, their market share is eaten up by the unorganized sector.
e) Symphony room cooler was priced between unorganized sector prices and the air conditioner
prices which range from 20-30k.
f)
The Symphony room cooler was known for innovative design and was promotes as alias for AC .
Different fixed cost and direct cost incurred are also given in the case.
2. Assumptions
1. We assume that we are able to sell the quantity we produce for Harmonica and Coolers category.
2. We are taking the average price given in the case as no specific price given for the Kooler category.
PROBLEM ANALYSIS
1. PROBLEM STATEMENT
a) What should be the price of SCSPL products i.e Koolers , Symphony and Harmonica
b) Whether the different line of products be launched or not?
2. OBJECTIVE
To calculate the break even point and the profit volume analysis to decide the pricing strategy of SCSPL
products.
DECISION ANALYSIS
CURRENT PRODUCTS COST ANALYSIS
A. Retailers
Given: Selling Price
= Rs 5000
= Rs 500
= 20% of 4500
= Rs 900
Realized Price
= Rs 3600
Sales
= Rs 2100
Markup
= 15%
Realized Price
= Rs 2415
Sales
Total Sales
= 7,20,00,000 + 2,41,50,000
= Rs 9,61,50,000
Now ,
Profit
10% of Sales
= (30000*2100) +
+ 0.25((30000*2100) +x)
[given PME = 25%total cost of production]
X(fixed cost )
= Rs 62,28,000
PME
= Rs 1,73,07,000
C. Pricing Method
1)Koolers
a) Going-rate pricing
b) Price is based on the competitors pricing as Oligopolistic industry
This is because of the fierce competition in the low-segment market. Too low a price would damage the
image of the KOOLERS, fearing it to be a low quality product; a higher price than market would not
attract many customers.
2) Harmonica
a) Price based on customers perceived value
b) Price premium extracted for products superior quality features. Also, there is no
competition in the segment, so a first movers advantage needs to be
capitalized.
= Rs 3500
= Rs 350
= 20% of 3150
= Rs 630
Realized Price
= Rs 2520
Now ,
1.25*(F.C. + D.C. * BEP) = Price*BEP
= Rs 5500
= Rs 550
= 20% of 4950
= Rs 990
Realized Price
= Rs 3960
Now ,
1.25*(F.C. + D.C. * BEP) = Price*BEP
where 25% of Production cost is PME
BEP = 634 units
PROPOSED DECISION
In the assumed scenario, profits have increased significantly from Rs. 96,15,000 to Rs.
1,38,25,000 so SCSPL should launch Harmonica and Koolers
So,
Harmonica will be positioned as a High end product so it can be priced between Rs.
5500 to Rs. 6000
Koolers will be launched to give head-on competition to the unorganized sector so it can
be priced lower i.e. at Rs. 3500 to boost sales
Profit and
market share
is less
easy to set
prices
Cons of
Going
Rate
Pricing
Pros of
Going Rate
Pricing
Reflect
idustry's
collective
wisdom
easy to
track
competition
Dependent
on market
leader
Uncertainity
of market
Pros
Cons
Higher Profit
margin
Loss of price
sensitive
customer
Increased Brand
value
Not applicable
in market where
quantity doesn't
matter