ATHENS GLASS

WORKS
GROUP 13

Introduction:
Athens Glass Works (AGW) was a midsized, regional glass company serving
several niche markets in the southern United States. The company enjoyed a
dominant market position for non-glare glass in the southern region because
of its fast and reliable service, willingness to deliver glass on short notice at
no extra charge whatsoever, provision of an exceptionally high quality nonglare glass with little loss of light and no blemishes, operation of its own fleet
of vehicles in order to efficiently manage delivery times and to provide
reduced shipping charges and finally AGWs sales staff was highly regarded
as exceptional for it helpful and generous service to its customers. However
in 1992, the company because of the increased pressure to improve margins,
raised the price its non-glare glass from $2.15 sq./ft to $2.36 sq./ft.
The problem at hand for Christina Matthews, the product manager for nonglare glass at AGW and Robert Alexander, the controller of the Specialty
Glass division at AGW, is to decide whether to continue with the present
price of $2.36 or revert back to the old price of $2.15.
Exhibit 2 presents an analysis on the variable cost and its impact on the unit
contribution margin and the total contribution margin.
The team at AGW was presented with two options:
1. Whether to return to the previous price of $2.15
2. Whether to maintain a price of $2.36
According to Christina, the total regional volume for the fourth quarter of
1993 was expected to be 920,000 sq./ft and she believed that if the
company were to revert back to the old price of $2.15, it could increase a
major portion of the market share with sales of 275,000 sq./ft. However, if
the company decides to maintain the current price of $2.36, it would risk
losing sales to up to 150,000 sq./ft.

At a price of $2.15, the company maintains a market share of 29.89%

whereas at a price of $2.36, the market share for AGW falls to 16.30%.

Market Share:
In the case of market share, a normal trend is observed regarding AGW with
respect to its competitors varying within the range of (34-36)% (see exhibit
1). This trend continued for the year 1991 in its third and fourth quarter as
well as maintained its respective range for the further three quarters of the
year 1992. However, as the company increased its price per square foot to
$2.36 with its perception being that its competitors would also increase their
prices under the pressure of corporate policies, its market share drastically
dropped to 26% and continued to decline thereafter to up to 20% in the
second quarter of 1993 as their competitors retained their prices to $2.15.
Moreover the sales volume also decreased rapidly when AGW increased its
price per unit (exhibit 1). As a result, the AGW management found itself in
conundrum of whether to reduce the price back to its previous value,
because doing so would help it regain its dominant market share back, or
maintain the price at the current value and keep its profit margins at a high.

Conclusion:
In the end we would like to conclude by saying that it is in better interest of
the management at Athens Glass Company to revert back to the original
price of $2.15 because we believe it could do more good than harm. The
company would gain back its lost market share which according to Christina
Matthews was essential for AGW to maintain its dominant position in the noglare market industry. The only drawback would be that at a price of $2.15
the company might show a loss in its financial statements but as it is more
essential to the stakeholders to maintain a prevalent market share, reverting
back would be the best option.

EXHIBIT 1

EXHIBIT 2

EXHIBIT 3

INFLUENCE DIAGRAM

Manageme
nt

Cost

Discretion

Price
Decreas
e?

Forecast

EXHIBIT 4
Sales Volume

Dominant
Market
Position

Market Share

Competito
rs Price