TEAM 8 Lilly case

Team Members:

Lamia Ben Fdhila Brian Mugova Reyad Hobba Atef Zouari Fakhri Hatira Hatem Mana

Executive summary: Lille Tissages: the largest company in its segment of the French textile industry. Item 345 was expensive yet competitive fabric, it used to be sold at 15 and the price was risen to 20 /meter. The marketing and the Finance directors have met to prepare a joint pricing recommendation: whether or not they bring the price back to 15 /meter Total market volume is 700 000 meters Marketing Managers opinion: keep the price at 20 and will probably reach 75 000 meters/volume The sales manager: lower the price : 15 to get 25% of the market = 175000 meters /volume Product cost at its lower level : 15.41

Q1: Should Lille Tissage lower the price to FF15?: Our assumptions: 1- LT has several products /businesses which are profitable 2- Competitors had higher costs and are in a hard financial situation Our Recommandation : We should bring the price back to FF15 : At this price level, competitors wont be able to increase their sales price, and well prevent them improving their finacial situation. At a mid term, our competitors maight get in trouble At that moment, we can adjust our price and improve market share and profitability.

Q2: If I were the manager would it be in my financial advantage to lower the price? :
YES but only if we can maintain profitability In this case: Well increase our volume and then realise economy of scales We ll reduce the price and at the same time reduce the payment terms, therefore well generate more cash, have lower credit costs and enough money to finance future investments and reduce our product costs. Q3: Is there any possibility that competition might raise their prices if L T maintains its price of FF20? If so, how do you take this factor into your analysis?: YES it is very probable since they are in financial difficulty, in this case we can consider 3 strategies: we can raise our price more than 20 Or bring our prices down to the competitor price level Or keep our original price : 20

Q4: At FF15 will Lille Tissage earn a profit on item 345? How do you decide?
At FF15, well reach 175 000 meters/volume : at this production level, the production cost has been evaluated at 15.41 therefore it is not profitable and the loss will be 0.41 /meter Nevertheless we can work on reviewing the allocation of selling and distribution oveheads.