Forner Company
De Castro, Allan Paul B.
11196734
ManAcc
Forner Carpet Company The case of Forner Carpet Company was about determining break-even points. This case requires to determine the appropriate price for a product in the market where the company is not a price leader. Forner Carpet Company, the market leader in high-grade carpet materials, plans to expand/diversify its production, and replace its equipment, hence, a need for fresh capital. In order to support this endeavour, Forner imposed a price increase on its L-42 product to boost income. However, market response has been unsatisfactory, with the competitors acquiring some of Forner’s share. That is where the problem arises. What pricing strategy should Forner Carpet Company utilize in order to maintain the profitability of the L-42 line? A thorough analysis on breakeven points was required to identify the relevant and irrelevant cost benefits in making a decision on price change. It was needed to determine which pricing strategy yields to higher profits. Break-even analysis is also relevant in considering other qualitative factors with regards to the pricing strategy. For this case in particular, the purpose of the price increase was mainly to generate added capital for a proposed business expansion which is a viable reason. However, the assumptions of the case were that the market share of Forner Carpet is not affected by the pricing behavior of the other market players and it focuses only on Forner's L-42 product line and assumes its independence from the company’s other products. It was mentioned in the case that the market for L-42 product was still stable amidst the price change but I still think that it would also be essential to consider the lost in market share of the product in the industry. In the case as proven by the analysis, it turned out that the decision to increase the price to aid the funding of the capital equipment and possible diversification was a good call. I could relate this
11196734
ManAcc
Forner Carpet Company The case of Forner Carpet Company was about determining break-even points. This case requires to determine the appropriate price for a product in the market where the company is not a price leader. Forner Carpet Company, the market leader in high-grade carpet materials, plans to expand/diversify its production, and replace its equipment, hence, a need for fresh capital. In order to support this endeavour, Forner imposed a price increase on its L-42 product to boost income. However, market response has been unsatisfactory, with the competitors acquiring some of Forner’s share. That is where the problem arises. What pricing strategy should Forner Carpet Company utilize in order to maintain the profitability of the L-42 line? A thorough analysis on breakeven points was required to identify the relevant and irrelevant cost benefits in making a decision on price change. It was needed to determine which pricing strategy yields to higher profits. Break-even analysis is also relevant in considering other qualitative factors with regards to the pricing strategy. For this case in particular, the purpose of the price increase was mainly to generate added capital for a proposed business expansion which is a viable reason. However, the assumptions of the case were that the market share of Forner Carpet is not affected by the pricing behavior of the other market players and it focuses only on Forner's L-42 product line and assumes its independence from the company’s other products. It was mentioned in the case that the market for L-42 product was still stable amidst the price change but I still think that it would also be essential to consider the lost in market share of the product in the industry. In the case as proven by the analysis, it turned out that the decision to increase the price to aid the funding of the capital equipment and possible diversification was a good call. I could relate this