sparta case
Case Questions
1. When Sparta increased their price of nonglare glass from $2.15 to $2.36 per square foot, they expected competitors to follow this and increase their prices as well. However, competitors did not follow this pricing change and SGP had a large loss of market share. Matthews believed if SGP returned to a price of $2.15 the company could regain a major portion of its original market share with sales of 275,000 square ft. Because SGP has a great reputation, their sales should not fall below 150,000 square ft even when the price was $2.36 per square ft. Pricing was Matthew and Alexander’s main concern. Matthews states that all the companies in the industry were facing the same general economic conditions from the recession. This led her to believe that competitors would not reduce their prices below $2.15per square ft. If SGP decides to return to a price of $2,15 this will help recapture the lost market share, and allow the company to maintain its dominant role in the nonglare-glass niche. However, the $2.15 price might show a product loss. Exhibit 1 it shows that in the 1st quarter of 2002 the sales volume is 139,000, this is below the 150,000 they did not want to happen. However, the next quarter the sales is 162,000. Since the sales average is still above 150,000, I agree with their assumptions. SGP is still able to keep its market share because of its great reputation.
2. Relevant costs
Per sqft
VC – direct labor and depreciation
FC – direct material and shipping
MC – variable manufacturing overhead, fixed manufacturing overhead, corporate overhead, selling & gen admin
Total production
VC – direct material, direct labor, shipping, and depreciation
MC - variable manufacturing overhead, fixed manufacturing overhead, corporate overhead, selling & gen admin
See spreadsheet attached
3. If the price stays at $2.36 per sqft, SGP will make an enormous profit if the sales volume stays above 150,000 sqft. On the other hand, if SGP
1. When Sparta increased their price of nonglare glass from $2.15 to $2.36 per square foot, they expected competitors to follow this and increase their prices as well. However, competitors did not follow this pricing change and SGP had a large loss of market share. Matthews believed if SGP returned to a price of $2.15 the company could regain a major portion of its original market share with sales of 275,000 square ft. Because SGP has a great reputation, their sales should not fall below 150,000 square ft even when the price was $2.36 per square ft. Pricing was Matthew and Alexander’s main concern. Matthews states that all the companies in the industry were facing the same general economic conditions from the recession. This led her to believe that competitors would not reduce their prices below $2.15per square ft. If SGP decides to return to a price of $2,15 this will help recapture the lost market share, and allow the company to maintain its dominant role in the nonglare-glass niche. However, the $2.15 price might show a product loss. Exhibit 1 it shows that in the 1st quarter of 2002 the sales volume is 139,000, this is below the 150,000 they did not want to happen. However, the next quarter the sales is 162,000. Since the sales average is still above 150,000, I agree with their assumptions. SGP is still able to keep its market share because of its great reputation.
2. Relevant costs
Per sqft
VC – direct labor and depreciation
FC – direct material and shipping
MC – variable manufacturing overhead, fixed manufacturing overhead, corporate overhead, selling & gen admin
Total production
VC – direct material, direct labor, shipping, and depreciation
MC - variable manufacturing overhead, fixed manufacturing overhead, corporate overhead, selling & gen admin
See spreadsheet attached
3. If the price stays at $2.36 per sqft, SGP will make an enormous profit if the sales volume stays above 150,000 sqft. On the other hand, if SGP