Agarwal Packers and Movers Limited Case Solution

1. Should Ramesh Agarwal have accepted his CFO's advice to charge higher prices? Justify 

From the analysis of the case study, it is recommended that Ramesh Agarwal should not have accepted his CFO’s advice to charge higher prices to his customers. Since the company exists in a highly competitive industry where there is a large number of buyers and sellers, Ramesh should not think of increasing the prices as it would result in the company losing sales. Since there are many substitutes available offering the same products and services, there is a high possibility that the customers will switch to another company for availing of logistics services. Also, if the packaging materials change its prices, the freight costs charged to the customers are likely to increase. Agarwal Packers and Movers Limited (APML) has a high price elasticity which means that due to many substitutes available in the industry, any small change in price would result in a greater change in the quantity demanded. If higher prices are charged, customers will demand less of the company’s products and services and will switch to cheaper alternatives. Keeping the prices low will result in brand protection as customers will stay loyal towards this brand and will become this service’ fanatics.

If prices are lower, the company can maintain a competitive advantage over its rivals in the logistics company. The profitability will increase, and it can earn a positive financial position resulting in greater revenues. Other than higher prices, Ramesh can still improve its brand image and increase its sales through multiple differentiation strategies. For example, branding and advertising can be improved, which can increase the demand for APML’s services. The decision not to respond to price hikes will result in eliminating competition. The option to choose from many buyers results in sellers going for the cheaper ones. Hence, price wars are likely to happen where competitors deliberately lower the prices to attract customers. In such cases, a price increase would result in an unfavorable financial condition for Agarwal Packers and Movers Limited. 

2. What was the market structure prevalent in the household relocation segment of the Indian Logistics Industry? Justify 

The Indian Logistics Industry has a monopolistically competitive market structure prevalent in its household relocation segment. This market structure has a number of characteristics that are similar to the operations of the Agarwal Packers and Movers Limited. There are a large number of substitutes available in the logistics industry of India. This means that even if large companies have a bigger market share, they are still vulnerable to risks that come from innovative small and medium enterprises. Innovation can help companies to generate success, and this is what Agarwal Packers and Movers Limited must focus on in order to increase its productivity and revenue. With many players operating in this industry, APML must not only hire skilled workers, but it must have an efficient business model which attracts more revenue and repel competition.