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Hind Oil Industries Demand Analysis Case Solution

Solution Id Length Case Author Case Publisher
2186 1048 Words (5 Pages) Abhishek Rohit, Debdatta Pal, Pradyumna Dash Ivey Publishing : W17229
This solution includes: A Word File A Word File

The price of mustard seeds had reached an all-time high. HOI was producing the oil at the same price even when the price for seeds had increased. HOI had always sold its product at a price lower than that of the competitors. The strategy that had been adopted by them from the very start was based on a price differential. Even though the brand had earned a good name over the years in the industry yet increasing the price was something they didn’t look forward to. The manager was of the view that if the prices were increased, the revenue for the company would be adversely affected.

Following questions are answered in this case study solution:

  1. Please identify the main dilemma that the manager faces. In your answer, please be sure to back it up with specific issues and events that caused the dilemma.

  2. Identify the main concepts that we covered in the course that could help the manager determine his pricing strategy. In using those concepts, how should he approach the resolution of his dilemma?

  3. Quantitatively, determine the optimal price that he can charge for Maa Oil, his only product, given the market he now faces, his competitors, and the prior year’s harvest/harsh weather conditions. Back up your answer with data from the exhibits.

Case Study Questions Answers

The sales were also seasonal in nature, which clearly meant that the revenue didn’t follow a steady stream. Oil varieties like palm oil and soybean oil were dominating the Indian market over time. They possess up to 42 percent of the shares for palm oil and 17 percent for soybean oil. Mustard oil only accounted for 13 percent of the market share in India. Since palm oil was cheaper this is why it dominated the Indian market. Further, it was supported by cost reduction, lower freight prices, and fewer import duties. Already such stiff competition in the market had made many of the oil manufacturers unprofitable. The threat of new entrants was already present in the market in addition to the industry is fragmented. The industry was a lucrative one because the demand for edible oil was increasing over time in India. Yet with the increase in income levels, individuals were shifting towards more refined and healthier options. 

2. Identify the main concepts that we covered in the course that could help the manager determine his pricing strategy. In using those concepts, how should he approach the resolution of his dilemma?

Taking into account the prices of the competitors in the market, the pricing strategy of the company can be set. Initially, the firm followed a price differential strategy so that it didn’t lose out on the customers it already had. Marginal revenue, actual cost, fixed cost, and variable costs should be taken into account prior to determining the pricing strategy. The manager should not increase the price of the product because then he would lose out on the market share of the product (Salvatore). Marginal cost is very important when then the price of a product is to be set in an environment where competitors are functioning productively. The manager can calculate the optimal price of the product in order to choose the price at which the profit can be maximized. I don’t think that the manager should increase his product’s price beyond that of his competitor’s. In case if he chooses to do so, he’ll lose out on the market share that the product has gathered over an extensive period of time. New oils such as cottonseed oil etc. have already displaced the market in addition to the introduction of packaged and unpackaged oils. The population is already moving towards oils that come in good packaging because the purchasing power and income per capita of the population have increased. Large oil manufacturers are already offering consumers the option of choosing from a diverse variety of products. The manager should take into account the pricing of the products in the market prior to resolving his dilemma. 

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