Athens Glass works Harvard Case Solution & Analysis

Athens Glass works Case Solution

Problem Statement

 The company has to find the a proper price level at which it can achieve its fair market share with fair profit so that it can cover its costs and has some profit to finance its future costs. Another problem which is seen in this case is that the cost system used by the company is inefficient.

Market share

 The sales volume for Athens Glass Works and the other competitors are given, by using this information market share can be calculated accordingly. Firstly total market volume is identifies, by adding the sales volume of both the company and its competitors. Then market share is calculated by dividing the associated market share with the overall market share. Thus market share is calculated for each period. This is effectively shown by way of a chart. It can be seen that the market share is in declining trend. As the prices increased the sales volume decreases and the company starts losing its market share. (See Exhibit 1)

For the year 1992 the 3rd and 4th quarter have quiet similar sales volume with 1991 3rd and 4th quarter with a difference of 28000 square feet only. Comparing the first quarter of the 1992 and 1993, there is increase of 28000 square feet. While for the second quarter in both years the increases is less with 22000 square feet.

Competitors Behavior

 For determining the overall behavior of the competitors in the industry, a calculation is made that shows the percentage or probability of the certain behavior of the competitor. From the calculation it is seen that the competitors has 62% tendency of following the same pattern the Athens Glass Works adopts, that is the pricing strategy it chooses. There is the probability or tendency of 38% that the competitors will remain neutral to the change made by the AGW. By looking at the trend it is seen that when Athens Glass Works changed it price from $2.05 to $2.15, competitors follows it and changed the price accordingly. The second change of price by AGW is might be presumed to be followed by the competitors due to this behavior. But when price is changed to $2.36, competitors remain neutral here and retain their price level of $2.15. Thus this led to the decline in the market share of AGW.

One of their wrong estimates of competitor’s behavior had made them lose their market share. AGW has made another estimate that the competitors will not reduce the prices below $2.15, and now the estimation is based on actual facts, the economic and industry conditions. Therefore this estimation is reasonably correct.

Regression

 In order to identify the relationship between different variables, different statistical model could be used such as regression analysis which could help the management in order to formulate future strategies with respect to the variable that are being choose in the regression analysis. (Sykes, n.d)

 In this case in order to identify the relation between price and demand, regression analysis performed which shows that relation between price and demand is strong which 73.87% is and it is considered as a positive strong relation. By analyzing the relation between price and demand of the glare glass products it is clear that the standard variation among the price and demand is 47%. Significance of the model is 3.63% which shows that the model is appropriate and the relation between the price and demand of the glare glass products is strong increase or decrease in the price of the glare glass products will affects its demand significantly.

Forecasting

 In order to identify the future trend of the price  and demand of the glare glass products, forecasted price of the products are identified on the basis of moving average method and for this purpose the data of last three quarters have been taken..................

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