Fortis Industries Inc. Harvard Case Solution & Analysis

Fortis Industries Inc. Case Study Solution

The Sales team will be motivated and it will become easier to sale their product to the consumers. This will create a competitive advantage for the company and will also boost the level of the revenues and profits with respect to the demand for the company’s premium product. By providing the discount, the sales team will convince the customer easily which ultimately satisfy the consumer. When the consumer will satisfy the sales will boost up and it will motivate the sales man that their hard work will pay off. This will result in increase in target sales that leads to the increase in bonuses and commissions and satisfaction level of the salesmen.

For the competitors; it will non beneficial that the competitor will not have any chance in order to increase their market share and reduce the brand name of Fortis and become a market leader in the industry. Fortis will maintain their market share and the competitor will have to face the tough competition by the Fortis and can’t attract the new customers in order to increase their consumer base.

These are all the effects that we have found under the Fortis price flexing strategy. For this, the company wouldn’t increase in a price although the company will provide seven percent discount on their premium prices in order to maintain their market share and consumer base in the industry. By giving the discounts the sales team will convinces the customer in order to buy their product which will result in growth in sales as well as achieving in sales targets. When the target will achieve, employees of the company will be motivated and receives commissions. However the competitor have to face tough competition by Fortis.

An increase in selling price of the steel strapping by offsetting an increase in raw material cost which is given in Exhibit 1 of the document, illustrates that an increase in price by 5 percent will a result in an increase the volume by 10 percent (inelastic demand) would increase the profits for the company and a reduction in the price of 5 percent would decrease the profits for the company. Then again, advising the value flex the value diminishes would be the variable costs, which can without much of a stretch be decreased to assist the organization. In this most noticeably awful and base case, 10% declines and increment in volume stay at all the costs successfully. These are the principle changes in both the techniques for the valuing system. Besides, there is a need to expand the cost by 5 percent to keep up the organization's unique benefit potential over the expansion of expense.

The six situations of the given inquiry are referenced in Exhibit 2 which is likewise appended in the exceed expectations sheet, delineating the examination on the situation which dependent on best case, base case, and most pessimistic scenario. The best situation contains 10 percent on the degree of 100 percent, the base case is subject to just 100 percent and the most pessimistic scenario is less 10 percent out of 100 percent. In the exceed expectations sheet, the yellow featured number demonstrates the great benefits on various value levels for the organization the non-featured numbers demonstrates the awful benefits on various value levels for the organization.

Which volume increase would be needed (or: which volume loss could be incurred, respectively) under the six prices/cost scenarios if the objective is to keep the profit ($) constant? What if the objective is to keep the profit margin (%) constant?

The volume in the worst case will be 90% of the total volume and 10% would go on the loss side. Under the six price or cost scenario results, some prices are meeting on the objectives of the company while the others are not. The yellow highlighted numbers are following the objective of the profit margin while the non- highlighted numbers are not in the support of the objectives of the profit margin. Furthermore, the objective of the company is to maintain its position by following the strategy of the price flex, which is essential for the company in both ends.

As George Reynolds, would you pass on the raw material cost increase or not? Why?

It is not good for the organization to pass the cost of raw materials on to the customers, because this result would create a negative impact on the company and its values. Further, it would de-motivate the sales teams and create a bad image in front of the customers and the corporation will lose its competitive advantage in the market and it would lead towards the losses rather than any gain from this strategy.

As George Reynolds, would you institute price flex as suggested or not? Why? Would you make any changes to the price flex program?

Price flex is a more appropriate option for the business and it should be applied within the company. This would not only bring a competitive advantage to the company but it will also ensure that the company will maintain its cash flows in the future.

The change that should be made in the price flex option is the ability to provide the discount which should be held by the senior staff rather than the sales staff. According to my opinion for the change in the price flex option, the sales staff should nominate who should receive the discount as it is possible that the sales staff would give discounts to everyone just to achieve its sales targets which would bring losses to the company in the long term.

What could explain the scatter gram shown in Exhibit 8?

The scatter diagram explains that if the company will not shift the burden of an increase in raw material prices and bear all the additional charges on itself (which is shown in quadrant four of the scatter diagram) then the customers will more prefer to buy ultimately the demand of a product will increase which will also increase the revenues and profits for the company............


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