Lesser Antilles Lines: The Island of San Huberto Harvard Case Solution & Analysis

DECISION PROBLEM

The case is asking to scrutinize the current situation of the San Huberto’s market. After the detailed scrutiny, the job is to evaluate the suitable pricing strategy that will enhance the growth of Lesser Anti Lines (LAL)and expand the business in order to increase the current market share in terms of its contribution. The pricing strategy requires an overall game plan that will neutralize the impact of strategy over the competitor named “KL”.

DECISION ALTERNATIVE & EVALUATION

In the given exhibit, we have generated a game plan showing the prices of both LAL and KAL according to which their estimates for the market share and contribution have been calculated. Both companies LAL and KL have adopted a strategy of niche marketing and they are the only players on the San Huberto’s market for this type of business.

The problem faced by LAL was that it was having low market share 40% as compared to its rival KL’s 60%.Also, the contribution earned by the company as per the current prices was showing a negative value.

We have evaluated four different alternatives by the help of game theory. These four alternatives depend on the different conditions. These four conditions and their ultimate decision, which is suitable for the company,have been shown according to the decision tree(Turocy, 2001). Also, the following fact has been taken into consideration that the demand is inelastic to price changes but may alter if other conditions may arrive in the future. Following are the four alternatives:

Alternative No. 1

Considering the first case in the game theory as given in the Exhibit, in which LAL has adopted an active means aggressive strategy towards the increase in the prices while KL has also reacted aggressively to its price increase. This is may be due to the fact that LAL doesn’t want to be in a loss and was hoping to earn maximum return as early as possible. However,the result of this strategy does not seem to be worthwhile as the company’s market share is still the same as before(Camerer, n.d).

Alternative No. 2

The second case in the game theory is given in the exhibit, in which LAL has adopted a passive strategy towards the increase in the price, which means no increment in the prices while KL has increased it by taking an aggressive (active) approach in the hope of generating more revenue.How ever,it failed to do so as the sustained price strategy of LAL has increased its market share to a substantial level, but instead of such a high share, the contribution earned by LAL as well as by KL is negative.

This strategy may be suitable in a manner if LAL wants to capture the market and forces KL out of it and then again increase the price slowly and gradually to earn a positive contribution after several years. The sample taken shows the result as the price of LAL is 800 and the price of KL is 1500.The market share of LAL is 110% while KL has -10% and the contribution of both the company is negative.

Alternative No. 3

The third alternative is when LAL adopted an active (aggressive) strategy towards the increase in the price, which means substantial increase in the price while KL will not react to this at all. In this strategy, LAL will lose its market share to -30% while KL’s market share will increase to 130% however,again the contribution will be an issue.

Alternative No. 4

The last alternative shows the tendency where both LAL and KL will take a passive strategy, which means not increasing price or increasing price to a certain level so that both can earn greater contribution with an increase or a decrease in market share but with a positive contribution. This can be due to the following facts when both companies want to earn a return, which will remain stable for several years. The prices randomly selected for both at 1000 show same result of their market share as before with a positive contribution margin.

Lesser Antilles Lines The Island of San Huberto Case Solution

All these alternatives have been shown in the decision tree provided in the end of the document.

Conclusion & Recommendation

The conclusion drawn from the analysis of above alternatives is that all the alternatives for LAL are not suitable due to the following reasons;neither the alternatives provide a result in which the company’s market share as well as contribution show the increasing figures. If the company wants to increase its market share as well as contribution then it is recommended for the company to create relationships with companies like Transcribe in order to gain further reputation. Moreover, since KL’s operational ability is weak and defected, therefore this will be a good chance for the company to strengthen its reputation without substantial increment in prices while simultaneously earning positive returns through increased sales........................

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