Medics Laboratories (Pvt.) Ltd. Harvard Case Solution & Analysis

Medics Laboratories (Pvt.) Ltd. Case Study Solution

Determining the ‘right’ price for the product is a very sensitive decision, charging abnormally high price would scare off the customer. Therefore, you cannot charge exceptionally high price, similarly you cannot charge unusually low price as it gives the wrong signal to the customers about the quality of the product, also you may loose profit which is essential for any business which is based on profit motive.Business can adopt various kind of pricing strategy depending upon their product, customers & the geographical location of the firm, such as price penetration, differential pricing strategy, discounting pricing, price skimming & may adopt dynamic pricing. But it is crucial that organizations first identify its business objectives and then select the best strategy to achieve those goals. In our case price is a close decision as Medics is in the business of providing health care products to its customers. Therefore, the price change should be highly justifiable & it would also perceive the value for money to the customers. Medics is operating in a competitive environment where many competitors provide the equally compelling product with a relatively similar price, therefore, the customer will only accept the increased price if the company adds more value to its product. In the case of Medics, they are in the expansion phase & they need to incur significant capital investment to increase their production capacity also need investment to improve their operation and make it more efficient, the increase could also be justified as their current price are less than their competitors. (Richards, n.d.)

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Company Background

Medics is a herbal medicine based industry, it established back in 1986 Mr. Tawassul Hussain was the founder of the company, the core objective of the establishment of the company is to provide naturally advance products with zero side effects to the users and provide an alternative to conventional medicine. In 1986 the company launched its first herbal product Digas Tablet (for digestive disorder), and with the passage of time, it added more products to its product line. Currently, the company has eight products within its product portfolio all the goods are available in different packaging & in various sizes & customers choose the one that best suits their needs. Currently, the company distributes its product through selective retail distributors within the country, it offers over the counter products to its customers.(Our History, 2014)

While making any price change, the Medics consider its market position, the market share of its product and also the overall size of the market, because any un calculated move would affect the current market share and annoyance to the customer.

Medics Laboratories (Pvt.) Ltd. Harvard Case Solution & Analysis

Existing Pricing Structure

The company is currently using Marginal Pricing Strategy, this covers all its variable cost well, but as the company is now planning to increase its production capacity it needs to increase its prices by 10% on all its products to cover its capital expenditures & to achieve targeted profit, one of its core product. Digas Tablet is in its maturity phase with high market share with relatively low price with one of its direct competitor Qureshi Laboratories similar product Gas to fill.(Marginal-cost pricing, 2006)

Price Increase

Therefore Medics here has an edge to enhance its price as it is currently charging $ 0.95 for 60 tablets pack & $ 1.20for 120 tablets pack, whereas its Qureshi is currently available only in 100 tablet bottle and are charging $ 1.40 for it. Both the companies are using glass bottle which is more expensive and also breakable. Therefore if the company increase its price by 10 % to its current price even then its revised price would be less than its competitor i.e. $1.20 + 0.12> $1.30 < $ 1.40. It can also increase its profitability by using a less expensive material such as plastic pet bottle instead of a glass bottle; it can positively market it by saying it is much lighter & also unbreakable, by doing this they can save cost and bring an edge over their competitor. They also need to bring improvements to the design and effectiveness of the product to make the increase more justifiable. Medics might also need to consider that price increase would probably not be the only solution to improve profitability. In fact,every time you raise the price of your product you enhance the risk of losing your loyal customers, therefore, it is imperative to consider its repercussions as well &on the contrary this might increase the competitors market share.

Communication

The most important thing is how you communicate the change to your customer since Medics is a manufacturer organization& currently not delivering the product directly to the end consumer. Therefore, it first needs to communicate the change to its distribution channel & through them to wholesalers & retailers. If the distributors perceive the change successfully than they would be able to communicate this to the wholesalers and the retailers as well, improved packaging is also a good justification to support the price change as it gives indicators to the customer that there are enough reason for the increase.............

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