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Akron Case Analysis

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Submitted By raenelleango
Words 3297
Pages 14
Akron Automobile
Flooring Company
Case Analysis

Baticulon, Marimar E.
Cheng, Deany Hendrick R.
Ngo, Raenelle Ean A.
Tan, Benson Michael T.
Tanganco, Lyonel T.

Acc 35
S.Y. 2014-2015

Submitted To: Prof. Raleo Belandres
March 22, 2015

I. Background
Akron Automobile Flooring Company is the leading manufacturer of flooring material in its region. The company does not handle any altering, cutting, or finishing aspects of flooring; it simply provides the material. This material is sold to finishers independent of the company, who then adjust the material to fit various car models.
The company announces prices for its products every six months. One of its offerings,
Carpet PA-2, is made using a special machine that cannot be used to make any other line of flooring. To improve Carpet PA-2’s margin, the company decided to increase its price per square yard from $3.95 to $4.75, effective January 1, 2003—a decision made in part due to the company’s anticipation of a large fund need in the near future. Their competitors, however, held their prices constant at $3.95 on carpets competitive with PA-2.
The subsequent two seasons saw a drop-off in the company’s sales of Carpet PA-2.
With this decrease in market share, the company must now decide whether to keep its price at $4.75 per square yard, or to scale it back down to $3.95. The company projects sales of
75,000 sq. yards due to the higher quality of Carpet PA-2 in comparison to the competition, but foresees sales of 150,000 sq. yards if it drops back to the old price. Moreover, the other products of Akron are not affected by the sales of PA-2. The other companies are also not expected to decrease their prices when faced with a decrease in price from Akron, due to their precarious financial position and lower efficiency compared to Akron.
Hence we ask: What was the relationship (if any)

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