Case Analysis: Regal Electrogas: Price Leader or Price Follower
Please address the following:
1. Regal's pricing seems to be in the middle of the pack of the competition. Is that a good place to be? If not, how should they price the desert cooler and why?
2. Ambassador seems to have the greatest brand equity. Think about how important that seems to be in this market. What does brand leadership mean in practical terms?
3. Clearly, Regal does not have deep pockets. How would you advise Mr. Ali on his immediate dilemma about whether to rescind his price increase, recognizing that a "wait and see" response itself would have consequences? Justify your response.
In the Regal Electrogas case study, Mr. Asad Ali must determine the pricing policy for his company's desert coolers. The case study indicates competition in the desert cooler segment is "based primarily on price, established image, and product appearance" (Azhar, 2008, p. 15). Currently, Ali has priced his desert coolers in "the middle of the segment's price and volume" (Azhar, 2008, p. 16). Having priced his desert coolers in the middle of the pack has enabled Ali to establish his brand and the quality of this desert coolers, without sacrificing margin. His competitors have focused on quality (Ambassador), particular target customers (Pascra, Canon), or lowest price (one shot dealers). Surveying the marketplace indicates a number of factors: consumers are driven by low prices, yet appreciate quality. Azhar (2008) notes that each time a lower priced model is introduced, the lower priced model experiences a surge in sales, until users determine the quality is inferior. As a result, quality models, like Regal offers, are more appealing in the long run. In addition, the Punjab province accounts for 85% of sales, but there is an opportunity to expand to other regions (Azhar, 2008). Furthermore, consumers appreciate choices in the market place; when Ali offered the same desert cooler under two different brand names overall sales increased.
In determining his pricing strategy, Ali must consider his costs, the likely competitor actions, and his objective. According to the case study, Ali's objective is to increase market share. This is an important consideration in determining the price. Regal's sales represent 9% of the top five desert cooler manufacturers, the top five manufacturers represent 56% of the total desert cooler market. To gain market share, Ali must either change his price and/or increase his quality, or take action to establish his ...
This detailed solution features an essay in response to questions regarding Azhar, W. (2008). Regal Electrogas: Price leader or price follower. Stanford Graduate School of Business, (pp. 15-20) case study. Includes APA formatted references.