aggarwal movers and packers case study PDF

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1) Should Ramesh Agarwal have accepted his CFO’s advice to charge higher prices? Justify Answer: Ramesh Agarwal should not accept the CFO’s advice to charge higher prices as: 1. AMPL operates in a Monopolistically Competitive market. 2. The products/services offered by the firms are almost identical within the industry. 3. The prices charged by competitors are also almost identical. APML has to be in the price range of other competitors. This is evident from the exhibit no.5. 4. In the monopolistic competition market, the cross ‘price elasticity’ of demand is positive. The industry and the market structure pose constraints on pricing power. 5. Due to the presence of several close substitutes, an increase in the price would mean driving the customers away to the other competitors.

6. AMPL followed a cost-plus pricing strategy, so it was covering all its costs. In addition, it had a 12.5% profit margin. 7. APML was a fast-growing niche logistic co. with growing revenues as indicated in exhibit 6. 8. Given the favourable industry drivers viz. Growth in National Income, rise in discretionary spending power, growing urbanisation & need for relocation – AMPL had huge potential for growth. Increase in volumes would contribute to increase in revenue for AMPL. Due to all of the above factors, the price rise as suggested by CFO seems unwarranted.

2) What was the market structure prevalent in the household relocation segment of the Indian Logistics industry? Justify Answer The market structure in the household relocation segment was monopolistically competitive market. The monopolistically competitive market have the following characterisitics. It is an amalgamation of perfect competition and monopoly. 1. Large Number of buyers and sellers. In case of AMPL,there were a large number of sellers offering close substitutes (including some fraudulently using the APML name) There was competition from few, large organized players as well as from small, unorganised players. 2. Differentiated products APML had a strong track record of product and service innovations which acted as differentiators. Differentiation of its offering from that of its competitors in the crowded household relocation industry was the key for it to have some degree of monopoly power over the product. 3. There was ease of entry and exit into the market. 4. Buying is a matter of choice and not chance. Choosing a relocater is not an easy task. There are lots of aspects to be considered before zeroing down the choice. The price, quality of service, safety being some of the factors. In short buyer makes an informed decision and his buying is not a matter of chance. 5. The demand curve is downward sloping but relatively elastic because of the presence of close substitutes. In case of APML, the industry and the market structure pose constraints on pricing power. The competitors charge identical prices. Hence an increase in price by APML would make its customer choose its competitors product. 6. Selling cost becomes important. While differentiation is important, equally important is incurring selling costs to inform customers about product differentiation and to change customer perception regarding their product to distinguish APML from the competition. With ‘Agarwal’ being a common last name in the Marwari business community, more specifically in the logistics industry, the media awareness campaign to inform its customers about potential fraudsters and to prevent them from using APML brand, using the letter ‘A’ as the brand logo and using Ramesh Agarwal as the brand ambassador became the need of the hour.

7. Prices charged differ though they would be in a range. The prices charged by competitors are similar. APML has to be in the price range of other competitors. This is evident from the exhibit no.5. In the monopolistic competition market, the cross ‘price elasticity’ of demand is positive. The industry and the market structure pose constraints on pricing power. Due to the presence of several close substitutes, an increase in the price would mean driving the customers away to the other competitors. 3) What are the differentiation strategies pursued by APML? How do they impact APML’s demand? AMPL deployed the following differentiating strategies: 1. Trucking Cubes:  Designed to overcome problems of trans-shipment and storage especially for small consignments.  Cost savings for small consignments- pay as per corresponding size of cubes booked  sense of safety and security to customers with self-locking facility.  Potential in the large defence industry relocation market. 2. The LED Box:  In 2013 APML devised LED boxes a special reusable state-of- art packing material which would enhance safety and life of fragile gadgets.  The boxes were made of standard TV sizes, were reusable and reduced packing cost by Rs 600 per item. They were also environment friendly. 3. Fabric sheets:  Reusable Fabric sheets replaced corrugated sheets in the packing process.  These sheets were more durable, shock absorbent, cost effective and water resistant. They improved quality by 260% and reduced cost by 26%. 4. Trendy Bags:  In 2009, APML introduced cost effective bags carrying APML logo for packing clothes, toys and books.  These bags were left with customers which helped in their marketing. 5. Personnel Differentiation at APML  Invested in its Human Resources to create better skilled workers  Employee incentive schemes of profit sharing resulted in better employee performance and differentiated its employees.

6. Truck Drivers  APML had realized that drivers held the key to a successful business strategy in transportation industry.  1. 2. 3. 4.

Introduced modified version of “Drive More Earn more” in which a driver could choose a co-driver on long routes. The plan increased Safety-fall in no of accidents. Productivity-large distances could be covered Reduced highway thefts. APML drivers earned more salary than average driver in the industry.

7. Service Differentiation by APML  A 24 X 7 customer support system was created which ensured their problems were resolved immediately.  Provided a personal shifting assistant.  Motto was “Zero Claims, Zero Tension”  Built customer satisfaction. 8. Marketing Differentiation by APML  Created website and other promotional material.  Highlighted “Agarwal Packers and Movers Ltd. Limca Book of Records Holders. An ISO 9001:2008 and ISO 39001:2012 certified company.” Q3b How do these impact APML demand? Answer 1. Differentiation of APML product provides some degree of monopoly power over the product. 2. Differentiation creates a perception that the services of APML are different for reasons other than price. 3. Such differentiation could enable APML to alter the demand curve for their product to their advantage, by making the demand curve more inelastic (steeper) and also shifting it upwards.

4) How do APML’s differentiation strategies impact supply? 1. Product differentiation helps APML to create a certain degree of loyalty for its products/services by positioning itself in customer’s mind.

2. In this way, APML could create entry barriers in a competitive environment. 3. Differentiation helps customer to perceive a product, superior and specific to other available options in the market, creating some degree of monopoly over the product. 4. Incurring selling costs to inform customers about product differentiation and to change customer perception regarding their product to distinguish APML from the competition is required to ensure effective supply. 5. APML can reach out to the customers through a distinctive brand identity and through Promotions....