Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 3K views

    Parle G

    Uploaded by

    sushrut7
    Parle-G is a low-cost biscuit brand in India that faces pressure from increasing costs. It is difficult for the company to raise prices as demand for Parle-G is highly elastic. The company segmented its customers into retail consumers and institutional customers. Parle-G contributed 68% of Parle's total revenue. Calculations showed that a price increase would lead to a large drop in sales volume and revenue, so maintaining current prices is a better strategy for Parle.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd

    Parle G

    Uploaded by

    sushrut7
    3K views2 pages
    Parle-G is a low-cost biscuit brand in India that faces pressure from increasing costs. It is difficult for the company to raise prices as demand for Parle-G is highly elastic. The company segmented its customers into retail consumers and institutional customers. Parle-G contributed 68% of Parle's total revenue. Calculations showed that a price increase would lead to a large drop in sales volume and revenue, so maintaining current prices is a better strategy for Parle.

    Original Description:

    Case study about Parle G India. It finds out elasticity and other things related to case.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Parle-G is a low-cost biscuit brand in India that faces pressure from increasing costs. It is difficult for the company to raise prices as demand for Parle-G is highly elastic. The company segmented its customers into retail consumers and institutional customers. Parle-G contributed 68% of Parle's total revenue. Calculations showed that a price increase would lead to a large drop in sales volume and revenue, so maintaining current prices is a better strategy for Parle.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    3K views2 pages

    Parle G

    Uploaded by

    sushrut7
    Parle-G is a low-cost biscuit brand in India that faces pressure from increasing costs. It is difficult for the company to raise prices as demand for Parle-G is highly elastic. The company segmented its customers into retail consumers and institutional customers. Parle-G contributed 68% of Parle's total revenue. Calculations showed that a price increase would lead to a large drop in sales volume and revenue, so maintaining current prices is a better strategy for Parle.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Case Parle G

    Parle G is low cost Biscuit brand in India. India was third largest biscuit producer in the world. Most of the growth in industry is fuelled by domestic demand. Pressure from increasing raw material costs and falling margins presents Parle with a difficult pricing decision. However, it is difficult for company to increase prices as its demand is highly elastic. Further, biscuit manufacturing can be divided in two sectors organised and unorganised. Organised sector comprises around 60% of Indian Market. In the organised sector five main categories of biscuits are glucose, marie, sweet, cream and milk. Out of these Glucose is high volume low margin product. Sweet, cream and milk cookies are usually sold at higher margins. All producers usually try to operate at all these categories. As a result there is intense competition in all the segments. The company segmented its customers for Parle-G into two types: retail consumers and institutional consumers. Major section of it is children and mothers, comprising the first sector and contributing 60% of target market. The teenaged consumers were targeted for better influence among non-consuming customers of the product. The institutional customers like hospitals, factories, railway stations, school, government offices and corporate offices, which usually received a discount of 3 to 4 percentage on bulk purchases. This contributed 10% to Parles total revenue. Majority of Indian population stays in rural atmosphere, the retailing of product in small packages (which the customer can afford) was becoming more and more important. Parle-G provided an INR 1.00 pack for 16.5-g packet of biscuits. This helped attract non users, one time users and new users. Parle-G used Amir Khan as a celebrity icon to promote their brand who delivered the tagline G for Genius. The ad spent of Parle was two per cent of annual revenues which amounted to a range between INR600 to INR700 billion during 2004-05 Primarily Parle products are perceived as offering value for money. Parle-Gs contribution to total revenue and total volume is 68% and 77% respectively. It was seen that, a price hike from Rs. 4 to 4.50 lead to drop in sales volume by 40%. If we assume similar effect, subject to Parle increase price in current year. We can say that, volume will drop from 500000 to 200000. Here price elasticity comes to 4.8 and therefore fall in revenue will be 14.28 billion. New revenue will be (53550*0.0002) which is 10.71 billion; as opposed to 23.8 billion. (See annexure at the end.) Therefore, rise in price does not seem a good option for Parle. On the other hand it may try innovative ways of cost reduction and reduction in weight of pack and keep prices fixed at

    current level. The major value seen in Parle brand is value for money component it is important for company to preserve it. Further, it can resort to charging a slightly higher prices for other higher ranges of biscuits and then cross subsidies Parle G. Annexure : Calculation for price elasticity and loss in net revenue Volume Price 0.0005 4 0.0002 4.5 Percentage change in quantity and Price -0.6 0.125 Price elasticity of demand = -4.8

    Revenue (@ price 4) Revenue per tonn New revenue (@ price 4.5) Loss of revenue

    23.8 billion 47600 billion 10.71 billion 13.09 billion

    You might also like