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Term 3 Week 1 - Forner Carpet Company

Forner Carpet Company produces high-grade automotive carpets and is the largest in its segment. It raised the price of its carpet L42 from $3.95 to $4.75 per yard on January 1st, 1993 to increase margins, but lost market share to competitors who held their price of similar carpets at $3.95. Forner estimates it could sell 150,000 yards of L42 if it lowered the price back to $3.95, but would only sell 75,000 yards keeping the price at $4.75.

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vineet chauhan
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43 views1 page

Term 3 Week 1 - Forner Carpet Company

Forner Carpet Company produces high-grade automotive carpets and is the largest in its segment. It raised the price of its carpet L42 from $3.95 to $4.75 per yard on January 1st, 1993 to increase margins, but lost market share to competitors who held their price of similar carpets at $3.95. Forner estimates it could sell 150,000 yards of L42 if it lowered the price back to $3.95, but would only sell 75,000 yards keeping the price at $4.75.

Uploaded by

vineet chauhan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Term 3 Week 1 – Forner Carpet Company

Important point of the case

 Make high-grade carpet materials for automobiles and vans


 Forner's products are sold to finishers who cut and bind material to customize size for
specific model vehicles
 Some finisher assembles carpets and floor mats for top-of-the-line cars
 Other finisher focus on replacement and van customizing
 Largest company in segment of carpets for automobiles
 Carpet L42 requires a special machine to produce.
 On January 1, 1993, Forner raised its price on the carpet from $3.95 to $4.75 to bring their
margin up to that of their other carpets.
 Forner's competitors, however, held their 1993 prices at $3.95 on carpets competitive with
L-42
 Forner's price increase resulted in a loss of market share
 Estimated that Forner could sell 150,000 yards if they dropped the price of L-42 back to
$3.95
 If Forner kept the price at $4.75 they felt they could sell 75,000 yards Price @ $4.75

Question
 Should Forner Carpet Company sell carpets at $3.95 (sell 150,000 yds) or $4.75 (sell
75,000)?
 Should Competitor Company rise carpets price to $4.75 ?
 Should Competitor Company decrease carpets price less than $3.95 ?

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