Forrester Co Case Study

Topics: Costs, Marginal cost, Cost Pages: 4 (1040 words) Published: November 12, 2011
1.Elasticity:
To find Forrester’s elasticity, I began by calculating Forrester’s market share for all periods and observed that without the change in price Forrester’s market share was always 35% of the Industry demand, I also noticed that Forrester’s demand fluctuated at the same rate as the Industry before the price change, confirming a correlation. Consequently, I considered that, all things held constant, Forrester would have a 35% market share in all periods (as shown on column “Sq Yds @ 35%”, the difference between this assumption and the actual change in demand would be caused by the impact of Forrester’s price change whose absolute number and percentage are calculated on columns “Sq Yds Lost” and “Prod Loss @ 35%”, respectively. Carpet L-42 Prices and Production 1985-1987

Selling SeasonIndustryForresterReal Mkt ShareSq Yds @ 35%Sq Yds LostMkt Share LostProd Loss @ 35%IndustryForrester 1985-1 549,000 192,000 35% 192,000 - 0%0%5.25.2 1985-2 517,500 181,000 35% 181,000 - 0%0%5.25.2 1986-1 387,500 135,500 35% 135,500 - 0%0%4.254.25 1986-2 427,500 149,500 35% 149,500 - 0%0%4.254.25 1987-1 450,000 135,000 30% 157,500 - 22,500 -5%-17%4.255.2 1987-2 562,500 112,500 20% 196,875 - 84,375 -15%-75%4.255.2

1988-1 630,000 150,000 24% 220,500 - 70,500 -11%-47%4.254.25 1988-1 630,000 75,000 12% 220,500 - 145,500 -23%-194%4.255.2

Selling SeasonIndustryForresterSq Yds LostForrester's demand due only to price changes 1985-1 549,000 192,000 - 192,000 1985-2 517,500 181,000 - 181,000 1986-1 387,500 135,500 - 135,500 1986-2 427,500 149,500 -...
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