Regal Elektrogas

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Uncertainties

Alternative

Uncertainties

1. Reduce the price immediately to the prices before tax reduction

- [High] How will competitors react to the tax changes will affect the industry?

- [High] Will the retailers also reduce the price? They might not be willing to give up their margins.

2. Keep the price for the current year

- [High] How will competitors react to the tax changes will affect the industry?

- [High] Will the retailers still want to sell Regal products with higher prices?

3. Reduce the price by to lower price than it was before,( 5% less than the price before raising the price)

- [High] Will the retailers also reduce the price? They might not be willing to give up their margins.

- [High] Regal might be giving away profit if the competitors do not reduce the price.

- [Medium] The production capacity is unknown.

4. Increase the price

- [High] Will the retailers still want to sell Regal products with higher prices?

- [High] How will competitors react to the tax changes will affect the industry. If they reduce their prices and get a market share from Regal, Regal can have cash flow issues.

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Trade-offs

It is difficult to rank the alternatives due to the fact that the retailers also have a say in the price setting. Even if Regal increases or decreases the price, if the retailers do not respond in the same way the end effect on sales might not be achieved.

Given the consequences and uncertainties, Alternative 3 is likely to satisfy most of the objectives if the retailers buy into the plan. So the decision is to go for Alternative 3 and create an implementation plan to get the retailers on board.

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Linked decisions

On the long term, Asad Ali needs to consider the following:

- Monitor the price of the competitors and make adjustments along the way if necessary.

- What should be the price of desert coolers for next years?

- Does Regal need more retailers to meet expansion plans?

- Does Regal need to change their product portfolio?

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What’s next - Implementation plan

As an implementation plan, we suggest that the prices are reduced to a level which is 5% lower than before the price increase. First, this plan should be communicated with the retailers and see if that they are excited about the plan. If the retailers are not excited, the prices should be kept the same as they are now.

The plan should be pitched as a seasonal campaign and introduce to the retailers that there is a new model Regal is introducing to the market priced lower than the current model, and the model will only be available for this season. The earlier model will also be available to the market.

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Pre-Mortem

- The sales of the lower price take over completely Regal sales which mean the company reduced the price and didn’t increase the sale.

- The retailers do not agree on the price reduction.

- The weather is cool so that the sales do not pick up.

- The production facility burns or cannot produce the products due to other disastrous situation.

- Economic crisis hits and consumers cannot buy coolers.

- The retailers decide to sell other brands and abandon Regal.