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What's Lille Tissages' Business and Competitive Situation?

Essay by   •  July 5, 2019  •  Essay  •  350 Words (2 Pages)  •  12 Views

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Week 1 - Discussion 1

1. What's Lille Tissages' business and competitive situation?

2. What's been happening to Lille Tissages' market share? Why?

1. What's Lille Tissages' business and competitive situation?
Lillie Tissage is the largest company in its market segment of the French textile industry. LT is in a very good place in their industry and seems mature on multiple levels. The sales director’s assesses that the company has good brand trust from their consumers. They are looking to increase their working capital to improve and expand production. Furthermore, they have reached an economy of scale that is not matched by their many competitors. LT sets the standards in their industry, with their competitors reacting to their pricing announcements. The marketing director noted that their competitors all had higher costs and are in difficult financial situations.

LT is currently preparing the joint pricing recommendation for Item 345. Starting in 2002, LT raised the price of Item 345 from FF15 to FF20. It’s competitors all held the price at FF15. This created an opportunity for LT’s competitors as the industry production volume grew while LT’s production volume shrank over the past two years.

2. What's been happening to Lille Tissages' market share? Why?

LT has been able to maintain an average market share of around 34% from 1999 to 2001. They dropped their prices in 2000, most likely in response to the large decrease in demand of ~25.2%. Since then, the market size has slowly bounced back, and LT increased their price from FF15 to FF20. This price increase caused their market share to decrease by ~4.7%. However, their revenue increased by ~21.2% versus their competitors increase of ~12.9% because of the price change.

It could be argued that LT had to increase their prices in order to maintain profitability of Item 345. According to estimated costs prepared by their finance director, LT does not appear to be capable of profiting if the price is set at FF15. Increasing volume is not likely to reduce total cost as increasing volume from 175,000 to 200,000 causes Item 345 to experience diminishing returns. Increasing production volume actually raises total cost.

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