Athens Glass Works
4 Pages Posted: 21 Oct 2008
Athens Glass Works has been losing significant market share over the last several quarters in the nonglare glass market with a price 10% above the competition. Lowering the price is under consideration. Unfortunately, fully allocated costs are such that the lower price results in a loss. Issues to be discussed and analyses to be conducted include the relevant costs for the decision and the reactions from competitors.
ATHENS GLASS WORKS
In early August 1993, Christina Matthews, the product manager for nonglare glass at the Athens Glass Works (AGW), met with Robert Alexander, the controller of the Specialty Glass Division, to review the product's performance and prepare a pricing recommendation for the coming quarter. Once approved by the division president, the price would be announced and, as was customary in this segment of the glass industry, adhered to for at least 90 days.
The flat-glass industry was a $ 10 billion industry worldwide, of which $ 2.7 billion was generated in the United States. Approximately 57% of domestic production was for the construction industry, 25% for the automotive industry, and the remaining 18% for specialty products ranging from the mundane, like mirrors, to a wide variety of high-tech applications. Among the many technical applications of specialty glasses were solar panels, laminated and tempered safety glasses, heat- and bullet-resistant glasses, electrical and insulating glasses, phototechnical and photosensitive glasses, aerospace glass, and cookware. Nonglare glass was a fairly simple specialty product designed to reduce the glare of reflected light. It was used primarily to frame and protect artwork.
With 1992 sales of $ 195 million, Athens Glass Works was a midsize, regional glass company serving several niche markets in the southeastern United States. For a number of reasons, AGW enjoyed a dominant market position for nonglare glass in its region: (1) AGW was known for its fast, reliable service; it was willing to deliver glass on short notice at no extra charge in any of a variety of cut-to-order sizes, including the industry-standard delivery size (48-by-96-inch sheets) and all of the standard picture-frame sizes; (2) AGW provided an exceptionally high-quality nonglare glass with little light loss and virtually no blemishes; (3) AGW operated its own fleet of delivery vehicles so that delivery times were well managed and shipping charges were kept low; and (4) AGW's salaried sales staff was widely acknowledged for its helpful, courteous service and customer orientation.
The production of nonglare glass, like many other coated-glass products, began with flat glass, the output of one of Specialty Glass's sister divisions. The flat glass was treated by the Specialty Glass Division with a patented coating that provided the desired optical characteristics. This process required specialized equipment that was usable only in the production of nonglare glass. The finished, treated glass was then cut to order and shipped.
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Keywords: competitive dynamics, pricing, relevant costs
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