In September 2015, the manager of Hind Oil Industries (HOI), a small edible oil manufacturer in Asansol, West Bengal, was challenged by a dilemma in pricing strategy. HOI had seen the price of mustard seeds, its primary raw ingredient, rise steeply because of harsh weather conditions in the previous harvesting season. HOI would need to raise the price of its product significantly in a price-competitive market dominated by larger companies. The manager wondered if he could increase the price of his only product, Maa mustard oil, to cover the substantial increase in production costs without suffering a loss in total revenue earned. If so, what would be the optimum price under various scenarios related to his competitors’ expected price hikes? Could HOI’s price be raised even if the competitors decided against raising their prices?
In September 2015, the manager of Hind Oil Industries (HOI), a small edible oil manufacturer in Asansol, West Bengal, was challenged by a dilemma in pricing strategy. HOI had seen the price of mustard seeds, its primary raw ingredient, rise steeply because of harsh weather conditions in the previous harvesting season. HOI would need to raise the price of its product significantly in a price-competitive market dominated by larger companies. The manager wondered if he could increase the price of his only product, Maa mustard oil, to cover the substantial increase in production costs without suffering a loss in total revenue earned. If so, what would be the optimum price under various scenarios related to his competitors' expected price hikes? Could HOI's price be raised even if the competitors decided against raising their prices?