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PLASTIC PRODUCTS LIMITED

Marketing of Throwaway Plastic Ball-Point Pens


In January 1977, Mr. Navneetbhai Shah, the owner of Plastic Products Limited, Ahmedabad, was
contemplating the manufacture and marketing of throwaway plastic ball-point pens.
The Company
Plastic Products Limited produced a variety of consumer durable plastic products as well as a
number of items of packaging materials. It had an annual sales volume of Rs.40 lakh, and made a
profit of Rs. 4 lakh a year. Mr. Shah was an innovative technician. He had in the past designed
many new products. In the previous year, Mr. Shah had made several attempts at manufacturing
throwaway ball-point pens.
The Product
The throwaway ball-point pen required manufacture of a thin, hollow barrel, and purchase and
fitting of brass parts-namely, the point was fitted. Ink was filled in the barrel through a simple
mechanical filling process. The other end of the barrel was kept open so that atmospheric
pressure could force the link to flow smoothly. It was also ensured that link would not spill out
from the open end. Mr. Shah, instead of making the barrel cylindrical, made it angular with six
sides. It was possible for him to colour the six sides of the angular surface white. The barrel
could be of different colours, depending on the colour added to the base plastic raw material.
Economics of Pen Business
Mr. Shah calculated the economics of manufacturing throwaway ball-point pens. His cost of the
barrel, ink filling, and purchasing and fitting the ball and the point all put together came to about
40 paise per pen if he produced about one lakh pens. Considering his other costs, and providing
for a reasonable margin for profits and risk, he would have to fix a factory price of 45 paise per
unit. Considering margins of the trade for stocking and selling such products, he thought that the
consumer could be offered such a pen for about 70 paise. The amount of ink put in the pen and
the consequent life of the pen was equivalent to that of a large refill available in the market at
about 70 to 75 paise. Mr. Shah, therefore, thought that it would be easy for the traders to market
a complete pen at the price of just a refill.
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He had made enquiries in the market about the different kinds of ball-point pens available. No
ball-point pens were available in the price range of 75 to 80 paise. Wilson was selling a different
kind of ball-point pen at Rs. 1.75. This too was a kind of throwaway pen as its refill could not be
changed. There were, however, several other ball-point pens available in the price range of Rs.
1.50 to Rs. 6. Most of the cheaper pens would require substitution of refills every now and then.
Each refills cost was 30 paise. As compared to Mr. Shahs pen, the ordinary ball-point pen
would require at least three refills of 30 paise each for the same life or amount of writing. There
were other ball-point pens in the market too; requiring refills costing Rs. 3.50 each.
Market for Pens
Mr. Shah thought that the pen market was huge. He knows from personal knowledge that there
were lakhs and lakhs of students in the primary and secondary schools. Therefore, the potential
users of ball-point pens could be a few hundred lakhs of students in colleges and schools. He also
thought that there was a large market for offices and institutions, as well as companies. He
thought that the throwaway pen would be very suitable for Banks, Post Offices, etc, where there
was a larger public use, with people sometimes putting the pen in their pockets by mistake and
walking away.He also thought that his throwaway pens could complete even with pencils. He
knew that the per unit price of the pencil was fairly high, and hence, the throwaway ball-point
pens might slowly replace the use of pencils.
Mr. Shahs Concerns
Mr. Shah was wondering whether or not he should make the necessary investment for producing
a few lakh pens per year. He was well aware that he did not have any substantial knowledge of
and skill in the marketing of pens per year. He was well aware that he did not have any
substantial knowledge of and skill in the marketing of pens. He did not know what would lead to
larger acceptance of his pens by traders in terms of readiness to stock and sell them. He was also
not very clear as to the need for giving a brand name to his pens, and how much advertising and
promotion effort he ought to put in.
Mr. Shah has approached you to help him. As a consultant, what advice would you give
him? And Why?
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