Term 3 Week 1 – Forner Carpet Company

Important point of the case

 Make high-grade carpet materials for automobiles and vans

 Forner's products are sold to finishers who cut and bind material to customize size for
specific model vehicles
 Some finisher assembles carpets and floor mats for top-of-the-line cars
 Other finisher focus on replacement and van customizing
 Largest company in segment of carpets for automobiles
 Carpet L42 requires a special machine to produce.
 On January 1, 1993, Forner raised its price on the carpet from $3.95 to $4.75 to bring their
margin up to that of their other carpets.
 Forner's competitors, however, held their 1993 prices at $3.95 on carpets competitive with
L-42
 Forner's price increase resulted in a loss of market share
 Estimated that Forner could sell 150,000 yards if they dropped the price of L-42 back to
$3.95
 If Forner kept the price at $4.75 they felt they could sell 75,000 yards Price @ $4.75

Question
 Should Forner Carpet Company sell carpets at $3.95 (sell 150,000 yds) or $4.75 (sell
75,000)?
 Should Competitor Company rise carpets price to $4.75 ?
 Should Competitor Company decrease carpets price less than $3.95 ?