“ Kepe] Harvard Business School Lille Tissages, S.A. Eariy in 1997, he marked firectar and the finance dicecior of Lille Tiss SA. mete prepare 4 jist pricing recommendanon for Ite 343. After the managing dicectar A3d approved her cecommendaton, the company would snaounce the price in letert to ith customers, I= accordance with company and industy practice. announced prices were adhered to er the year slags caaicsl changes in the market S34 occurree Lille Tistages was located in Lille, France. [twas the largest company in its segment ofthe Franch seatle natstey ite 19% aalee had exceeded $595 millies. Company salesmen were on 3 stcaight salary basis, end each salesman sold the fll ine, Mest of Lille Tissages’ competitors were imal Usually. they waited lr Lille Tesagas to announce prices before sailing out ther wn once hte wer 345, 19 expensive yet com pative fabeic, was the sole product af x gepartment whose facilities could net be ublized o8 other sers in the produc line, in January 1995, Lille Tages nad, ‘aise its price from FFIS to FF20a mater. This had deen done to bring the aroli per meter on em S43 up to that of ather products in the line. although the company was in 4 stong postion Faancially, it would equise consicerable capital in the nex: few years to finance 4 recently approved long-term modernization and expansion program. The 1995 pricing decision had been ont of several changes advocated by the eirecoss in an attempt fo strengthen the company's working capital position so aso insure that adequate fund: would be avails for this program. Competitors of Lille Tssages had held ic prices on producte similar to Item 345 at #15 uring 1995 and 1996. The industry ané Lile Tissages volume for tem 345 for the years 199196, 36 estimated bythe sales direcer are shows in Exhibitt. As showa by this exhibit Lille Tissages had los a significant portion of is form er market postion. In the sales Sitecor’scpinion, a teagonable forecast of industey volume for 1997 a2 700,000 meters, He wat certain that the com pany could sel 25% af the 1997 industry total if adopted the FF13 price, He feared 4 further volume deci i id not sett the competi He feired a further volume decline if it did net meet the Competitive price. AS many consumers were convinced of the superiority of the Lille Tssagee product the sales director reasoned that sales of Liem 345 would probably sot fall below 75,600 smetecs,even ata FF20 price. During the icing discussions, the finance director and the marketing direcor had considered two ot ‘ped of the arable. The finance director was concerned about she possiblity thas compestrs would redact thei prices below P15 if Lille Tiesages announced 9 #F15, price for item 345. The maskenng director was confident that competitors waulé not go below FFIS Ti ses prt he hei ls dca hr Ua ade har te an ing ee ‘ernst ware (Copyright ©1997 by te Presten and Fellows of Harvard College. To order cops or request permission to eprocce materials call -500-55-76,wrte Harvard Busines schon Pushing Boston. MA OE. 9 0 ii /worw besafervarceeu. Wo pact of ts publication may be eepeduced. sored in rmneal eye, seein Spano ares in ry er OY any retgacrone Mecanl, POM recording. or otherwise without the permastion f Hara Binet Sohoows ” tite Tssages. 3A. aces Exhibit 1 [tem 45, Prices and Production, 191-1995, ee Raa ae Pe Volume af Production (meters), Price (Frenen francs) ae a Lo Yoar Industry Total tile Tssages "Competitors _Lit Tiscages 1991 510.000 242.000 20.00 20.00 1992 575.000 200.000 20.00 20.00 1393 ‘20,000 150000 15.20 1s.00 1994 «75.000 465.00 1800 15.00 1996, 00,000 150000 1800 20.00 1396 (est) 525,000 125,000 1800 20.00 —IS SO TT ie BO eed wo