These are the following questions which were asked by the Pricing Strategy Manager of Fauji Cement.
WHAT FACTORS DO YOU CONSIDER WHILE SETTING THE PRICES?
In Pakistan, All Cement manufacturing Association (Which Consist of 29 Firms) set monthly meetings where they decide which price is to be set according to the economic factors. ACMA set them a one price which is Maximum Retail Price (MRP) and the Cement companies are not allowed to cross that MRP limit. Suppose if the MRP is 490. So that all the Cement manufacturing companies sell at the low prices of MRP rate. But this is one factor other thing is while setting the prices in Pakistan we must consider the prices that their other competitors use. E.g. if Best way is selling at PRs 460, Fauji Cement must sell at the nearest price of PRs 460 to get the market share. Whenever set the price they see the economic factors as well. They check their resources and see from where they get the raw material and at which cost, they had to pay. So, while considering all these factors they set the prices.
DO YOU CONSIDER INTERNATIONAL PRICES WHILE SETTING THE PRICES OF FAUJI CEMENT?
Yes, they consider. As prices strategies varies from market to market. They see their other competitors while setting the price. Let’s suppose if talked about Indian Cement. They sell at 400 so if they want to stay in the market they have to sell at low price. Because Indian Cement is the well know brand in the Indian market and if Fauji Cement sell at the highest price as compared to Indian Cement peoples will never going to buy. So, it is clearly saying that they consider because that is very important for them.
HOW DOES AN INTERNATIONAL CEMENT PRICE AFFECT THE PRICES OF CEMENT PAKISTAN?
International market doesn’t affect the price of Cement of Pakistan. The international Market is different as compared to the market of Pakistan. If we were taking about the International market, there economical condition is different as compared to Pakistan. They see their international market competitors in the internationally market where they exist. And they set the prices according to them. Suppose if they are producing in Pakistan, they see the resources in Pakistan where they get the cheap coal and cheap labor and used the recourses from Pakistan because it will cost them less. And if is talking about the international, they see the recourses from there because it will cost them more if they produce in Pakistan and then supply to other countries. As to survive in the market they must consider the prices of other competitors that are already doing this in the market. So, their International prices doesn’t affect the prices of Cement in Pakistan.
WHAT IS THE MAXIMUM PROFIT MARGIN YOU PREFER WHILE SETTING THE PRICES?
While setting the prices, first thing that they see is how much they bear the cost to producing this? Cost include all the expenses that occurred while producing the Cement i.e. Variable Cost (salary, electricity bills, etc.), Fixed Cost (Plant Rent, Machinery Cost etc.) & Raw Material that were used while producing. After considering all these expenses they set the price where they get the maximum profit after deducting these things. They must sell at the higher the prices of each unit of cost. (Suppose they occurred a cost of Rs: 490 that include all the expenses and they will sell at Rs: 580 to get the maximum profit on each unit.
WHAT IS THE BENCHMARK YOU LOCALLY SET WHILE MAKING THE PRICING STRATEGY?
Yes, they do have a benchmark while setting the prices. They see their competitors and set their prices according to them. There Benchmark is Best Way Cement, Attock Cement, Lucky Cement, & Askari Cement. We consider these while locally set our prices.