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A STRUGGLE FOR DOMINANCE:
THE NEWSPAPER PRICE WAR OFSUMMER 1994
Group: 2
Aditya Jha
Elisa Sthapit
Hezron BK
Isha Neupane
Prayash Aryal
Sujeep Maharjan
Sunita Poudel
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WHAT IS HAPPENING ?
Price War:
Times : Sept, 1993- Price reducedfrom 45 to 30p
Telegraph: 23rdJune, 1994- Pricereduced from 48 to 30p
Times: 24thJune, 1994- Price againreduced to 20p
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QUANTITY OF
DEMANDNewspaper 000/day September 1993 May 1994
Times 442 517
Telegraph 1008 993
Guardian 404 402
Independent 332 277
Financial times 287 300
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STOCK MARKET POSITION
Newspaper
(in pence,
except where
stated)
22 June 94 23 June 94 24 June 94
News
international
times
$404.5 $410.5 $399.0
Telegraph 540 349 332
Independent 165 134 130
United
newspaper
daily express
593 510 485
Daily MailTrust
1050 903 870
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INSIDER TRADING INTELEGRAPH
Conrad Black, chairman of Telegraph sold 12.5mshares making 73 millions few days before pricecut.
The accusation of insider trading was laterdenied by him.
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AND MMCS
INTERVENTIONPredatory Pricing
- To set low price to eliminate competition
- Times reduction of price from 30 to 20might be predatory
MMCs Intervention- Expected to penalize predatory pricemakers
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ECONOMIC ANALYSISLaw of Demand (Times Newspaper)
442 5170
10
20
30
40
50
DEMAND CURVE
DEMAND
CURVE
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Cross-Price Elasticity
=
%change in price of Y
where, X= TelegraphY=Times
From the data given, CPE of Telegraph in respect to
change in price of Times equals to 4%
1% change in price of Times will positively affect 4%
change in demand of Telegraph.
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RECOMMENDATION TO
GUARDIAN
Scenario 1
Guardian should experiment with lowering itsprice for few days just like IndependentIf demand increases Significantly price could bemade permanent
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RECOMMENDATION TO
GUARDIAN
Scenario 2 (If Demand doesnt increase)
No Price CutAlready operating profit on the lower side
No significant drop in share price
Brand loyalty of Guardian- evident from the fact
that despite Times and Telegraph lowering itsprice, Guardians demand has not dropped
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THANK YOU