APML Case Study – Group Assignment – Group 6

Question 1. Should Ramesh Aggarwal have accepted his CFO’s advice to charge higher
prices. Justify.

Answer – We recommend that Mr Ramesh Aggarwal should not go ahead with the CFO’s
advice of price raise. Because -

 Highest Price Point - APML is already charging the highest price point compared to
its competitors in the market. Increasing the price will make them loose more
customers to the competition.

Price quotation for relocation from New Delhi to Bengaluru

Charges
APM Gati LG Packers Delight
Quotation 33,410 28,450 32,550 25,300

APML is charging 15% more than Gati, and 24% more than Delight already.

 Brand Protection – APML can become more profitable by curbing the other
competitors leveraging on its name. For e.g. Agarwal Shift Packers & Movers,
Agarwal Packers & Movers etc.

 Branding & Advertising – By focusing more on advertising and promotions, APML

can change the consumer’s perception towards their product. Differentiating their
product as superior will increase the demand thus altering their demand curve.

 Differentiation Strategy – APML can adapt various differentiation strategies like

moving experience, personal, service etc. to position their product as a unique
choice compare to other competitors in market. Strong differentiation strategy helps
in eliminating the direct competition.

 Tapping Growing Economy – A growth in GDP and disposable income with favorable
government policies like affordable housing etc. offers a wide market for the
relocation industry. APML can consider it as a new market to tap on.

Q2. What was the market structure present in the household relocation segment for the
Indian logistics industry? Justify.

The market structure present in the household relocation segment for the Indian logistics
industry was a Monopolistic Competitive Market structure because of the following reasons:

 Large number of sellers offering close substitutes: The Household relocation

segment was highly fragmented with 92.5% comprised of unorganized players (many
 of whom were using the Agarwal brand name to and only 7.5% compromised of
large, organized players).

 Freedom of entry and exit into the market: With a high number of unorganized
players in the industry, the entry and exit to the market was easy. Also, the
relocation segment was expected to grow at 18% CAGR and reach $20 billion in
2020, which made it a lucrative industry for players to get into the business.

 Differentiated Product: APML differentiated its product by adopting various

differentiating techniques like packaging, service, human capital and marketing
differentiation to stand out amongst all the other substitutes.

 Different prices charged but within a range: All the players present in the market
had a different price offering for their services but within a range to sustain the
competition in the market. For example, Price quotations for relocation from New
Delhi to Bengaluru of four firms viz Agarwal Movers and Packers, Gati International
Pvt Ltd, LG movers Ltd and Delight varied in the range of Rs 25000 – Rs 33500.

 Buying is matter of choice and not chance: With so many substitutes available, the
customer can choose to go with any player in the market depending on the level of
satisfaction of the customer’s needs.

 Concept of Industry: There were several industry drivers which dictated the terms
and prices of the industry. Some of those were :-

 Growth in National Income and Rise in Discretionary Spending Power: India

experienced a rise in the GDP which increased the income level and the spending
power of the country. This directly affected the Household Relocation industry.

 Growing urbanization and growing need for relocation: 60% of the Indian
population was in the working age-group and a growing economy and growing
urbanization increased the demand for the relocation segment of the industry.

 Growth of E-commerce: Online retailers were expected to compete not only on

product price but also on shorter delivery time, the logistic industry could tap
onto this opportunity.

 Tax Reforms – GST: The introduction of GST was seen to be favorable to the
organized players of the industry as it would reduce the logistics and
warehousing costs which under the current tax structure had to be paid multiple
time due to movement across India’s 29 states.

Q3. What are the differentiation strategies pursued by the APML? How do these impact
the demand?
Answer: Over the years, APML had pursued various differentiation strategies –

i) Differentiating for a moving experience- Differentiation from one’s offering from

that of competitors was the key for firms to have some degree of monopoly
power over the products. Such differentiation could enable APML to shift
demand curve upward and making it more inelastic. (Change in the price didn’t
change the demands). Following are the ways by which APML could make the
difference-

 Trucking cubes – APML started charging its customers on per cube

basis instead of an entire truck. Thus, reducing the transportation cost
of customers. It also stores the consignment in warehouse for 21
days.
 LED Box – APML moved from using wooden Crates for packing
LED/LCD Televisions to cartons packing which reduced the packing
cost by 75%. It also reduced the damage while packing the TV in
wooden crate.
 Fabric sheets- APML started using fabric sheets which were durable,
shock absorbent, cost effective and water resistant. Its reusable
nature led to cost saving of 26% and improved quality by 260% by
protecting goods from the moisture and scratches.
 Trendy bags- APML Replaced carton with eco-friendly bags having its
own logo. It increased the visibility of the brand.

APML was able to cut the various cost associated with relocation cost which directly
benefited the customers thereby increasing the demand of services.

ii) Personal differentiation- Since Transportation industry had shortage of skilled

and unskilled labor, APML hugely invested in developing talent by introducing
new schemes.

 Truck drivers- APML introduced “Drive more and earn more” incentive-
based scheme. In which Driver would receive Rs 15200 for clocking more
than 15 hours with 50 KM/hours speed. It enabled truck drivers to cover
large distance from 250 KM to 450 KM more safely by reducing accidents
and theft.
APML could increase its efficiency by 80% which helped APML to provide quick
transportation/delivery services as compared to its competitors. It further helped APML in
attracting more demands.

iii) Service differentiation-

 24* 7 customer support insured immediate resolution faced by

customer.
 APML had adopted zero claim, zero tension which helped build customer
satisfaction and trust.
 By focusing on better customer experience, APML could Build trust and satisfaction which
helped APML to tap on returning customers.

iv) Marketing differentiation –

 To cement their brand in the industry APML used Limca book of records,
public recognition and achievement.
Marketing differentiation helped APML to build a distinctive identity. It would help
customers to choose APML over others due to differentiation in services.

Q4. How do APML’s differentiation strategies impact supply?

Answer: To increase the supplies, APML launched the plan “Drive more, earn more” under
which the drivers would be paid more if they drive additional kilometers. But quickly he
realized the flaws of his plan that this plan would only increase the probability of accidents
and damage to consignments.
So, later the plan was devised with the driver being given an option to choose a co-driver for
longer routes. The base pay was Rs. 2 per km and the drivers were paid incentives if they
clocked more than 15 hours a day. This plan increased productivity and the distance covered
by a single truck per day increased from 250 km before to 450 km after.

This way, they were able to serve more customers with the same number of trucks.