MANAGERIAL ECONOMICS: CASE LETS

DISCUSSION
 Case Let One: MAKING MAGIC THE MULTIPLEX WAY
CASE-I: Making the middle class of India, a virtual nonexistent entity on Independence, has gradually become more sensible, educated and demanding. The overall growth
of the economy has given a tremendous thrust to the middle class, expected to grow by 5 to 10 percent annually. It has grown over 57 million by 2001-02 and is expected
to cross 153 million by 2009-10.

The average household income in urban India has grown at a CAGR of 5 per cent over the last decade, not only is this, but the age profile of the INDIAN spenders is also
undergoing a sea of changes.

The multiplex business has rightly tapped the growth of consumerism in India as it has understood the pulse of the Indian Consumer’s preference towards superior
ambience, comfortable seating, air-conditioning and good quality snacks, even at the cost of paying higher price. The average price of ticket in a conventional theatre is Rs.
15-35, while a multiplex charges on an average of Rs. 75-350 and consumer is willing to dish out this extra amount to enjoy the “complete” movie experience, which most
of the traditional theatres could not render and are thus facing the fate of near extinction. It thus promises to take the moviegoers’ experience to a whole new level and
giving a new dimension to watching movies at theatres.
What lessons can you draw from the above case regarding consumer behavior?

Questions
 
1.Do you think change in consumer perception in middle class has been instrumental in emergence of multiplexes? What can be other reasons?
 
2.Would law of diminishing marginal utility apply to movie watching? Will this affect the growth rate of multiplexes? Or can it be seen a cause for establishment of
multiplexes? Give argument in support for your contention.
 
3.Can multiplexes use the concept of consumer surplus for attracting more consumers? How?
 
 
Case Let Two: Peapod Online Grocery

 
• The online grocery turned out to be a lot tougher than analysts thought a few years ago. Many of the
early online grocers, including Webvan, ShopLink, StreamLine, Kosmom, Homeruns, and PDQuick, went
bankrupt and out of business. At one time, Webvan had 46 percent of the online grocery business, but
it still wasn’t profitable enough to survive. The new business model for online grocers is to be part of
an existing brick-and-mortar chain. Large grocery chains, like Safeway and Albertson’s, are experiencing
sales growth in their online business but have yet to turn a profit. Jupiter Research estimates that
online grocery sales will be over $5 billion by 2007, about 1 percent of all grocery sales, while it expects
more than 5 percent of all retail sales to be online by then. A few years ago, optimistic analysts
estimated online grocery sales would be 10 to 20 times that by 2005, but it didn’t work out that way.
         
• Question:
1.What behaviors are involved in online grocery shopping? How does online shopping compare with
traditional shopping in terms of behavioral effort?
 
2.What types of consumers are likely to value online grocery shopping from Peapod?
 
3.Overall, what do you think about the idea of online grocery shopping? How does it compare with
simply eating in restaurants and avoiding grocery shopping and cooking altogether?