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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