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Derb Cement

Derba Cement's demand is primarily driven by construction and infrastructure development in Ethiopia, with moderate price sensitivity among buyers. The company should implement competitive pricing, volume discounts, and relationship-building strategies to optimize sales while monitoring construction trends and competitor pricing. Additionally, offering value-added services and targeted marketing can help differentiate Derba Cement in the market.

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21 views4 pages

Derb Cement

Derba Cement's demand is primarily driven by construction and infrastructure development in Ethiopia, with moderate price sensitivity among buyers. The company should implement competitive pricing, volume discounts, and relationship-building strategies to optimize sales while monitoring construction trends and competitor pricing. Additionally, offering value-added services and targeted marketing can help differentiate Derba Cement in the market.

Uploaded by

direahmeddireahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Product Selection: Derba Cement

Demand Types:

• Derived Demand: Demand for Derba Cement is strongly derived from the demand for
construction and infrastructure development in Ethiopia.

• Explanation: As the demand for housing, commercial buildings, roads, bridges, dams, and
other infrastructure projects increases, the demand for cement (including Derba Cement) also
increases. If there's a slowdown in construction activity (e.g., due to economic recession,
political instability, or government budget cuts), the demand for cement will decrease
accordingly. The boom in real estate and infrastructure projects has created lots of demand in
the nation.

• Joint Demand: Derba Cement exhibits joint demand because it is used in conjunction with
other essential inputs in construction.

• Explanation: Cement is required along with other raw materials like aggregates (sand,
gravel, crushed stone), reinforcing steel (rebar), water, and labor to produce concrete, which is
a fundamental building material. The demand for Derba Cement is interconnected with the
availability and demand for these complementary products. If there's a shortage of rebar, for
example, it could indirectly impact the demand for cement.

• Price Sensitivity and Insensitivity: Derba Cement exhibits moderate price sensitivity.

• Explanation: While cement is a significant cost component in construction projects, it's not
always the most price-sensitive factor.

* Price-Sensitive Factors: Large construction companies and contractors are highly price-
conscious and will likely seek the most competitive prices for cement, potentially switching
between suppliers if there are significant price differences. Small contractors and individual
builders are also price-sensitive.

* Price-Insensitive Factors: For projects where quality and reliability are paramount (e.g.,
major infrastructure projects), or where switching costs are high (e.g., due to existing
relationships or contracts), buyers may be less sensitive to minor price fluctuations.
Government-funded projects may also be less price-sensitive. If demand is higher than supply,
then buyers will be price insensitive.

• Elasticity:

• Reverse Elasticity: Reverse elasticity of demand is less relevant in this case.

• Cross Elasticity of Demand: The cross-elasticity of demand for Derba Cement is relatively
high with respect to other cement brands in Ethiopia.

* Explanation: If the price of Derba Cement increases significantly while the prices of
competing brands (e.g., Mugher Cement) remain stable, customers will likely switch to the
cheaper alternatives. This is especially true for price-sensitive buyers. Therefore, Derba Cement
needs to carefully monitor the pricing strategies of its competitors. The more substitutes the
customer has, the more price elasticity they will have.

Recommendation:

Based on these demand characteristics, here are some pricing and marketing strategies Derba
Cement could use to optimize sales:

• Competitive Pricing:
• Maintain competitive pricing relative to other major cement producers in Ethiopia.
Regularly monitor competitor prices and adjust pricing accordingly to remain attractive to price-
sensitive customers.

• Volume Discounts:

• Offer volume discounts to large construction companies and contractors to incentivize bulk
purchases and secure long-term contracts. This could involve tiered pricing based on the
quantity of cement purchased.

• Relationship Building:

• Focus on building strong relationships with key customers, such as government agencies
and large construction firms. This can increase customer loyalty and reduce price sensitivity.

• Value-Added Services:

• Offer value-added services such as technical support, on-time delivery, and quality assur

ance to differentiate Derba Cement from competitors and justify a premium price.

• Targeted Marketing:

• Develop targeted marketing campaigns aimed at different customer segments, highlighting


the specific benefits of Derba Cement for each segment (e.g., quality, reliability, price).

• Supply Chain Management:

• Optimize supply chain operations to reduce costs and improve efficiency. This can help
Derba Cement maintain competitive pricing while still achieving profitability.

• Monitor Construction Trends:

• Closely monitor trends in the construction industry to anticipate changes in demand and
adjust production and marketing strategies accordingly.
By understanding and responding to these demand characteristics, Derba Cement can optimize
its pricing and marketing strategies to maintain a strong position in the Ethiopian market.

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