Chapter 9 – Teaching Note for Promotion Challenges at Gulmarg Skis
As Gulmarg plans its response for the coming season, the company must make its plans without quite
knowing what Kitz plans to do. The choices for Gulmarg are to not promote, promote in October, or
Gulmarg
Action
No Promotion
October Promotion
December Promotion
Kitz Action
No
promotion
October
promotion
December
promotion
No
Promotion
October
Promotion
December
promotion
No
Promotion
October
Promotion
December
promotion
October
1,600
1,280
1,600
4,320
3,840
4,320
1,600
1,280
1,600
November
2,400
2,160
2,400
1,920
1,920
1,920
2,400
2,160
2,400
December
4,200
3,780
3,360
3,360
3,360
2,688
7,520
6,856
6,260
January
3,800
3,420
3,420
3,040
3,040
2,736
3,040
2,736
3,040
February
2,200
2,200
1,980
2,200
2,200
1,980
1,760
1,760
1,760
March
2,200
2,200
1,980
2,200
2,200
1,980
1,760
1,760
1,760
Table 1: Demand experienced by Gulmarg under different scenarios
The optimal schedule when neither firm promotes is as follows (see worksheet Nobody Discounts):
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Copyright © 2019 Pearson Education, Inc.
If both companies promote in October, each experienced a growth of 10 percent for October (1) and
Copyright © 2019 Pearson Education, Inc.
October promotion by Gulmarg. The 10 percent reduction in February and March would be based on
demand not affected by the October promotion. The optimal production plan for Gulmarg in this case is
as follows (see worksheet Oct Disc Gulmarg Dec Disc Kitz):
(3), and January (4). The December promotion by Gulmarg would then increase demand in December (3)
by 40 percent of the reduced amount (because of the earlier Kitz promotion). There would also be a
If both companies promote in December, each experiences a growth of 10 percent for December and
The profits for Gulmarg for different scenarios are shown in Table 2.
Gulmarg’s Action
Kitz’s Action
Gulmarg’s Profits
No promotion
No promotion
$7,817,600
No promotion
Promote in October
$7,180,200
No promotion
Promote in December
$7,036,200
Promote in October
No promotion
$7,933,500
Promote in October
Promote in October
$7,741,900
Promote in October
Promote in December
$7,296,992
Promote in December
No promotion
$8,073,680
Promote in December
Promote in October
$7,474,856
Promote in December
Promote in December
$7,625,400
From the above results, it seems to be safest for Gulmarg to promote in December because this option
maximizes the minimum profit that Gulmarg could earn no matter what action Kitz took. However, if