Pt. Karet Kuring

Case 1. Industrial Marketing

PT. Karet Kuring

Derived demand and the unique nature of price elasticity impact business in several ways. PT. Karet Kuring is manufacturer of rubber parts that are used by several business including automobile, small appliance, and powered law equipment. PT. Karet Kuring has found that (1) the demand for its finished products has been somewhat irregular, (2) it has encountered shortages and prices changes in its sources, and (3) prices of raw materials have changed form time to time. These factors have made it difficult for the company to operate in consistent manner over time.

The demand for automobile at the retail level is quite cyclical, generally following the pattern of the overall economy. The demand for component parts by automobile manufacturs follows this pattern, with manufacturers lagging behind major shifts in the markets by a few weeks to adjust their products levels. Demand for lawn equipment at the retail level is extremly seasonal, with peak demand over the summer months. Demand for component parts by equipment manufacturers follow this trend. Although it is adjusted somewhat to spread manufacturing over a longer period of time. The demand for appliances is very stable, with little variation based on season or level of economic activity.

PT. Karet Kuring utilizes two basic types of raw materials that in some cases can be substitute. In most cases, however, changing the raw materials input causes a costly changcover in capital equipment. The company’s capital equipment (which is fully depreciated) is in good working condition and is expected to last for several more years before replacement.