Frito-Lay/Cracker Jacks Case Analysis
Organizational Culture and Globalization
Stanley Brett Yunker
Davenport University
MGMT 735
Professor Andrew Makar
October 18th, 2010 Case Recap Superior Supermarkets (SS) is a division of Hall Consolidated, a privately owned wholesale and retail food distributor. SS is the smallest of three chains which caters to the South Central United States and is ranked either No. 1 or No. 2 in each of its markets. SS has been considering an ‘Everyday Low Prices’ strategy for many years. It is felt by due lower than expected sales based on budget targets, that revisiting the issue of a new pricing strategy is warranted. A management meeting is scheduled to discuss this matter and a decision is expected on this topic.
Problem Identification Superior Supermarkets (SS) in the Centralia market are being faced with a potential loss in market share as reflected in the last two quarters of declining revenue, even though the net profit margin was only slightly lower than the budgeted target. It is proposed that the three stores in the Centralia area implement an ‘Everyday Low Pricing’ program to better position itself competitively, reduce operating costs, and cater to the growing price consciousness of its consumer base. Currently, SS is viewed as having the highest priced items among its competitors and is inferior to its competitors in a number of store characteristics, except convenience, quality of bakery goods, and store service (as determined by a customer survey). In order to consider a new pricing program, a number of factors need to be considered. In particular, customer value perception, buyer price sensitivity, product demand, product differentiation (among competitive offerings), life-cycle stage of products, and break-even analysis. Customers will be more willing to respond to price reductions on items they perceive as having a higher value (value increases with decreased price or increased perceived benefit). Also, not all supermarket
Stanley Brett Yunker
Davenport University
MGMT 735
Professor Andrew Makar
October 18th, 2010 Case Recap Superior Supermarkets (SS) is a division of Hall Consolidated, a privately owned wholesale and retail food distributor. SS is the smallest of three chains which caters to the South Central United States and is ranked either No. 1 or No. 2 in each of its markets. SS has been considering an ‘Everyday Low Prices’ strategy for many years. It is felt by due lower than expected sales based on budget targets, that revisiting the issue of a new pricing strategy is warranted. A management meeting is scheduled to discuss this matter and a decision is expected on this topic.
Problem Identification Superior Supermarkets (SS) in the Centralia market are being faced with a potential loss in market share as reflected in the last two quarters of declining revenue, even though the net profit margin was only slightly lower than the budgeted target. It is proposed that the three stores in the Centralia area implement an ‘Everyday Low Pricing’ program to better position itself competitively, reduce operating costs, and cater to the growing price consciousness of its consumer base. Currently, SS is viewed as having the highest priced items among its competitors and is inferior to its competitors in a number of store characteristics, except convenience, quality of bakery goods, and store service (as determined by a customer survey). In order to consider a new pricing program, a number of factors need to be considered. In particular, customer value perception, buyer price sensitivity, product demand, product differentiation (among competitive offerings), life-cycle stage of products, and break-even analysis. Customers will be more willing to respond to price reductions on items they perceive as having a higher value (value increases with decreased price or increased perceived benefit). Also, not all supermarket
References: Anderson, P.L., R.D. McClellan, J.P. Overton, and G.L Wolfram (1997). Price elasticity of demand. Retrieved on August 10th, 2010 from http://www.mackinac.org/1247 Kerin, R