Marketing 400 level case study

hi-value_hints_.docx

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MKT 412

Hi-Value Supermarkets Hints

Note: Dates in the first three paragraphs of the case are wrong. Convert them as follows: 2006 is really 2003, 2005 is 2002, and 2004 is 2001. This will keep the opening information consistent with the dates later in the case. Also in the first paragraph, replace “Superior stores” with “Hi-Value Supermarkets.”

There are a number of topics included in this case, but since it goes with Chapter 8, your focus should be on pricing strategies. As we’ve discussed, however, pricing does not occur in a vacuum and there is other information which will impact your analysis of this case and any potential strategies. For those of you not familiar with retail (including supermarket) pricing, one strategy is “hi-lo” where prices may be set at a certain, generally higher, level but then reduced through sales, coupons, promotions, etc. Another strategy is everyday low pricing (EDLP) in which stores set prices on a consistent basis and do not discount. Note that EDLP does not necessarily mean having the lowest price in the market area; nor does it mean that this strategy needs to be applied to all product categories. Based on sales, consumer price sensitivity and elasticity, margins, and other factors, different strategies can be applied to different product categories.

Questions you may wish to consider as you analyze this case include:

· What is the supermarket competitive environment in Centralia? What are the key market trends? What is Hi-Value’s competitive positioning? What should it be?

· What is important to Centralia supermarket shoppers? How does Hi-Value compare to its competitors on these criteria? What are the implications for Hi-Value?

· What is happening with Hi-Value in the first quarter of 2003? What do you know about Hi-Value’s performance in the recent past? How does this impact what they should do?

· What is Hi-Value’s primary current pricing strategy? What are the pros and cons of this strategy for Hi-Value? What is Hi-Value’s financial outlook, including profitability, for 2003 if they continue this strategy given the information in the case?

· What are the pros and cons of an EDLP strategy for Hi-Value? What are the financial implications of implementing an EDLP strategy for Hi-Value? Pros/cons and financial implications of implementing EDLP on specific categories vs. all product categories? (Note that you should be able to develop at least the top part of an income statement for Hi-Value in some detail based on the case data and use that to analyze what happens under various scenarios. Since there is no expense data by product category, focus on the gross margin when analyzing any product category pricing options. You can assume that Hall Consolidated executives do not want to see any decrease in current profitability goals, and that these can be based on 2002 levels. You can also assume that Hi-Value must maintain its dollar gross margin to cover expenses and profit goal, and that, while you may look at different pricing options for different product categories, the proportion each category represents of sales will stay the same.)

· Treat the three Centralia Hi-Value stores as a group for purposes of this analysis.

· In your alternative analysis and eventual recommendation, how are the financial implications of your analysis balanced by the non-financial ones given what you know about Hi-Value and the Centralia supermarket shoppers’ behavior?

(S16)