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    Assignment #4 Case: Hi-Value Supermarkets (Pgs 500-511) Due: Before 11:59 P.M. April 20, 2020

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    Lisa Fleming
    1. The document discusses a case study assignment for Hi-Value Supermarkets. It analyzes the competitive environment in Centralia and Hi-Value's relative performance. 2. Key points of analysis include Hi-Value controlling 23% of the market but being seen as more expensive. Everyday low pricing is considered as an option to improve perceptions and potentially gain market share. 3. Implementing everyday low pricing could have pros like improved inventory management but also cons like decreasing margins if sales don't increase enough. Maintaining profit levels would require around a 24% increase in total sales. 4. The recommendation is for Hi-Value to implement an everyday low pricing advertising campaign to gain the perception of lower

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    Assignment #4 Case: Hi-Value Supermarkets (Pgs 500-511) Due: Before 11:59 P.M. April 20, 2020

    Uploaded by

    Lisa Fleming
    101 views3 pages
    1. The document discusses a case study assignment for Hi-Value Supermarkets. It analyzes the competitive environment in Centralia and Hi-Value's relative performance. 2. Key points of analysis include Hi-Value controlling 23% of the market but being seen as more expensive. Everyday low pricing is considered as an option to improve perceptions and potentially gain market share. 3. Implementing everyday low pricing could have pros like improved inventory management but also cons like decreasing margins if sales don't increase enough. Maintaining profit levels would require around a 24% increase in total sales. 4. The recommendation is for Hi-Value to implement an everyday low pricing advertising campaign to gain the perception of lower

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    MBA 5313 - Assignment_4

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    1. The document discusses a case study assignment for Hi-Value Supermarkets. It analyzes the competitive environment in Centralia and Hi-Value's relative performance. 2. Key points of analysis include Hi-Value controlling 23% of the market but being seen as more expensive. Everyday low pricing is considered as an option to improve perceptions and potentially gain market share. 3. Implementing everyday low pricing could have pros like improved inventory management but also cons like decreasing margins if sales don't increase enough. Maintaining profit levels would require around a 24% increase in total sales. 4. The recommendation is for Hi-Value to implement an everyday low pricing advertising campaign to gain the perception of lower

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    101 views3 pages

    Assignment #4 Case: Hi-Value Supermarkets (Pgs 500-511) Due: Before 11:59 P.M. April 20, 2020

    Uploaded by

    Lisa Fleming
    1. The document discusses a case study assignment for Hi-Value Supermarkets. It analyzes the competitive environment in Centralia and Hi-Value's relative performance. 2. Key points of analysis include Hi-Value controlling 23% of the market but being seen as more expensive. Everyday low pricing is considered as an option to improve perceptions and potentially gain market share. 3. Implementing everyday low pricing could have pros like improved inventory management but also cons like decreasing margins if sales don't increase enough. Maintaining profit levels would require around a 24% increase in total sales. 4. The recommendation is for Hi-Value to implement an everyday low pricing advertising campaign to gain the perception of lower

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    ASSIGNMENT #4

    Case: Hi-Value Supermarkets (Pgs 500-511)


    Due: Before 11:59 P.M. April 20, 2020

    Answer the following six questions before writing your case brief:

    1. How would you characterize the supermarket competitive


    environment in Centralia?
    Hi Value controls 23% of the market. This is the 2 nd most market share
    amongst the 4 major brands. Though they are nearly tied with Harrison’s
    who have much lower prices than they do. Overall, Hi-Value seems to be
    doing relatively well in the market share category. Hi-Value does have an
    opportunity to gain a larger portion of the market share. If they were to be
    able to change their overall company perception by the public.

    Rank Order Criteria Best % Worst %


    Harrison's Missouri Mart Grand American Hi-Value
    High Rank 1 Price 36% 34% 11% 7%
    2 Meat 27% 11% 20% 18%
    3 produce 35% 11% 21% 24%
    Lower Rank 4 Convenience 21% 25% 18% 35%

    Rank Order Criteria Best % Worst %


    High Rank 1 Price Harrison's Missouri Mart Grand American Hi-Value
    2 Meat Harrison's Grand American Hi-Value Missouri Mart
    3 produce Harrison's Hi-Value Grand American Missouri Mart
    Lower Rank 4 Convenience Hi-Value Missouri Mart Harrison's Grand American

    Once we reorder the chart and only look at the most criteria to Hi-Value’s
    customer, we see that Hi-Value has a lot that it can do to gain market
    share. Customers find the store to be convenient and have decent
    produce, but that is about it. The company could look at its meat products
    and availability or even implement a new pricing structure.
    The grocery business is highly competitive. There are typically quite a few
    competitors all vying for the same customer. Customers are also typically
    not loyal to just one business. They tend to shop where it is convenient
    and cheap. Pricing being more important factor, convenience usually only
    plays a roll if you need just a few items (not spending a lot of money). If a
    customer is looking at spending a lot of money on a large shopping trip,
    they will be inconvenienced to save money.

    2. How might everyday low pricing affect Hi-Value Supermarkets’


    competitive situation in Centralia?
     Consumers consider Hi-Value to be expensive. This is not a good look
    for a grocery store in an area where people are price conscious
     The above analysis does suggest that Hi-Value would benefit from
    EDLP. The number 1 issue for customers is price. Whether or not you
    have the lowest prices, you have to have the appearance of low prices,
    or at least highly competitive prices.
     I think that EDLP would help Hi-Value gain traffic to its stores.
    Especially for the customers that may currently go out of their way to
    another store they perceive as less expensive.
     Usually if people think they are getting a deal, they will spend more.
    EDLP should help them increase their sales and price per ticket for all
    of their stores.

    3. What are the pros and cons of an everyday low pricing strategy for
    Hi-Value Supermarkets in Centralia?
    Pros of EDLP for Hi-Value in Centralia:
     Improved inventory management
     cost savings from fewer price changes
     allows for non-price/image advertising
     reduces price as a deterrent to patronage
    Cons of EDLP for Hi-Value in Centralia:
     EDLP will likely decrease overall store gross profit margins
     EDLP could position Hi-Value directly against Harrison’s

    4. What are the economics of everyday low pricing for Hi-Value


    Supermarkets in Centralia?
    This was like the rash away/Red away problem. If you change one of the
    expenditures, how much more do you need to sell to make up for that.

    The table below show’s how a 7% pricing decrease would look.


    EDLP Price Reduction OF 7%
    Current Contribution Margin New Contribution Margin

    Sales $1.00 $0.93

    - Cost of Good Sold $0.712 $0.712

    = Contribution Margin $0.29 $0.22

    New Contribution Margin % = 23.44%

    A 7% across-the-board price decrease will reduce Hi-Values contribution margin from 28.8% to 23.44%

    In order for Hi-Value to at least maintain its current total contribution margin dollars of $4,126,090 sales must increase by
    $ 17,602,125.36

    There must be a 23.44% increase in Hi-Value Total Sales Revenue to maintain current level of CM$ ($4,126,090).
    23.44%

    If the 1.1% cost saving from EDLP is added to the new CM% then the total sales must increase by
    24.54% $ 16,813,141.69

    Additional percentage calculations can be found in the excel spreadsheet.

    5. What action(s) would you propose for Hi-Value Supermarkets in


    Centralia?
    I would suggest Hi-Value implement the EDLP program, but they should
    not change their prices. After looking at a price changes ranging from 5-
    9%, it does not seem reasonable that they could increase sales to a high
    enough level to compensate for any price cuts. The advertising campaign
    though could help them gain shoppers. You don’t have to have the lowest
    prices in town, just the perception of low prices.

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