Marketing Case Analysis

  

Write about 5 pages analyzing the case in the PDF file Hi Value Supermarket.pdf the paper should follow these steps1-  factual summary (non-obvious information in the case) half a page.2- case problem/opportunity (identify and explain the problem) 1 to 1,5 page.3- alternative solutions.1 to 1,5 page. 4- select best solution (select and justify ) 1 to 1,5 page5- conclusion. half a pagethis is the exact example Superior Supermarket.docx and this case is very similar to Hi Value Supermarket case.
hi_value_supermarket.pdf

superior_supermarket.docx

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SUPERIOR SUPERMARKIT
I. Factual Summary:
1. Current prices are reflective of a high-end branding strategy. Superior
Supermarkets everyday prices are approximately ten percent higher than
Harrison, and seven percent higher than both Grand American and Missouri
Mart. Subsequently; higher prices have become a competitive concern due to
their declining market share in Centralia.
2. Everyday low price will result in gross profit decline due to reducing price. In
order to sustain the gross profit, Superior should gain $ 4,127,752.2 to keep its
net profit without change.
Items
Grocery
Meat and Poultry
Produce
General Merchandise
Bakery
Total
% Of total
50 %
20 %
18%
7%
5%
Sales
$7,163,350
$2,865,340
$2,578,806
$1,00,869
$716,335
$14,326,700
% Of GP
30%
18%
30 %
33 %
50 %
GP
$2,149.005
$515,761.2
$773,641.80
$330,946.77
$358,167.5
$4,127,725.2
II. Case Problem/opportunity:
1. The major issue presented in the Superior Supermarkets case study is should
Superior Supermarkets adopt an everyday low price strategy in its three
stores in Centralia to enhance customer loyalty and improve the image of
Superior Supermarket stores.
III. Alternative Solutions:
1. Maintain current pricing strategy. This alternative will benefit Superior by not
having a need for new training or advertising adjustments, so it will not add
1
any extra cost. Also, Superior will maintain its current profit margins.
Moreover, Superior will avoid a possible pricing war with competitors.
In contrast, potential loss in market shares to lower priced competitors likely
to happen. Furthermore, maintain current pricing will not address the
declining sales issue. Since shoppers become more price conscious, Superior
can lose its both current and potential customers.
2. Adopt an “Everyday Low Price” strategy. By adopting this strategy, Superior
will be more prices competitive in the market. Also, it could potentially
reduce operating costs and improve inventory management since the
variation in demand will be reduced.
On the other hand, Superior will face a reduction in its store gross profit
margins. Moreover, price war could start with competitors especially
Harrison’s, since Harrison’s observed as the best supermarket on price.
Superior can implement one of four possible ways for everyday low price
strategy.
i) Ten percent discount for all products. Superior gross profit will be
reduced from 28.8 percent to 20.89 percent. In order to maintain the
current gross profit, Superior needs to obtain $18,763,481 on sales,
which is 31 percent.
2
Current GP
10 % Reduction
Sales
$ 1.00
$ 0.90
GOGS
$ 0.712
$ 0.712
GP Margin
$ 0.288
$ 0.188
New gross profit margin percent = 0.188 / 0.90 = 20.89 percent.
New sales required after adding 1.1 % cost saving
$ 4,126,089.6 / (0.2089 + 0.011) = $18,763,481
ii) Seven percent discount for all products. Superior gross profit will be
reduced from 28.8 percent to 23.44 percent. In order to maintain the
current gross profit, Superior needs to obtain $18,763,481 on sales,
which is 17.4 percent.
Sales
GOGS
Current GP
$ 1.00
$ 0.712
7 % Reduction
$ 0.93
$ 0.712
GP Margin
$ 0.288
New gross profit margin percent = 0.218 / 0.93 = 23.44 percent.
New sales required after adding 1.1 % cost saving
$ 4,126,089.6 / (0.2344 + 0.011) = $16,813,731
$ 0.218
iii) Ten percent discount in a grocery and general merchandise. Superior
gross profit will be reduced from 28.8 percent to 25.1 percent. In order
to maintain the current gross profit, Superior needs to obtain
$16,438,603 on sales, which is 14.7 percent.
3
Grocery Gross Profit
Seasonal Merchandise Gross Profit
Current GP
Current GP
10 % Reduction
10 % Reduction
Sales
$ 1.00
$ 0.90
$ 1.00
$ 0.90
GOGS
$ 0.70
$ 0.70
$ 0.67
$ 0.67
GP Margin
$ 0.30
$ 0.20
$ 0.33
$ 0.23
New gross profit margin percent
New gross profit margin percent
0.20 / 0.90 = 22.22 %.
0.23 / 0.90 = 25.56 %.
Items
Sales
GP
Grocery
50 %
23.3 %
Meat, Poultry, Seafood 20 %
18 %
Produce
18 %
30 %
General Merchandise 7 %
26.7 %
Bakery
5%
50 %
Total
New sales required = $ 4,126,089.6 / 0.251 = $16,438,603
Store GP
17.7 %
3.6 %
5.4 %
1.9 %
2.5 %
25.1 %
iv) Seven percent discount in a grocery and general merchandise. Superior
gross profit will be reduced from 28.8 percent to 26.4 percent. In order
to maintain the current gross profit, Superior needs to obtain
$15,629,127 on sales, which is 9.1 percent.
Sales
GOGS
Grocery Gross Profit
Seasonal Merchandise Gross Profit
Current GP
7 % Reduction Current GP
7 % Reduction
$ 1.00
$ 0.93
$ 1.00
$ 0.93
$ 0.70
$ 0.70
$ 0.67
$ 0.70
GP Margin
$ 0.30
New gross profit margin percent
0.23 / 0.93 = 24.73 percent.
$ 0.20
4
$ 0.33
$ 0.26
New gross profit margin percent
0.26 / 0.93 = 27.96 percent.
Items
Sales
GP
Grocery
50 %
25.8 %
Meat, Poultry, Seafood 20 %
18 %
Produce
18 %
30 %
General Merchandise 7 %
29.1 %
Bakery
5%
50 %
Total
New sales required = $ 4,126,089.6 / 0.264 = $15,629,127
Store GP
12.9 %
3.6 %
5.4 %
2%
2.5 %
26.4 %
IV. Selected Solution:
1. Superior Supermarkets should adopt a seven percent discount in a grocery
and general merchandise since it needs 9.1 percent more on sales to keep its
current contribution margin.
2.
Superior can add bakery and deli to each location since it has 50 percent
profit margin and highest number of customers associated best bakery with
Superior.
3. By only dropping prices by seven percent, Superior Supermarkets puts itself
close enough to its competitors that shoppers opportunity cost is low
enough that they will continue to shop at Superior for the service and
convenience aspects as well.
4. Superior Supermarkets should convert its current advertising campaigns to
ones that promote the new pricing strategy. Superior should focus on the
benefits to the consumers and the competitiveness of the prices in order to
instill confidence in the consumers that they are getting the best value for
their dollar.
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V. Conclusion:
Although Superior Supermarkets has done well in the past, current consumer
trends indicate a shift towards a greater focus on price in a consumer’s choice in
where to purchase goods. Currently, Superior Supermarkets pricing strategy has
yielded prices well above those of their competitors and a pattern of dwindling sales
has resulted. In response to this downturn, Superior Supermarkets should adopt a
seven percent discount in a grocery and general merchandise and decrease their
prices to levels competitive with the other businesses with whom Superior
Supermarkets competes. By evening the playing field and maintaining a sense of
“Everyday Low Prices”, Superior Supermarkets should see a return to growth in
sales and market share and due to the economies of scale in which it operates, a
positive return for the company overall.
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