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Price competition in retail
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"Flanking in a Price War" discusses some of the strategies utilized by retail grocery chains, wholesalers, and co-operatives within the Quebec Grocery Industry. Pricing strategies are the main focus of this article. It outlines both successful and non-successful pricing tactics. In addition, it emphasizes the importance of considering all pricing options, through price experiments, before deciding upon a pricing strategy.
It tells of the decline of an industry leader, Steinberg Inc. Steinberg Inc. dominated the Quebec grocery retail industry from 1950 to 1980 while using a discount pricing strategy. Use of that pricing strategy enabled Steinberg to gain more of the market share, forcing some of the smaller independent grocers to close. It also weakened the market position of some of its tougher competition, especially six small fully integrated chains.
Steinberg Inc.'s success quickly gained the attention of some of its toughest competitors. Two retail co-operatives merged and two major wholesaler-sponsored groups (Provigo and IGA) aggressively took over franchised convenience stores. 81 Dominion stores, which was Steinberg's main competition, were acquired by Provigo. It was those acquisitions that helped Provigo become Quebec's largest chain. All four of the major companies were using a price promotion strategy.
The grocery industry was experiencing rapid fundamental and competitive changes. As a result, all the firms were forced to chose new competitive strategies. Their chosen strategies would prove to be critical to their future success. Steinberg initiated a price war with major price cuts, rebates on all receipts, and heavy promotion. Provigo and Metro-Richelieu quickly responded in kind. IGA, however, decided to have academic professionals to perform price experiences before developing their strategy.
The experiment had a Bayesian design, using a basic factorial covariance model. The experiment explored the differential price elasticity between stock-up goods and nonstock-up goods. Stock-up goods are defined as frequently used nonperishable items that can be stockpiled. Nonstock-up goods are defined as items that are usually perishable and are often used/purchased infrequently. It was also assumed that demand elasticity for price decreases would be considerably larger than for price increases.
The experiment was scheduled to run for six weeks. Seventy-two grocery items, both stock-up and nonstock-up items, were chosen by a panel of grocery retailing experts to be used in the experiment. The items selected had steady weekly sales and were sold in large volumes.
The experiment that was performed consisted of prices being manipulated on a set of 72 grocery products over a six week period. The products were classified as stock-up goods or non stock-up goods.
The retail giant’s policies to offer lowest prices on the market is one that gives the company an upper hand since it can leverage on its massive economies of scale, but ultimately the low prices throw the local economy into turmoil. The many small businesses within the regions find it extremely difficult to compete with the low prices offered by the retail giant, Wal-Mart. According to Wolff-Mann (2016), the opening of Wal-Mart in North Carolina resulted in a 30% drop in the sales of a 44-year-old grocery store. Whenever the grocery store cut prices to retain its clients which were being lost to Wal-Mart, the giant retailer would always undercut or match the price. This unfair practice led to the close down of the store, while other businesses in the region succumbed to the stiff and unfair competition. Therefore, when Wal-Mart moves into a small town, things do not get better; the company introduces unsustainable economic models which makes thing worse within the
Youdath illustrates some of Kmart’s management changes, Charles Conway wanted to turn Kmart into an “Everyday low price destination,” making Wal-Mart Stores a direct competitor. Conaway cut back on advertising and the results were not profitable. After an unprofitable holiday season in 2001 the company filed bankruptcy. In 2002, James Adamson hoped to improve customer service and restock the shelves within the Kmart Stores. While Kmart was taking time to recover from filing Chapter 11, its rivals like Wal-Mart and Target were stealing its customers. When Kmart was focusing on random in-store discounts, Wal-Mart and Target were pitching low prices, broad inventories, hip products, and a pleasant shopping experience (2002).
In the early 1970s, Steinway encountered competition from low-cost producers based on in Japan. While Steinway¡¯s fine image and reputation was unquestioned, the business wasn¡¯t particularly profitable. In addition to it, due to some stockholders who were unwilling to invest but mainly interested in income, Steinway¡¯s financial conditions became worse, so the family company came to an end, was sold to CBS. CBS recognized that the business didn¡¯t fit its corporate strategy. In 1985, CBS sold the company to John and Robert Birmingham, Boston-based investors. Under Birmingham, Steinway returned to its former stature, stressing quality and focusing on the high-end market. But ten years later, Steinway is also sold two investors, Kyle Kirkland and Dana Messina because of financial problems.
The purpose of this memo is to show the affects of how Albertson’s is trying to implement many strategies in order to try, and compete with its powerhouse competitor Wal-Mart. This memo will contain information on steps Albertson’s is taking to gain back some of the market share that Wal-Mart has swallowed up. It will also describe Albertson’s planned innovations that will be what determines their success. Lastly it will discuss how through IT as well as a successful implementation of satisfying consumers demands, will possibly allow them to compete with the ever so powerful Wal-Mart.
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
In 2002, CEO of Levi Strauss, Phil Marineau was faced with a tough decision: whether he should sell product at Wal-Mart. In the last five years, Levi-Strauss had lost sales and had to close US plants to move production to cheaper offshore areas. Levi's really needed to revive the brand image to gain back some lost sales and was using marketing to create new advertisements and product placement to broaden their target market. Levi's had tough competition on every level of the price-point spectrum, whether it be high end retailers like Diesel or Calvin Klein, middle vertically integrated retailers like Gap or American Eagles, and on the bottom, private-label brands like Wal-Mart and Target.
For Oliver’s Market among the five Competitive forces, pressures associated with the threat of new entrants into the market are the strongest one. Because Wal-Mart and Target had announced plans to develop regional supercenters in the Sonoma county region. They are strong candidates for entering the market, because they possess the res...
The framework that will compare Publix Super Markets and its competitors is the Five Forces Model of Competition. The five aspects that will be discussed are the threat of new entrants into the market, the bargaining power of suppliers and buyers, threat of substitute products and rivalry among competing firms. Striving for the optimal position in each of these categories has given Publix Super Markets the reputation it has pride towards earning. It is important to every compa...
The purpose of this presentation is to provide a comparative analysis of business activities of two well-known representatives of the US retail industry, Target and Walmart. My research is focused on a business strategy of these largest and most experienced American merchandising companies; particularly, on their activities in Canada. Based on the data collected from the various sources, I would like to detect, analyze, and demonstrate the obvious causes that have lead to a catastrophic failure of Target in its unsuccessful attempt to win a Canadian market.
Historically, Dollar General operated in a highly price sensitive market segment, with 55% of its consumer base earning an average annual gross income of less than $40,000.[2] To attract these customers, Dollar General employed an Everyday Low Price strategy similar to Wal-Mart’s. Thus, keeping costs low and driving high traffic volumes were critical to the company’s financial success. Dollar General achieved this strategy in several ways, including keeping rents and labor costs low, locating in low-income, high traffic areas that offered consumers few substitutes, and offering a wide variety of popular CPG and white label goods.
Challenges in Today's U.S. Supermarket Industry. 2014. Challenges in Today's U.S. Supermarket Industry. [ONLINE] Available at:http://msdn.microsoft.com/en-us/library/aa479076.aspx. [Accessed 31 March 2014].
deal with “luxury” goods (Exhibit N). It is important to note that the sale of “luxury” goods is affected more
Big rivals such as Tesco and Morrisons started to compete in price by shrinking packages, introducing cheaper equivalent products, or using cheaper ingredients. Although these strategies cause a sluggish revenue increase, it works on boosting sales and market shares. For example, Tesco’s sale grew by 2.2 percent during July to September. Apart from the traditional retailers, Aldi who applies a similar discounter model is also a strong competitor. In 16th July, the market share of Aldi was 6.2% while Lidl occupied 4.6% of the market (Gale,2016) Compared to Lidl, Aldi has a more dominant market position and better corporate with local farmers. To stand out from these rivals, Lidl still has a long way to go.
Walmart needed high levels of growth to continue to survive and saturation of domestic market. Global retail expansion has attracted many large-sized companies with targets to increase business profits and market share. Global expansion not only attracts large organizations but also small to medium-sized companies, companies new to international expansion, as well as those who are already expanding in the international arena. However, there are also well-known retailers who failed in their expansion in certain global markets due to regulatory, legal and cultural challenges, competition, and attempting to change local shopping behavior. The lower pricing strategy was their basic strategy to expand Walmart’s philosophy, “Every Day Low Price” to all parts of the world. The only challenge was the distribution system; the company had given in to union demands from the state-run. Walmart was not influenced. The marketing strategies still involved huge discounts and great values on all of their products, similar to strategies in their home country: maintaining low prices every day, especially middle-class customers, yet maintaining profits. They also suggested