1. What methods can a company use to influence competitive behavior?
2. Although consumers may be relatively price insensitive toward an innovative product, manufacturers will offer a low price to the distributors and retailers. Why?
3. Using marketing tactics and legal threats, IBM is actively trying to keep mail order retailers from selling its line of personal computers. IBM earns the same wholesale price regardless of whether its products are sold be a mail order or by a full-service retailer. Why then would IBM want to discourage mail order sales?
4. National cereal manufacturers receive high margins for many of their cereals, often ranging from 60-75 percent. By contrast, the large retail grocery chains (Kroger, Safeway, etc.) that sell cereal make much smaller margins. What would explain this divergence in margins?
5. Laura’s Raw Yarn (LRY) Company sells undyed wool yarn through the mail, promoting it through craft magazines. All of the raw wool is supplied by Stephen Rich Lamb Farms which raises lambs to be sold to local butchers and sells its wool only to LRY, which then spins the wool into high quality yarn. The yarn is bought by individuals and independent crafts people who use it for knitting, crocheting and weaving products that are highly prized. What types of economies does Laura’s Raw Yarn exploit? What types of economies does Stephen Rich Farms exploit? Are there further possibilities for obtaining cost advantages that either of these companies might exploit? What actions would be necessary to achieve those economies?
6. What might be the relationship between cost advantages and the product life cycle? Do the available advantages change over time?
7. The use of scanners in supermarkets has made store audit data cheaply available for all grocery products. Some people claim that this will completely replace the use of aggregate sales data for estimating price sensitivity. In what ways is scanner data preferable to aggregate sales data for estimating price sensitivity? In what ways is it less preferable? What are the major differences between aggregate and store audit data?
8. What method(s) would you use to estimate consumer price sensitivity for an established consumer packages good:
1. Given an unlimited budget and no time constraints.
2. When little money is available and an answer is needed immediately.
3. What are the tradeoffs involved?
9. Evaluate the following statement: Antitrust laws punish companies, not individuals. So long as you prove that you are following company policy, you are not personally subject to prosecution for pricing decisions.
10. A mail order company has begun to sell your prestige luggage at a 30% discount to the consternation of department stores that sell it at list price. You refuse to fill the mail order company’s next order, explaining that you no longer wish to have that company sell your product. Is this practice illegal or legal? Explain your answer.