Flanking in a Price War
Article Main Points Summary
The article begins by giving a brief analysis of a study that was conducted in Quebec in the early 1980's involving the grocery industry. It discusses a point of time before the leader in market share, Steinberg, Inc., initiated a price war. One of the authors of the article, Roger J Calantone, was involved in an experiment with one of the smaller grocery chains, IGA. The experiment was designed to see what IGA should do so as to retain profitability if their main competition launched an all out price war. The main premise was that certain goods, if prices were lowered, would have more favorable price demand elasticity than other goods. This would enable the grocer to not have to slash prices across the board, rather only cut prices on specific goods so as to retain profitability during a price war with the other competitors. During this time, the other competitors combined had dominant market share.
The piece gives a background of the Quebec grocery market between 1950 and 1983, and discussed the main players in the market in this time period. It specifically discusses Steinberg, Inc. This grocery chain, as previously mentioned, was the market leader for most of this time until 1980 due to some questionable pricing strategies it had implemented as well as some political changes that occurred in the late 1970's. The next point of the article was to discuss a pricing experiment IGA and the author chose to follow to help combat a price war initiated by its competitors. The premise of the experiment was to ascertain if certain goods were reduced in price, while others maintained or increased price, what would happen to overall demand elasticity as well as specific goods' demand elasticity. The goods were divided into two key components and these were: stock-up goods (non-perishable items that could be bought in bulk) and nonstick-up goods (perishable items). The methodology and results of the... [continues]
Article Main Points Summary
The article begins by giving a brief analysis of a study that was conducted in Quebec in the early 1980's involving the grocery industry. It discusses a point of time before the leader in market share, Steinberg, Inc., initiated a price war. One of the authors of the article, Roger J Calantone, was involved in an experiment with one of the smaller grocery chains, IGA. The experiment was designed to see what IGA should do so as to retain profitability if their main competition launched an all out price war. The main premise was that certain goods, if prices were lowered, would have more favorable price demand elasticity than other goods. This would enable the grocer to not have to slash prices across the board, rather only cut prices on specific goods so as to retain profitability during a price war with the other competitors. During this time, the other competitors combined had dominant market share.
The piece gives a background of the Quebec grocery market between 1950 and 1983, and discussed the main players in the market in this time period. It specifically discusses Steinberg, Inc. This grocery chain, as previously mentioned, was the market leader for most of this time until 1980 due to some questionable pricing strategies it had implemented as well as some political changes that occurred in the late 1970's. The next point of the article was to discuss a pricing experiment IGA and the author chose to follow to help combat a price war initiated by its competitors. The premise of the experiment was to ascertain if certain goods were reduced in price, while others maintained or increased price, what would happen to overall demand elasticity as well as specific goods' demand elasticity. The goods were divided into two key components and these were: stock-up goods (non-perishable items that could be bought in bulk) and nonstick-up goods (perishable items). The methodology and results of the... [continues]
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"Flaning in a Price War." StudyMode.com. 07, 2005. Accessed 07, 2005. http://www.studymode.com/essays/Flaning-Price-War-61965.html.
