A&P Case

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COURSE NAME: CONSUMER BEHAVIOR

GROUP NO: 5

CASE NO: 1

CASE NAME: The Great Atlantic & Pacific Tea Company

SUBMITTED TO: Prof. Shyam Vyas

SUBMISSION DATE: 22nd January 2010

GROUP MEMBERS:

1) JAHANGIR SINGH SIDHU

E-mail id: sheikhu88@hotmail.com

Phone No: 97790-30663

2) HARJINDER ARORA

E-mail id: greaty_rock1@yahoo.co.in

Phone No: 97807-62077

Summary:

For decades The Great Atlantic & Pacific Tea Company (A&P) had dominated the US food and grocery market. However, with its size had come increasing managerial inefficiencies and an inability to respond to demands of a changing market. A very crucial error was made in the 1950’s when A&P failed to follow customers in their move to the suburbs. In 1971, William J Kane took over as chairman and CEO of A&P. This was a time when company sales had levelled off and profits were declining. In an effort to overcome this slide, Kane ordered the conversion of thousands of regular A&P units to “WEO” (Where Economy Originates) supermarkets, which were described as super-duper discount stores. ). The big difference between WEO’s and the company’s conventional units was lower prices on 90% of the merchandise and a reduction in the variety of production offered from an average of 11000 items (SKUs) to as few as 8000. In 1973, the retail chain lost its number one market position to Safeway. Jonathan Scott took over Kane’s position in 1975 recognizing that the retail chain had far too many deteriorating stores in declining urban neighbourhoods. Scott embarked on an ambitious program to close more than 1200 unprofitable units. In an effort to regain market position, Scott responded by introducing the ill-fated “Price & Pride” advertising program. . It was a spirit-building campaign. Modern stores with pleasing wide aisles served as a backdrop to the ads. As a consequence, customers again left in substantial numbers to shop at competing stores. During the mid-1970s, an ambitious program was undertaken to build many new and modern A&P stores and to remodel others. Regrettably, action fell behind plans. For example, in 1977 when 70 new stores were planned only 46 were opened due to an inability to manage the program. The Price & Pride program was finally abandoned in Jan 1978 and a new promotional theme was adopted “You’ll do better at A&P”. Along with this, three major steps were taken. First, “action prices” were instituted to pass manufacturers specials directly on to customers in the form of lower prices. Second, generic products were offered in many stores. In 1979, the diminishing giant fell to the 3rd position in the supermarket industry and showed signs of serious economic problems. At this time James Wood was brought in to replace Scott. One of the first moves of James Wood was to stop closing stores. Instead, a number of units were converted into “Plus Stores” which “limited assortment” units were stocking thousands of essential products far less than the 12,000 products found in a general supermarket. However, perhaps because shoppers could not fulfil all of their shopping needs at Plus Stores, and because prices were not really drastically lower than their competitors, the Plus Stores proved unsuccessful as A&P entered the 1980’s.

Question/Answers:

Q1. Does it seem that A&P has tended to favour any particular model or models of buyer behaviour? What appears to be the degree of success that has resulted?

In our group’s opinion, we feel that A&P has favoured price conscious behaviour model of human behaviour. In the starting the company’s philosophy was to reduce prices and emphasise on volume basis. So in order to reduce prices the company reduced its product offering (SKUs). The company further converted its stores into “plus stores” which were limited assortment and these stores had “no frills” in designs and did not match with the advertisements campaigns, so A&P did not had success in their efforts to...
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