Page 363 - Introduction to Business

CHAPTER 9 Developing the Product and Pricing Mixes 337

from Ford’s annual product development budget Wal-Mart are pressuring their suppliers to only provide
of $6 to $7 billion. It was estimated that the new them with fast-moving products. Third, large-scale food
platform would require about $1 billion. retailers—Albertson’s, Kroger, Safeway—are increasing
The development budget figures are based on the number of private label products they develop and
Ford being able to continue wringing cost sav- stock, leaving less shelf space for processors’ brands.
ings out of its team value management program, (Robert Berner, Diane Brady and Wendy Zellner, “There
which relies on the identification of waste and Goes the Rainbow Crunch,” Business Week, July 19,
employing less costly ways of obtaining raw 2004, p. 38).
materials and parts from suppliers.
Ford will be able to sell the car at a price in Asia 1. What concepts discussed in this chapter are
referred to in this Interpreting Business News?
and South America that is much less than the 2. Why would food retailers want to market their own
$10,000 currently charged European consumers.
private label products?
1. What concepts discussed in this chapter are 3. Which participant in the supply chain appears to
illustrated by this Interpreting Business News? have the most power?
2. What are the advantages and disadvantages of
Ford’s strategy?
3. Are there other regions of the world in which the Web Assignments
new vehicles might be sold?
4. Do you think that Ford’s new cars will be 1. Go to the websites for Sony, McDonald’s, and
DaimlerChrysler. Compare the information
successful? Why or why not?
contained on them about the products they offer
Large food processors, such as General Mills, H.J. and their prices. Which website offers the most
Heinz, and Hershey Foods, are reducing the number of information about the products? Do any discuss any
products they sell through food retailers. Three factors new products that are being worked on? Are there
explain this decision. First, the processors believe that any mentions of products being discontinued? Is
they can increase profits by trimming product lines that product quality emphasized? How?
are not selling well and are beset by higher commodity 2. Return to the websites in assignment 1. Is there
prices. (Prices of soybean oil and cheese increased 70 much information on these websites about the
percent and 80 percent, respectively, in 2003.) Heinz firms’ prices? Do they appear to be using price as a
estimated that this strategy increased its operating major competitive weapon? Are price reductions
income to $1.38 billion in 2003, up 17.5 percent over being emphasized as a way of keeping and
that obtained in 2002. Second, large retailers like attracting customers?

Portfolio Projects

Exploring Your Own Case in Point Starting Your Own Business
This chapter provides guidelines for developing a com- You will need to develop product and pricing mixes for
pany’s product mix and pricing mix. Answer these key your startup company. Drawing upon what you have
questions about your selected company’s product and learned in this chapter, answer the following.
pricing mixes. 1. Describe the level of quality for your products or
1. How important are new products and services for services.
your selected company? Can you identify any sig- 2. Describe the packaging for your products.
nificant technological breakthroughs that it has
3. What warranties or guarantees will you offer for
developed?
your products or services?
2. How much does your company spend annually on 4. Develop (or describe) your trademark or logo.
research and development? Does it appear to
5. Develop a step-by-step approach for arriving at the
emphasize basic or applied research?
prices you will initially charge for your products or
3. Do you believe the demand for your company’s services. Be sure to consider the costs of your
products or services is elastic or inelastic? products or services, competitor prices, and the
Does it vary according to types of products or amount of marketing support you will provide
services? each product.

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