Full Frame is a family-owned company that operates five custom framing stores. Each store offers a variety of services: matting and mounting prints; framing photos, paintings, posters, and prints; and sales of posters and prints. About 85% of the business is the service of matting, mounting, and framing photos, prints, and paintings. The main goals of Clyde Fuller, the founder, are growth and profitability: growth now, and profitability later. He sees the business as a commodity-service business, in which other frame shops provide essentially the same service, and the competition is on price and customer service. From his seven years in the business he knows that any frame store's work has to be high quality or it will quickly lose customers, so he maintains quality as a necessary component of his business and uses price and customer service to succeed in competing with other shops. The strategy has worked well for Clyde as he has been able to grow from a single store seven years ago to five stores at the present time. The additional stores are managed by embers of Clyde's extended family.
To achieve a competitive price, Clyde watches his costs carefully and limits the amount of profit margin that he expects from each customer transaction. He looks for only an 8% markup over the total costs of the service. This policy has meant that initially his take-home profits were not great, but the low price has enabled him to attract customers and to grow the business. Total profits have increased as the business has grown. To enhance his low-price approach, he has devised efficient techniques to provide his service, and he instructs his employees to follow his techniques to be very efficient with their time and use of materials. He also has a profit-sharing plan that rewards each store employee when cost-per-service declines at that store.
Required
1. What strategy does Clyde use in the business? Briefly explain your choice.
2. Do you think Clyde's pricing and employee-incentive policies support this strategy? Why or why not?