John Smith Is the President of "ABC Co., a local company that manufactures industrial products. ABC Co sells several product lines, each having multiple Individual items (SKUs). ABC Co sells directly to their customers with their own sales force and provides each customer a negotiated price quotation for each product they may want to purchase. ABC Co does not have a published list of prices for their products.
John has a problem. For the past 2 years, he has been experiencing cost inflation In his raw materials and, as a result, his margins have declined to an unacceptable level. Early this year, John tried to address this situation by announcing a price Increase to his customers, with an effective date of February 1. 200B. The price increase was set at 5% across the board for all customers and products.
Several months have since passed and the profit Improvement ho expected has not materialized. John's sales manager assures him that they sales persons implemented the price increase everywhere they could, except for "a few exceptions due to competitive reasons So John doesn't understand why his bottom line did not improve.
John is feeling pressure from the Board of Directors to recover his cost inflation and get his profit margins back to acceptable knots. He feels that another price increase for his customers is needed, but is concerned about the ability of his organization to deliver the benefits of an increase to the bottom line.
Yesterday, John called you for advice on the next price increase. At your request, he has sent you a sample of Invoice data for 3 customers, covering 2007 and 2008 years to date. You have a couple of days to review this data and formulate your answer to his request for help.

1. Questions to answer
   I) Using the data provided, 
2. a. Determine the price change amount for all customers for all products. 
3. b. Any concerns about volume decreasing with the price increases? 
4. c. Any other insights? I. Cannibalization — new products ii. Is there any segmentation and opportunities for price discrimination? M. Prices were not lowered — why? 
5. d. What can you tell about organizational structure/architecture? 
6. 2) What would your advice be to John?
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Answer rating: 100% (QA)

Quiz 1 Customer A 2007 100 2008 105 Price Change 5 or 5 Customer B 2007 200 2008 210 Price Change 10 or 5 Customer C 2007 300 2008 315 Price Change 15 or 5 Quiz 2 There is a concern that volume will d... View the full answer