ock 9 WIL PROJECT CASE STUDY ORIENTATION Applicable VLO's for This Week's Case Study 7. Compare and contrast various pricing strategies and their effects on sales and profits Brief Introduction to This Week's Case Study Competition is intensifying, and QUICK FOODS corporation is revising its pricing strategy. Debra, the founder of QUICK FOODS corporation, is considering moving towards competitive pricing. She the relevant information and is planning to analyze the effect of this move on sales and profits. This Week's Detailed Case Study Information QUICK FOODS corporation, current pricing strategy is "Price Skimming", but the recent intensification in competition, is affecting the bottom line. Debra met with the finance director to obtain more information on this issue. The finance director explained that a while ago two companies entered the market, and started actively competing with QUICK FOODS corporation, thus the company's sales are declining, and profits are falling. Debra believes that the company is offering a premium product, which dictates a higher price. She is not willing to risk the company's image in order to improve the bottom line. She strongly believes that any price cuts will lead to the deterioration of the company's image. This will put the company in a position similar to discount stores, and thus the company will face intense competition. The finance director does not agree with Debra, since premium brand name could still be achieved, and prices should not be cut substantially to improve the company's situation But keeping prices at the current level, will halt the company's growth prospects, and the company will start losing 15% of its sales each year. The finance director cited that a price cut of at least 10% should be implemented to keep the company's sales growth at 5% level. If nothing will be done to the pricing strategy, the company could risk going out of business in a couple of years. Debra realized the need for quick action and asked his staff to summarize the key findings The scoond day, one of his staff brought an executive summary with the following information in it. Current pricing strategy [Price Skimming Current average product price when QUICK FOODS corporation, average price is 20% higher compared to competitors prices than the average market price for a similar product in a store offering similar service. Average product price at QUICK $100 FOODS corporation Average direct costs per product Total overhead and indirect expenses S2 Million Demand Elasticity For a 10% decrease in price the demand goes up by 15%, i.e. sales increase by 15% Current sales level s 4 million Note: QUICK FOODS corporation is not using any credit facilities at any bank or financial institution After examining this information Debra decided to calculate a couple of metries before adjusting the pricing strategy. She is willing to know the current break-even point. She is also interested to know the change in sales if she adopts a "Competitive Pricing Strategy with prices in-line with competition. Deliverables, Format and Marking Scheme for This Week's Case Study Your task is: 1% calculate the company's current sales and profits. 1% calculate the company's sales and profits if the company adopts a competitive pricing strategy" and its prices will be 10% higher than the average price in the market place. 3% hased on your calculations analyze which strategy should be followed and why? Note: you can make any assumptions that are deemed necessary for this case. Clearly state your assumptions in your submissions. Your findings should be summarized in a 1-page word document. $20