Upon doing a SWOT analysis, the owner realizes her prices average 10% higher than the prices of the same products at the Petco which is at a large strip center about three miles away. 

 

1. What would her new gross margin dollars and gross margin percentage be if she lowered her prices by 10% to match the competition and her sales in units stayed the same? Note - if prices go down by 10% and unit sales stay the same, sales $ will go down by 10%!
2. If sales do not change because of the price reduction, how will this decision affect her net profit?
3. By how much, in dollars and percentage, must sales $ increase for the owner to maintain her profit?
4. By what percentage must unit sales increase for her to maintain her net profit?
5. Based on our discussions of the consumer buying process, do you think the owner should reduce prices to match the big box competitor? Why?