Reed Case

1199 Words5 Pages
Reed Supermarkets 1. How realistic is Morrissey’s goal of 16% market share by 2011?
Morrisey’s goal of 16% is not unachievable but it is highly unlikely that Reed will be able to achieve such expectations by 2011. Reed is an established company in Columbus with the strongest market share already, and its position is being attacked on multiple fronts. On one end, the company is losing some price sensitive customers to supercenters, warehouse clubs, and most recently dollar stores and Aldi. On the other end, Whole Foods has three stores in the metro area, two of which were opened in the last five years and any further expansion could steal market share from Reed directly (though expansion had slowed so this was not an immediate
…show more content…
If Reed continues to focus on building its quality image, then it should not be as concerned about these low-priced retailers.

4. Should Reed continue the dollar specials campaign? What is the financial impact of this decision?
Reed should not continue with the dollar specials campaign for the following reasons: 1. Reed mainly targets the high end market. The dollar campaign not only conflicts with their brand image but also has a negative effect on the position it aimed to build over the past years. 2. Reed’s strategy is to attract affluent customers by providing a wider range of superior selections. Because of the wide product selection, it is not able to keep operating expenses as low as Aldi and dollar stores (who have a limited product focus). Therefore, it is not at Reed’s advantage to enter into the area (low price strategy) where they don’t have a real competitive advantage. 3. The supermarket is already a low margin industry (2% according to the case). The dollar special campaign might make things even worse. According to the calculation below, the items sold during the campaign have a negative profit margin, thus having a negative financial effect on Reed’s overall profit margin.

Table 1 | Price Before Dollar Sale | Price After Dollar Sales | Unit | % | $ | $ | % | Sales | 100% | 2.70 | 1.50 | 100.00% | COGS | 77.30% | 2.09 | 2.09 | 139.14% | Gross Margin | 22.70% | 0.61 |

More about Reed Case

Get Access