Auburn University Montgomery Reed Supermarket Case HWK Questions

Please read Reed Supermarkets case and answer the following questions according to the notes and requirements. Please analyze the case based on the situations in the case (i.e., situation in yr 2010 for Reed Supermarkets case). Please do NOT search the internet or use any other sources. The case analysis should be completed based on the information available in the case ONLY. Please do NOT copy and paste the same tables/figures in the case, in case you include any figures or tables, put them (e.g., financial forecast table) in the appendix.

Q1. What would be an alternative of the dollar specials program?

(Note: There are many alternatives, but I want you to suggest the only ONE that you think is the most effective alternative of the dollar special programs and specify WHY you think so and HOW to implement it. Please describe a detailed action program of the alternative that you propose. The modification of the current dollar specials program is also considered an   alternative.)

Q2. Should Collins continue the dollar specials program? Or should he try the alternative plan that you suggested in Q1 instead?

(1) Please justify your recommendation with specific reasons including both marketing and financial reasons.

(2) And, please complete a financial forecast table for your final recommendation below.

(Note: For financial forecasts, you need to make reasonable assumptions about how the financial metrics (e.g., revenue, gross profit, and/or net profit) would change after applying your recommendation (‘with dollar specials’ or ‘with the alternative’). You must specify and justify any assumptions that you make for the financial forecasts using the information in the case and your knowledge about the retailing industry.

Thus, for EACH CELL of the table, please write down the equations/solutions WITH numbers (e.g., revenue x operating profits% = $1 million x 0.2 = $200,000) and/or assumptions that you used. Otherwise, it is difficult to figure out how you come up with each number and utilize your assumptions in the calculation. Hence, any answers without specific solutions including numbers and/or assumptions won’t get any points. You can put this information in each cell OR as notes under the financial table.

(Financial assumption means: if Reed Supermarkets apply my recommendation (or if Reed                  Supermarkets keep the dollar specials program), the sales (or costs, gross profit, net profit, etc.) would be $X (or increase (or decrease) by X% or $X) because ~~~~~.)

Financial Forecasts for your recommendation (The table you need to fill out for Q2-2)

Scenario 1:           Original Condition in 2010

(i.e., without          applying the dollar specials program)

Scenario 2:         Your                    recommendation

Revenue (total annual dollar sales)

Gross Profit $

(=Revenue – COGS=Revenue *Gross Margin%)

Selling, General & Administrative Expenses (SG&A)

Net Profit $

(=Gross Profit – SG&A=Revenue*Operating profit%)

(Hint:

– Exhibit 1 has information about the estimated annual sales of 2010 before applying the dollar special program. For the revenue of scenario 1, you can simple put the same number in Exhibit 1. Thus, it is up to you whether to use the estimated annual sales per store ($26.4 million) or estimated total sales ($660 million) for the revenue of scenario 1.

– Exhibit 2 has information about the current gross margin %, SG&A expenses % (i.e., total expenses % in the case), and net profit %.

– For scenario 2, you need to make a few assumptions based on the information in the case and recalculate the numbers if needed.)