Academic journal article Journal of the International Academy for Case Studies

Badger Service & Supply: Pricing Strategy, Value Creation, and Channel Disintermediation in Wholesale Distribution

Academic journal article Journal of the International Academy for Case Studies

Badger Service & Supply: Pricing Strategy, Value Creation, and Channel Disintermediation in Wholesale Distribution

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case is pricing strategy within the context of complex interactions that have resulted from changes in three elements of the competitive environment: the commoditization of product markets, disintermediation in marketing channels, and a fundamental change in buyers' perceptions of value. Each topic is addressed within the context of marketing management. This case challenges conventional ideas about the value added by channel intermediaries and the role of pricing strategy in value creation. Secondary issues include globalization, e-commerce, and distribution strategy. This case has a difficulty level of four, appropriate for senior level courses. This case is designed to be taught in one class hour and is expected to require two hours of outside preparation by students.

CASE SYNOPSIS

Badger Service & Supply is a regional wholesale distributor of heating, ventilation, and air conditioning (HVAC) equipment in Wisconsin. The competitive challenges that threaten the firm's continued existence and the strategic alternatives available to them illustrate a crisis that confronts distribution companies in many sectors of the economy. Radical shifts in the nature of competitive dynamics are rooted in the globalization of product markets, disintermediation in marketing channels, and a fundamental change in buyers' perceptions of value. Badger's response to the havoc produced by these forces has relied heavily on revisions to the firm's pricing policies. However, chronic price dealing and other defensive pricing strategies over the past five years have accelerated the decline in profitability rather than curtailing it.

The commoditization of products, increasing emphasis on price as the almost exclusive basis for competition, the impact of e-commerce across a wide range of applications, and the growth of intense competition from foreign products can be observed in virtually every service- and product-oriented industry to a greater or lesser degree. At one time, wholesale distributors and other channel intermediaries were regarded as immune from the direct impact of foreign price competition by virtue of both the value-added functions they provided and their proximity to channel end-users. The protective wall that being closer to the customer once provided is being rapidly eroded, however, as foreign competitors have pursued strategies to shorten distribution channels or eliminate independent intermediaries altogether. The solutions posed in this case study provide a range of useful alternatives for managers confronting these challenges.

INSTRUCTORS' NOTES

This case can be taught in several different ways. At the most fundamental level, students can be required to simply answer each of the seven questions posed by Dana Meeker at the end of the case. An outline of appropriate answers to these questions is provided at the close of this note. More advanced applications of the case will promote a wider array of discussions about the fundamental issues facing Badger within the context of other sectors of the economy. Having students role play the parts of various channel members has proven to provide a lively and valuable approach to teaching many dimensions of this case study.

LEARNING OBJECTIVES

* Help students understand the complex interactions between distribution channel choices and pricing strategy.

* Critically examine the value of the functions provided by channel intermediaries and the consequences of shifting functions from one channel member to another.

* Appreciate the significance of value creation and value-added services in setting pricing policies.

* Examine how enhanced global competition and the Internet have impacted distribution and pricing practices in the HVAC industry.

* Emphasize the need for firms in highly competitive markets remain adaptive to shifts in the technological and competitive environment. …

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