【正文】 ful primarily because it has lower prices than its petitors. That39。s partly right. Its success probably also has something to do with a larger selection of products, given the larger average store size. How did USCo get so much bigger than the petition? It started by building superstores in rural markets served mainly by momandpop stores and small discount retailers. USCo bet that people would be willing to buy from it, and it was right. As it grew and developed more clout with suppliers, it began to buy out other discount retailers and convert their stores to the USCo format. So whenever USCo buys out a peting store, it also physically expands it? Not necessarily. Sometimes it does, but when I said it converts it to the USCo format, I meant that it carries the same brands at prices that are on average ten percent lower than the petition39。s. What criteria does USCo use in deciding whether it should physically expand a store it39。s just bought out? It depends on a lot of factors, such as the size of the existing store, local market petition, local real estate costs, and so on, but I don39。t think we need to go into that here. Well, I thought it might be relevant in terms of predicting what it will do with the 300 stores that it bought in Canada. Let39。s just assume that it doesn39。t plan to expand the Canadian stores beyond their current size. OK. I think I39。ve learned enough about USCo. I39。d like to ask a few questions about USCo39。s ability to succeed in the Canadian market. Does USCo have a strong brand name in Canada? No. Although members of the Canadian business munity are certainly familiar with the pany because of its . success, the Canadian consumer is basically unaware of USCo39。s existence. Does CanadaCo carry products similar to USCo39。s, or does the Canadian consumer expect different products and brands than the . discount retail consumer? The two panies carry similar products, although the CanadaCo stores lean more heavily toward Canadian suppliers. How much volume does CanadaCo actually sell? About $750 million worth of goods annually. Is there any reason to think that the costs of doing business for USCo will be higher in the Canadian market? Can you be more specific? I mean, for example, are labor or leasing costs higher in Canada than in the .? Canada does have significantly higher labor costs, and I39。m not sure about the costs of leasing space. What are you driving at? I was thinking that if there were a higher cost of doing business in Canada, perhaps USCo would have to charge higher prices than it does in the . to cover its costs. That39。s probably true, but remember, CanadaCo must also cope with the same high labor costs. Can you think of additional costs incurred by USCo39。s Canadian operations that would not be incurred by CanadaCo? USCo might incur higher distribution costs than CanadaCo because it will have to ship product from its . warehouses up to Canada. You are partially right. CanadaCo has the advantage in distribution costs, since its work spans less geographic area and it gets more products from Canadian suppliers. However, since CanadaCo continues to get a good deal of product from the ., the actual advantage to CanadaCo is not greatonly about two percent of overall costs. All this suggests that USCo will be able to retain a significant price advantage over CanadaCo39。s stores: if not ten percent, then at least seven to eight percent. I would agree with that conclusion. Step 5: Summarize and make remendationsI would tell the CEO the following: In the near term, you might be safe. Your stores have a much stronger brand name in Canada than USCo39。s, and they seem to be well managed. However, as consumers get used to seeing prices that are consistently seven to eight percent less at USCo, they will realize that shopping at USCo means significant savings over the course of the year. Although some consumers will remain loyal out of habit or because of your high level of service, it is reasonable to expect the discount shopper to shop where prices are lowest. Moreover, over time your brandname advantage will erode as USCo bees more familiar to Canadian consumers. You certainly have to worry about losing significant share to USCo stores in the long term. You should probably do something about it now, before it39。s too late. Can you suggest possible strategies for CanadaCo? Maybe it can find ways to cut costs and make the anization more efficient, so it can keep prices low even if its cost of goods is higher. Anything else? It might consider instituting something like a frequent shopper program, where consumers accumulate points that entitle them to future discounts on merchandise. What might be a potential problem with that? Well, it might not be that costeffective, since it would be rewarding a significant number of shoppers who would have continued to shop there anyway. Any other suggestions? CanadaCo might want to prepare a marketing or advertising campaign that highlights its high level of service. It might even institute a CanadaCo Service Guarantee that surpasses any guarantees offered by USCo. Assuming the only way to keep customers is through petitive pricing, is there anything CanadaCo can do to appear petitive to the consumer? It might want to consider offering fewer product lines, so that it can consolidate its buying power and negotiate prices with suppliers that are petitive with USCo39。s. It might lose some customers who want the variety of products that USCo has, but it may be able to retain the customer who is buying a limited array of items and is just looking for the best price. All of your suggestions are interesting, and you would want to analyze the advantages and disadvantages of each in more detail before making any remendations to the CEO. View Other Practice Cases Step 1: Actively listen to the