Question;Assume that you work for a chain of food stores and that you are interested in how your companys prices compare with your competitors. Since a food store carries many items, it is likely that you are higher on some products than on others. The goal of the study is to determine whether or not you can claim to besignificantly lower in price than any of your competitors.A random sample of 36 products, from the thousands available, were priced at six food stores in the Macomb, Illinois area in 1980. The prices are attached. If a name brand existed for a product, the same name brand was priced at all the eight stores, if possible. In addition, if a store had an equivalent house brand, its price was also recorded. (Note that W. Pierce has no house brands.) The data is contained in the EXCEL file grocdata.xls included in the supplementary files for this Module. You will note, as you look at the data, that some data is missing and also that in some cases, the house brand costs more than the name brand (probably resulting from a sale on the day of the price check).Assignment:You are to assume that you are employed at one of the five stores (do notpick W. Pierce). You are to determine if your store is significantly lower orhigher in cost than the other five stores listed. You need to pick a market basketof items by randomly picking 25 of the 36 items on which to base a decision. Foreach of the items chosen, you should randomly decide if you will include the nameor house brand of that item in your market basket.Knowledge of your companys relative position compared to the othercompanies would be quite useful in advertising. If you turn out to be significantlylower you could use this fact in your ads. If you turn out to be the same as the othercompanies you might wish to emphasize service, quality, or brand selection in youradvertising. If you turn out to be significantly higher, Im not sure you couldspin the result but perhaps such a result would lead to deeper questions about themanagement of the company.You should work with an overall alpha level of.05.Hints:After you have chosen your market basket you may find you have chosenone of the products for which the price is missing. You should developsome rationale for estimating a price for this product as it is undoubtedlyavailable. Examples of how you might estimate a price include using theaverage value of all the stores for which you do have prices (which makessense for name brands), or if a house brand you might find that theprice in your store is always approximately some fixed percentage lowerthan the name brand price. Also, regression analyis might be helpful.There are many other possibilities. Be sure to include a discussion of thisissue and include in your report a listing of the actual items and the prices(either actual or estimated) that you will be analyzing.It is clear that you cannot analyze the data as it is since you would be in somecases literally comparing apples to oranges. Some kind of transformationis necessary before you begin your analysis. One approach might be tocompute the average or median price for each row (e.g. Cabbage) andreplace the price for that item at each store by the percentage above (+)or below (-) the mean or median price. For example the prices ofname brand sugar are $2.09, $1.69, $1.70, $1.64, $2.13, and $1.99 perfive pound bag (remember this is 1980). Since the average price is $1.87,these would convert to 11.6%, -9.8%, -9.3%, -12.5%, 13.7%, and 6.23%of the average price. Similar figures could be computed based on themedian. Be sure to include a discussion of this issue in your report aswell as a clear listing of the transformed data you will actually beanalyzing.3) W. Pierce does not sell house brands. Thus, even if you were willing tobuy a non-name brand product at W. Pierce, you couldnt. Therefore, at W. Peirce,de facto, the house price is identical to the name price.
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