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Appropriate pricing methods for Glasses Hut

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It is no surprise that owners of Glasses Hut have a pretty clear vision of where the chain is headed, but even they never foresaw some early challenges that nearly derailed the eyewear company.

Problems with supply, aggressive rivals and recession all posed serious risks during the difficult start-up period, but founders Andy Lee and wife Sandy had the perseverance and business sense to prevail.

Glasses Hut, including its subsidiary brands, now has 43 shops island wide and raked in $40 million in revenue last year. An impressive record, given that it began with a shop in Clementi.

in January 1997, restricted by limited funds for extra staff. Andy Lee and Sandy, both Singaporeans with optometry degrees from Britain, started their shop with their savings and loans. Business was brisk initially and they even had no time for meals, working daily from 10 am to 11 pm, seven days a week.

More trials came in 1999, when the couple realised just how cut-throat the industry could be. Some larger chain stores, worried about the young upstart's growth, banded together to force some suppliers to stop selling stocks to Glasses Hut.

Overnight, Glasses Hut was left without much stock to sell and they had to cancel orders and refund customers' deposits. A possible solution was to look overseas, so Andy Lee knocked on the doors of the headquarters of some large suppliers.

That proved to benefit the budding chain hugely, as it managed to secure goods at a lower price, bypassing the middleman. But the catch was that the suppliers asked for large orders, to justify their gamble on a new operation.

While some companies might crumble under the pressure, Glasses Hut rose to the occasion and undertook a rapid expansion. Within three years of the supply crisis, it had 12 shops. Its fast growth propelled the company into the big league of Singapore's optical retail industry.

The company showed a steady hand during the 2003 SARS crisis, when sales plunged. It had to work extra hard, and called up regular customers to offer more services to increase sales. This period also provided more opportunities to train their staff to provide better customer service.

Another problem lies in the difficulty of finding skilled staff like optometrists. Although some local institutions offer diplomas and degrees in the field, there is still shortage of talent and they command rather high wages. However, the company ensures that they have well qualified staff to manage their outlets.

Glasses Hut offers a wide selection of eyewear products, and tries to bring in new ranges quickly. It also sources for products at optical fairs, including those in Milan and Paris.

Their growth in business has been undoubtedly helped by the poor eyesight of Singaporeans: about 80% of those above 18 years are short sighted, one of the highest myopia rates in the world.

In 2008, Glases Hut received a grant from Spring Singapore to upgrade its point of sale system, which improved its stock management. The $125,000 grant was given under Spring's Technology Innovation Programme and it helped them to work more systematically, reducing human error and increasing their productivity. There was hence less manual counting and checking required.

In July 2011, the company also used the same system to implement a fingerprint login system to simplify tracking of staff attendance and punctuality, and in doing so, helped to quantify staff productivity. Its aggressive programme of store openings has delivered annual growth of 20% for the last five years.

However, the company may slow expansion a little as they have already achieved a reasonable spread of locations in Singapore.

The company has some outlets in Beijing and Kuala Lumpur and they are currently studying their options as they feel that there are further potentials overseas. 

Question 1A

Apply two (2) appropriate pricing methods that Glasses Hut could use to price its products and services at its retail outlets. Give reasons to support your answer.

Question 1B

Employ two (2) price adaptation strategies that Spectacle Hut could use to make its products and services more attractive to consumers.

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Solution Preview


Glasses Hut offers eyeglasses that are stylish and trendy. The company has experienced
tremendous growth, which is not expected to continue in the future. Therefore, pricing methods
should focus on maintaining or increasing market share with its existing locations. Product line pricing
and cost plus pricing can be used for Glasses Hut. Product line pricing involves setting product prices
differently for different products. Each product within the Glasses Hut line has something different to
offer consumers. A style from Paris or Milan may draw in consumers who want trendier, more stylish
eyewear. Younger people tend to desire fashionable accessories and there is no shortage of
consumers in the young adult age brackets who will require glasses, based on the high rates of
myopia in Singapore. More traditional styles may be desired by older consumers who simply want to
correct their vision and go about their daily tasks. The trendier styles from Paris will no doubt cost
more to acquire, so the price should reflect the cost. ...

Solution Summary

The appropriate pricing methods for Glasses Hut is examined.

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Claire's Antiques, headquartered in Sarasota, Florida, builds reproductions of certain antique furniture. Claire's Antiques is beginning its 11th year of business. It continues to grow its product line and target customer market and it recently became a public company by issuing shares of its common stock with the NASDAQ exchange.

Claire's Antiques reproduces just three types of antiques. Those products are clocks, dinette sets, and bedroom suites. The bedroom suites have a higher profit margin when compared to the other products, but it also has a lower sales volume. The clocks have a lower profit margin when compared to the other products, but it also has a greater sales volume. Its antiques are sold directly by Claire's Antiques and through independent distributors (typically antique shops and mail-order companies).

Each antique is made of solid oak wood. A clock contains a glass door, clock mechanism, and a pendulum. The dinette sets include a table with four legs, one table extension, and six chairs. The bedroom suite contains one bed frame, two night stands, and a dresser with a mirror. Variable costs commonly include:

- Various component parts, packaging, etc.
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- Other costs allocated on a per unit basis

Claire's Antiques tries to produce approximately the same number of antiques it expects to sell in a given period of time. However, Claire's Antiques can not always accurately predict the market. If it manufactures too few antiques, the company loses sales. However, if Claire's Antiques manufactures too many antiques, it may not be saleable because of the changes in consumer preferences. Claire's Antiques may have to sell its products at a discount or even at a loss to liquidate its inventory. To reduce inventory costs, management is considering implementing a "Just In Time" (JIT) inventory management system.

Goals for the next year are to grow the business to other regions, increase profit margin, and expand its product distribution centers.

Operations deals with how the company is performing. Operations may be refined into different manufacturing processes such as design, material acquisition, assembly, testing and so on.

A VP of operations has asked you to make a presentation at the weekly status meeting on how to improve the efficiency and effectiveness of each manufacturing sub processes individually and as a whole.

She states that to drive performance, you will need to examine accounting-based data on material, labor, and overhead costs. This type of information is not disclosed in financial reports used for lenders and owners. Rather product cost information relates to how the operation is now doing and moving forward in the future. External reports are more backward-looking about how an entity DID operate. While there will be a strong relation between operation profits and profit per the external financial statements, the way that profitability is measured can vary greatly especially since profits on an external financial report are defined according to strict definitions set by the accounting regulators. Nevertheless, the VP of operations finds the relation between operation profits and profit per the external financial statements most useful.

You are to present your findings and recommendation at this meeting.

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