Pioneer Electronics Case Study Essay

1344 Words Apr 23rd, 2012 6 Pages
Case Summary

In 1975 Pioneer maintained relationships with approximately 3,500 franchise retail outlets, the retail outlets benefited from a 5% Pioneer investment in local advertising, and attractive gross margins and credit terms. However, that same year, Pioneer and three competitors were forced to sign consent decrees with the U.S. Federal Trade Commission promising not to engage in alleged anti-fair competition practices – namely requiring distributors to use suggested list prices and punishing those distributors who didn’t comply either through delayed shipments or revoked franchises. A market price war followed the signing of the consent decrees, lowering franchise’s profits while increasing revenue for Pioneer. Pioneer followed
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Industry sources predicts a substantial increase in the market shares of department stores and catalog showrooms.
Disadvantages: Department stores and catalog showrooms do not offer the extensive customer services provided by specialty stores, including professional sales assistance, demonstration, extended store warranty, on-the-premises repair, home delivery and installation, and loaner component programs.

• Alternative #2 - Multiple Branding
U.S. Pioneer would offer several product lines of varying quality and price points under separate brand names. Different product lines would be carried by different types of retail outlets. The department-store line would be of lower quality and price than the signature line.
Advantages: Multiple branding had been used successfully in other industries. It would enable U.S. Pioneer to adapt most effectively to future changes in retail distribution. Pioneer already sells compacts and car stereos to discount stores under the Centrex brand name.
Disadvantages: This strategy could tarnish Pioneer’s reputation for selling only top-of-the-line products. Pioneer may have trouble keeping their distribution channels distinct, and therefore be incurring too much cost on the low end products or being destroying the brand value of the high end products.

• Alternative #3 - Company-owned Stores
Another alternative is to operate its own retail stores. Some retailers in the low-fi

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