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OfficeMax

OfficeMax OfficeMax, Inc., based in Shaker Heights, Ohio, has nearly 950 stores in 49 states. OfficeMax stores sell over 7,500 name brand and private-label office products from writing instruments and paper products to computers and office furniture at discounted prices. The company is currently one of the nation’s office supply chain. In addition to opening more domestic stores in this year, OfficeMax has also decided to branch out into Mexico, Japan, and Brazil. OfficeMax’s vision is to become the leading super discount office supply retail store offering a variety of core office supply products and services by featuring more innovative store-within-store formats to better serve the customers across the nation and now the world. The mission of OfficeMax is to achieve higher profit margins through improved efficiency in inventory management and distribution, accelerated sales and revenue in major markets, and advertising to attract new customers in all markets, and improved customer in all areas. CEO Feuer described the company’s objective as to creating business vehicles that will contribute significant comparable sales gains year after year to become the low-cost provider with the strongest balance sheet. At this time, price, product, and place and distribution, which are focused in this study, are major concerns for the company to maintain stable management systems. In the simplest terms, price is what is charged for something. It is not easy to define price in real life situations. This is because prices reflect many dimensions. Price is a multi-dimensional component of the marketing mix that must be understood in clear, precise terms. Pricing objectives should always flow from and fit in with company level and marketing objectives. Pricing objectives must be explicitly stated because they have a direct effect on pricing policies as well as methods used to set prices for a super discount retailer like OfficeMax. OfficeMax’s executives understood that the product area of the marketing mix is concerned with developing the right product for the target market. Place is concerned with getting the right product to the target market place. A product reaches its customers through a channel of distribution. Promotion is concerned with telling the target market about the right product. Promotion includes personal selling, mass selling, publicity, and sales promotion. Price is the forth component of the marketing mix. For the competitive environment of discount office supply stores, pricing becomes a very vital component of this marketing mix. In setting price, marketing managers must try to consider the kind of competition in a target market. They must also try to estimate the customer reaction to possible prices. Besides this, they must also know the current practices as to discounts, and other forms of sale. Further, they must be aware of legal restrictions on pricing. If customers will not accept the setting price, all of the planning effort in the marketing mix is wasted. All four Ps (Product, Place, Promotion, and Price) are interrelated and tied together in the marketing mix, obviously, the selection of the target market and developing this marketing mix are interrelated. Both parts must be decided together. It is strategies that must be evaluated against the company’s objectives. A marketing strategy sets a target market and a marketing mix. A pricing strategy in the market plan is a written statement of a marketing strategy and the time. The marketing strategy ids related to the objectives of the OfficeMax’s marketing plan that can be clarified to address the following questions in detail: (1) What marketing mix is to be offered to whom and for how long?, (2) What company resources will be needed at what rate?, (3) What results are expected in regards to sales and profits monthly, quarterly, and yearly? For OfficeMax’s executives, it is extremely important to understand what profit-oriented objectives of pricing mean and imply in shaping the marketing mix. A target return objective sets a specific level of profit as an objective. Often this amount is stated as a percentage of sales or of capital investment. A target return objective has administrative advantages in a large tour company. Performance can be compared against the target. A profit maximization object, as pursued by OfficeMax’s executives in recent years, seeks to get as much gross and net profit as possible. It might be started as a desire to earn a rapid return on investment. Some people believe that anyone seeking a profit maximization objective will charge high prices that are not in the public interest. Economic theory, however, does not support this idea. Pricing to archive profit maximization does not always lead to high prices. Demand and supply may bring extremely high prices to the tourist industry only when competition cannot offer good substitutes. But this happens if and only if demand is inelastic. If demand is very elastic, profit maximizes may charge relatively low prices. Low prices expand the market size and result in greater sales and profits for OfficeMax. Profit maximization can also produce desirable results indirectly. Consumers may vote with their purchase dollars for firms that do the right thing. The profits from voting guide other firms to do the right thing to be competitive. In the intensely competitive office supply industry, the competitors must avoid adopting status-quo objectives. This is often called the “don’t rock the pricing boat” strategy for pricing. They may be stated as stabilizing prices or meeting competition and avoid the need for hard decisions to try to improve profits. A status quo pricing objective may be part of an aggressive overall market strategy focusing on non-price competition. This means that aggressive action takes place in the other components of the marketing mix, such as promotion or product, rather than in the pricing component. OfficeMax, this pricing strategy should be avoided in terms of its major percentage of sales, business documents and disposable supplies. Price policies of different types should be considered. A flexible-price policy means offering the same product or service to different customers at different prices. Flexible-price policies often specify a range in which the actual price charged must fall. The advantage of flexible pricing is that OfficeMax company’s sales reps can make price adjustments, when considering the prices charged by competitors, the relationship with the customers, and the customer’s bargaining abilities. This type of pricing strategy is very important for big buyers such as business customers. But flexible pricing does have disadvantages. A customer who finds that others have paid lower prices for the same products becomes dissatisfied with the company. If buyers learn that negotiating can be in their interest, then they will increase the bargaining time. This can affect selling costs. Also, in some instances, some sale reps let price-cutting become a habit. This reduces the role of price as a competitive tool and leads to a lower price level and a thinner profit margin for the corporation. Sales representatives of OfficeMax must be trained in the fine art of using flexible pricing only when appropriate and when not cutting into profit margins at a deep rate. Pricing policies must be implemented over the product life cycle. This is why the price level decision must focus first on the market demand for any given product category offered by OfficeMax. One type of policy is known as a skimming price policy. This is a policy that tries to sell the top of a market or top of a demand curve at a high price before aiming at more price-sensitive customers. Skimming may maximize profits in the market introductory stage, especially if there is little competition. A skimming policy is more attractive if demand is quite inelastic. A skimming policy usually involves a slow reduction in price over time. It is important to realize that as price as reduced, new target markets are being sought. Bibliography:

Word Count: 1293