Etienne Friend

8/8/2019 Etienne Friend

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CHAPTER ONE .................................................................................................................. 2INTRODUCTION ............................................................................................................... 2

Background of the Study ................................................................................................. 2Statement of the Problem .................................................................................................3

Purpose of the Study (General Objective) ....................................................................... 3.......................................................................................................................................... 6Sources: Researcher .........................................................................................................6

CHAPTER TWO ................................................................................................................. 9LITERATURE REVIEW .................................................................................................... 9

Introduction ...................................................................................................................... 9WHAT A PRICE SHOULD DO ................................................................................. 9PRICING OBJECTIVES ........................................................................................... 10PRICING STRATEGIES ..........................................................................................11PROMOTIONAL PRICING .....................................................................................12A DEEP CUT STRATEGY .......................................................................................14

THE ALTERNATIVE STRATEGY .........................................................................16PRODUCTIVITY IN TERMS PROFIT MARGIN ......................................................17Gross Profit Margin ...................................................................................................18 Net Profit Margin ....................................................................................................... 19

PRODUCTIVITY GROWTH IN SUPERMARKETS ..................................................20CONCLUSION ..............................................................................................................24

CHAPTER THREE ...........................................................................................................26METHODOLOGY ............................................................................................................26

Introduction ....................................................................................................................26Type of Research ...........................................................................................................26Population ...................................................................................................................... 26

Sampling and sampling technique .................................................................................27Data Collection ..............................................................................................................27Instrument of Data collection .........................................................................................27Instrument validity .........................................................................................................28Instrument Structure to meet Research Objectives ........................................................ 28Procedure for data collection .........................................................................................28Method of data analysis .................................................................................................28Conclusion .....................................................................................................................28

References ..........................................................................................................................30



CHAPTER ONE

INTRODUCTION

Background of the StudyThe Rwandan supermarket industry as per the description of supermarkets that I will

relate to my study has over the past decade experienced an increasing number of new

entrants, a sustained increase in number of participants as well as an accelerated rate of

increase in market growth for this industry till date. Factors accounting for this ongoing

saturation and expansion of this industry can be attributed to more than one reason, all of

which may fall beyond the scope of this study and consequently will likely not be

discussed here.

The researcher’s interest in choosing this topic aroused from my observance of the

increasing number of participants into this sector of business in Rwanda. Another reason

was my keen interest into wanting to gain knowledge of how these supermarkets are able

to thrive and survive in the present and emerging market competition.

There are different forms of retail firms within the retail industry which may be

considered as supermarkets but for the scope of this study I will like to limit my

definition of supermarkets to the conventional supermarkets which maybe defined or

described as a self-service or departmentalized food store with meat, grocery, produce

departments, as a well as a range of assorted foods and related products.

Retailers have to select prices which are most competitive and offer consumers with a

satisfactory value for prices which they pay for the products received and services

rendered unto them. Pricing may not have been so relevant if supermarkets did not face

competition, competition provides consumers with choice and substitutes at the expense

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of the retailers and thus in a competitive environment retailers need to consider the

sensitivity of consumers to product prices when pricing goods.

Statement of the Problem

Retailers in considering the other principles of the retailing concept may tend to shift

their focus and emphasis from the value driven principle and price orientation whilst

highlighting the other principles in an attempt to formulate a profitable retail strategy.

This study aims to highlight the importance of pricing in a retail supermarket, the

different pricing techniques available and whether we can effectively manage product

pricing to achieve productivity targets. There fore the researcher will give answer to the

following questions:

• To what extent is supermarkets are able to efficiently carry out pricing strategies?

• What is the actual level of operations in the supermarkets?

• To what extent does product pricing improve the operation of supermarkets in

Rwanda?

• What are the challenges faced by the supermarket in efficiently carry out pricing

strategies?

Purpose of the Study (General Objective)

This study is intended to improving productivity of Rwandan supermarkets through

product pricing.

Specifically the study will have the following objectives:

• To evaluate the extent to which supermarkets are able to efficiently carry out

pricing strategies

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• To assess the actual level of operations in the supermarkets

• To evaluate the extent to which product pricing improves the operation of

supermarkets in Rwanda

• To find out about the challenges faced by the Rwandan supermarket in efficiently

carry out pricing strategies

Significance of Study

• To provide Rwandan retailers with significant insight about pricing strategy and

its potential impact on profit margins and inventory turnover period, all of which

have a direct relationship with sales, revenue and profit.

• Providing Rwandan retailers with significant knowledge of the value driven

principle of the retailing concept and its relationship with pricing and profit

margins of a retail supermarket.

• A guide retailer’s can follow in understanding what price strategy or approach

will be most applicable for every condition, product and service offered.

Hypothesis

The improvement of Rwandan supermarket productivity can not be improved

through product pricing

Basic Assumptions

1. All the respondent are in one Region

2. The respondents will all be from Rwanda

3. Most of the respondents will be females.

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Limitations of the Study

During the period of the research, the researcher anticipates the following

limitations:

There are a lot materials required to carry out the research but its access is limited.

It is much more difficult to come up with the right facilities like computers, pens, Internet

access and most of all printers to print the compiled work.

There will be an enormous of data that will be analyzed but finding it and

retrieving it is very difficult because it may be too much and it may take a very long time

to get something small.

Respondents’ unwillingness to cooperate, the researcher will not take it for

granted and guarantee that every respondent will be willing to answer the question. The

researcher will overcome this obstacle by asking the same question in different ways, a

method referred to as triangulation.

Possible Solutions

The researchers will use books and Internet where possible in retrieving the

necessary data required in their research.

The researchers intend to use self administered questionnaire on their respondents

in obtaining the necessary information required in their research.

The researchers will work within the time frame given by the Institution during

their research by use of their own personal timetable of scheduled meetings, by being

committed and disciplined.

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Conceptual framework

Sources: Researcher

Delimitation of the Study

Content scope

The study is limited to the improvement of Rwandan supermarket profitability

through product pricing strategy. The researcher will look keenly at the stages of product

pricing and how it can be improved in order to improve the profitability of supermarket.

Time scope

The research will take a period of 3 months from the period when the proposal

will be approved by the supervisor to the period of the presentation of the final findings.

In this period, there will be collection of raw data from the field, sorting out the relevant

information, interpretation of the data and writing the final copy which will be handed

over to the supervisor

Operational Definition of Terms

Retailer: A retailer is a name assumed by anybody in the decision making process of a

retail supermarket

PRODUCT PRICING

Premuim PricingPenetration pricingPrice Skimming

PRODUCTIVITY IN

TERMS OF

PROFITABILITY

MARGIN

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Retail Supermarket: A self-service or departmentalized food store with grocery, meat,

produce foods, a wide range of assortment of foods and other related products

Retail Strategy: The overall plan guiding a retail firm

Pricing Strategy: The overall plan guiding a retail supermarkets pricing process

Profit Margin: Can be referred to as profit for the period divided by total sales revenue

for the period multiplied by a hundred

Value Driven Principle: Retailer offers good value to customers, whether it to be

upscale or discounts. This means having prices appropriate for the level of products and

customer service.

Productivity: Cost as a percentage of sales. Productivity can also be the efficiency with

which a retail strategy is carried out.

Organization of the Study

The study is composed of three chapters namely: Introduction, Literature review

and Research Methodology

Chapter 1 contains the Background of the Study, Statement of the Problem,

Purpose of the Study, Significant of the Study, Statement of Hypothesis, Basic

Assumptions, Limitation of the study, Delimitation of the Study, definition of terms and

Organization of the study.

Chap 2 contains the Literature, other similar studies and ideas for the

development of the conceptual framework and an understanding of the research in

general.

Chap 3 outlines the methodology. This includes the methodology that the

researcher is going to use in order to carry out the research. It includes Population of the

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Study, Sample Size and Sampling Procedure, Procedure of the Study, Research Design,

Data Collection, and Data analysis.

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CHAPTER TWO

LITERATURE REVIEW

Introduction

This chapter presents literature reviewed on improving productivity of Rwandan

supermarkets through product pricing. It includes literature about pricing, what a price

should do, what is promotional pricing, productivity and supermarkets.

PRICING

Pricing is the process of determining what a company will receive in exchange for its

products. Pricing factors are manufacturing cost, market place, competition, market

condition, and quality of product. Pricing is also a key variable in microeconomic price

allocation theory. Pricing is a fundamental aspect of financial modelling and is one of the

four P’s of the marketing mix. The other three aspects are product, promotion, and place.

Price is the only revenue generating element amongst the four Ps, the rest being cost

centres (www.thepricingpractice.com)

WHAT A PRICE SHOULD DO

There are three things a well chosen price is expected to do i.e. achieve the financial

goals of the company (e.g., profitability), fit the realities of the marketplace (Will

customers buy at that price?), support a product's positioning and be consistent with the

other variables in the marketing mix.

Prices are influenced by the type of distribution channel used, the type of promotions

used, and the quality of the product. A Price will usually need to be relatively high if

manufacturing is expensive, distribution is exclusive, and the product is supported by

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extensive advertising and promotional campaigns. Low prices can be viable substitutes

for product quality, effective promotions, or an energetic selling effort by distributors.

An efficient price is a price that is very close to the maximum that customers are prepared

to pay. In economic terms, it is a price that shifts most of the consumer surplus to the

producer. A good pricing strategy would be the one which could balance between the

price floor (the price below which the organization ends up in losses) and the price

ceiling (the price beyond which the organization experiences a no demand situation)

www.LSBF.org.uk .

PRICING OBJECTIVES

The firm's pricing objectives must be identified in order to determine the optimal pricing.

Common objectives include the following:

Current profit maximization

This seeks to maximize current profit, taking into account revenue and costs. Current

profit maximization may not be the best objective if it results in lower long-term profits.

Current revenue maximization

This seeks to maximize current revenue with no regard to profit margins. The underlying

objective often is to maximize long-term profits by increasing market share and lowering

costs.

Maximize quantity

This seeks to maximize the number of units sold or the number of customers served in

order to decrease long-term costs as predicted by the experience curve.

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Maximize profit margin

This attempts to maximize the unit profit margin, recognizing that quantities will be low.

Survival

In situations such as market decline and overcapacity, the goal may be to select a price

that will cover costs and permit the firm to remain in the market. In this case, survival

may take a priority over profits, so this objective is considered temporary.

Status quo

The firm may seek price stabilization in order to avoid price wars and maintain a

moderate but stable level of profit.

For new products, the pricing objective often is either to maximize profit margin or to

maximize quantity (market share). To meet these objectives, skim pricing and penetration

pricing strategies often are employed. Joel Dean discussed these pricing policies in his

classic HBR article entitled, Pricing Policies for New Products. (www.netmba.com)

PRICING STRATEGIES

There are many ways to price a product. Let's have a look at some of them and try to

understand the best policy/strategy in various situations.

Premium Pricing

Use a high price where there is uniqueness about the product or service. This approach is

used where a substantial competitive advantage exists. Such high prices are charge for

luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing

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Prices are set artificially low in order to gain market share. Once this is achieved, the

price is increased. This approach was used by France Telecom and Sky TV.

Economy Pricing

This is a no frills low price. The cost of marketing and manufacture are kept at a

minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming

Charge a high price because you have a substantial competitive advantage. However, the

advantage is not sustainable. The high price tends to attract new competitors into the

market, and the price inevitably falls due to increased supply. Manufacturers of digital

watches used a skimming approach in the 1970s. Once other manufacturers were tempted

into the market and the watches were produced at a lower unit cost, other marketing

strategies and pricing approaches are implemented.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four

main pricing policies/strategies. They form the bases for the exercise. However there are

other important approaches to pricing.

PROMOTIONAL PRICING

Promotional pricing is a sales and marketing technique which involves reducing the price

of a product or service to attract customers. This technique can be effectively used across

numerous industries including food services, cosmetics, and household cleaning supplies.

This often involves reducing prices to unsustainably low levels. In some cases, products

and services may be sold at or below cost. A buy one get one free scheme may even be

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used. When this is done, interest in goods can be greatly increased; meaning sales are

also likely to increase dramatically (www.LSBF.org.uk )

Psychological Pricing

This approach is used when the marketer wants the consumer to respond on an emotional,

rather than rational basis.

Product Line Pricing

Where there is a range of product or services the pricing reflect the benefits of parts of

the range. For example car washes. Basic wash could be $2, wash and wax $4, and the

whole package $6.

Optional Product Pricing

Companies will attempt to increase the amount customer spend once they start to buy.

Optional 'extras' increase the overall price of the product or service. For example airlines

will charge for optional extras such as guaranteeing a window seat or reserving a row of

seats next to each other.

Captive Product Pricing

Where products have complements, companies will charge a premium price where the

consumer is captured. For example a razor manufacturer will charge a low price and

recoup its margin (and more) from the sale of the only design of blades which fit the

razor.

Product Bundle Pricing

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Here sellers combine several products in the same package. This also serves to move old

stock. Videos and CDs are often sold using the bundle approach.

Geographical Pricing

Geographical pricing is evident where there are variations in price in different parts of the

world. For example rarity value, or where shipping costs increase price.

Value Pricing

This approach is used where external factors such as recession or increased competition

force companies to provide 'value' products and services to retain sales e.g. value meals at

McDonalds (www.marketingteacher.com)

Retail Pricing

Retailers offer a wide selection of goods and consumers often make a choice of a

purchase decision in respect of a basket of goods not a single product. The consequence

being that retailers decide what price policy is most like to encourage consumers to

patronize his shop rather than that of a competitor. The basic choice of pricing strategies

(assuming that price is an important element in the market mix) is between a series of

deep price cuts (i.e. in relation to the recommended or the usual competitive prices) no

limited number of products and more modest price cuts on a wider range of products.

A DEEP CUT STRATEGY

Amongst the two strategies there appears to be dialectic of thought as to which strategy

works out best for both retailers and consumers. The latter approach was justified on the

grounds that since the cost sine the cost of search makes it difficult for consumers to

judge whether the overall level of prices (or indeed the prices of the basket of goods that

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they intend to buy) are lower in one shop than in the other, they will evaluate the prices

on the basis of the number of goods. Thus the retailer need reduce on a limited number of

prices, ensuring of course that the reductions are adequately advertised. The advocates of

this approach could point to the fact that it had been adopted by the multiples, and

especially the grocery multiples, who had rapidly increased their market shares in the

recent years.

More recently deep price cut approaches may not always be most successful even in the

groceries but let us accept that there will be in at least some circumstances grounds for

adopting a policy which involves substantial differences in gross margins earned on

different product.

A sound guide to pricing policy is that margins should vary inversely with the elasticity

of demand and in a manufacturing firm price will continue to reduce only so long as

either the profit or the revenue derived from the product continues to rise.

In retailing prices of the products may be reduced beyond the point at which the profit

and even the revenue derived from these products begin to decline. This may occur if the

retailer believes that the loss will be outweighed by the revenue and profit derived from

the other products bought by the consumers who have been attracted into the shop by the

price cuts. WE can therefore conclude that the higher the internal cross elasticity’s among

products, the more successful a policy of selective price cuts is likely to be.

Holdren has suggested that the products for which the transfer effect (a similar concept to

cross price elasticity) is likely to be greatest are those (a) which are produced in multiple

units, (b) whose price is high enough to permit a reduction which is perceptible, (c)

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which are of great budgetary importance, (d) which are advertised so heavily as to leave

consumers highly price conscious. Products having one or more of these characteristics

include flour, tinned milk, baby foods, coffee, sugar etc. Products with a low transfer

effect also include things like condiments and shoe laces, goods with a high price

elasticity, fresh produce and impulse items such as potted plants.

It is not always easy to draw the lines between these two groups of products and the

transfer effects of products do change over time. What retailers can do is to stock shops

mainly non food items which were customarily sold by specialty shops at high margins.

Once consumers become accustomed to seeing such products on supermarket shelves, the

transfer effect may become much greater. An equally important consideration in these

outlets is the high own price elasticity attaching to some of these products, together of

course with the convenience to the consumer of finding a wide product range under one

roof.

THE ALTERNATIVE STRATEGY

I referred earlier to the fact that much of the running in the U.K. grocery market in the

recent years has been made by firms which have adopted a policy of cutting prices across

the board. Some indication of the advantage in prices offered to consumers by these firms

in a given study of food prices in the North of England. A survey of prices of 120 food

products showed that while the cheapest conventional multiple store sold, this basket at

12.5 percent below the recommended prices, the 9 discounters sold at from 14.3 percent

to18.9 percent below, the majority tending towards the higher figure. The likely outcome

of the competition between firms adopting these alternative strategies is that both will

survive, each appealing to groups of consumers having somewhat different requirements

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and attributes. Nevertheless the indications are that current economic conditions, with a

rapid rate of inflation, favours across the board’ policy.

Consumers may become confused about the market price of individual products. It also

appears that this confusion may be accompanied by irritation when frequent price

promotions make the identification of prices even more erratic. Consumer’s attitudes on

this point are especially important for the large retailer who stocks many categories of

goods, since he has of course the greatest scope for varying the margins amongst these

categories. Consumers are likely to respond more favourably to lower price levels on

goods various alternative substitutes.

There are a range of options open to the retailer at both the strategic and the tactical level

added to the many different forms of non-price competition, the alternative competitive

stances that can be adopted by the retailer are very varied.

PRODUCTIVITY IN TERMS PROFIT MARGIN

A ratio of profitability calculated as net income divided by revenues, or net profits

divided by sales. It measures how much out of every dollar of sales a company actually

keeps in earnings. Profit margin is very useful when comparing companies in similar

industries. A higher profit margin indicates a more profitable company that has better

control over its costs compared to its competitors. Profit margin is displayed as a

percentage; a 20% profit margin, for example, means the company has a net income of

$0.20 for each dollar of sales.

Looking at the earnings of a company often doesn't tell the entire story. Increased

earnings are good, but an increase does not mean that the profit margin of a company is

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improving. For instance, if a company has costs that have increased at a greater rate than

sales, it leads to a lower profit margin. This is an indication that costs need to be under

better control.

Imagine a company has a net income of $10 million from sales of $100 million, giving it

a profit margin of 10% ($10 million/$100 million). If in the next year net income rises to

$15 million on sales of $200 million, the company's profit margin would fall to 7.5%. So

while the company increased its net income, it has done so with diminishing profit

margins. (www.investopedia.com)

A company's earnings do not always tell the entire story. Increased earnings are good, but

an increase does not mean that the profit margin of a company is improving. For instance,

if a company's costs are rising at a faster pace than are sales, this will lead to a lower

profit margin, indicating that the company should rein in its costs. Consider a company

that has net income of $10 million from sales of $100 million, giving it a profit margin of

10% ($10 million/$100 million). If in the next year net income rises to $15 million on

sales of $200 million, the company's profit margin will fall to 7.5%. Although the

company has increased its net income, it has done so with diminishing profit margins

(www.financial-dictionary.thefreedictionary.com)

According to (begineerinvest.about.com) every organization or business entity must

come up with two types of profit margin in order to evaluate the productivity of an

organization in terms of profit margin

Gross Profit Margin

Although we are only a few lines into the income statement, we can already calculate our

first financial ratio. The gross profit margin is a measurement of a company's

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manufacturing and distribution efficiency during the production process. The gross profit

tells an investor the percentage of revenue / sales left after subtracting the cost of goods

sold. A company that boasts a higher gross profit margin than its competitors and

industry is more efficient. Investors tend to pay more for businesses that have higher

efficiency ratings than their competitors, as these businesses should be able to make a

decent profit as long as overhead costs are controlled (overhead refers to rent, utilities,

etc.) To calculate gross profit margin, use this formula: Gross Profit ÷ Total Revenue

Calculating Sample Gross Profit Margin

For illustration purposes, let's calculate the gross profit margin of company X Golf

Supply (a fictional company) using its income statement.

Assume the average golf supply company has a gross margin of 30%.

We can take the numbers from X company Golf Supply's income statement and plug

them into our formula: $162,084 gross profit ÷ $405,209 total revenue = 0.40.The

answer, .40 (or 40%), tells us that Greenwich is much more efficient in the production

and distribution of its product than most of its competitors.

Net Profit Margin

The profit margin tells you how much profit a company makes for every $1 it generates

in revenue or sales. Profit margins vary by industry, but all else being equal, the higher a

company's profit margin compared to its competitors, the better.

Calculating Net Profit Margin

To calculate net profit margin, several financial books, sites, and resources tell an

investor to take the after-tax net profit divided by sales. While this is standard and

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Pepsi’s sales (2006). Wal-Mart’s success is often attributed to its expert logistics systems

(2006; 2001) and its cost conscious “corporate culture.” The productive gap between

large national chains and single unit retailers is quite large (2006) and it is conceivable

that food retailing exhibits even more asymmetries than the retail sector average. In

addition, Wal-Mart’s aggressive pricing has been credited with reducing operating

margins of competing supermarkets and lowering consumer prices for many food items

(2007).

Still with reference with what is said in www.lvthesis.typed.com on, there has been much

speculation about the competitive effects of Wal-Mart’s expansion such as for example,

the February 2005 bankruptcy filing of Winn-Dixie, large supermarket chain based in

Florida, was widely blamed on Wal-Mart’s rise (2005). In fact, vast majority of

supermarket bankruptcy cases in the last decade have cited Wal-Mart as a catalyst (2003).

For strategic management, budgeting as well as pricing, there can be recognition of Every

Day Low Pricing strategy has proved to be successful innovation resulting in higher

profits to super-markets adopting it in competition with Promotional Pricing.

Conventional wisdom attributes this success either to lower costs or to Every Day Low

Pricing better serving time constrained consumers, while discouraging cherry pickers

who seek promotions.

However, it is unclear that such cost savings are being fully realized since Every Day

Low Pricing stores also engage in price promotions. Aside, continued existence of promo

stores means that costs are not the only factor, and they compete effectively without

relying just on the cherry pickers. Furthermore, experimental evidence suggests that a

supermarket cannot obtain higher profits by merely setting constant low prices, leading to

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the question: exactly what makes Every Day Low Pricing successful? This question is of

particular relevance to both academics and practitioners who have been intrigued by the

success of this retailing strategy. Amiably, supermarket issues will be a part of research,

economic analysis of competition, and the empirical findings should be of interest to the

broader community of researchers and managers.

Strategic decision-making simply refers to the long-term direction of an organisation. By

means of the configuration of the resources of the organisation, the organisation

strategizes to achieve sustainable competitive advantage while also fulfilling the

expectations and aspirations of all the stakeholders. Budgeting, as the foundation of all

financial plans, refers to the process of determining planned expenses and revenues. It is

also planning for investments either long-term or short-term. Product pricing, on the other

hand, means to establish a selling price for a product. Prices of the products have a direct

effect on the success of the business. As such, prices should cover costs and profits and

must be established to assure sales (www.12manage.com).

Definition of supermarkets

There are different forms of retail firms within the retail industry which may be

considered as supermarkets but for the scope of this study I will like to limit my

definition of supermarkets to the conventional supermarkets which maybe defined or

described as a self-service or departmentalized food store with meat, grocery, produce

departments, as a well as a range of assorted foods and related products.

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Profile & Trends in retail business environment in Rwanda

The retail industry in Rwanda is gradually expanding. In urban areas, a prospering

population just returning from working in Europe or the US is seeking foods from these

western markets. There is a developing trend towards larger outlets and chains. The

Ghanaian consumer has shown a preference for imported foods and high value consumer-

ready products, which are prepared and packaged for use on one or two occasions. The

development of the retail sector will be fuelled by this demand in the coming years. By

Western standards, the food retail industry in Rwanda is rudimentary. There are only

three supermarkets, which have branches in more than one city or urban centre. Three

large supermarkets with only one outlet are located in the capital city, Kigali. Several

medium-sized independent supermarket units have recently been opened in the urban

centers. The majority of outlets in the country are tiny groceries in rural and urban areas

of below 10 sq. m., offering basic product lines. The import of food products is

increasing, encouraging the development of larger ranges to offer more choices to

consumers, annual retail food sales in Rwanda increased by about 30% during the mid to

late 1990’s. Following the liberalization of the Rwandese economy, there has been an

increase in private sector economic activities. In 1999, retail food sales grew by about 10

percent. The establishment of several small to medium sized retail outlets in Rwanda, by

independent retailers, has greatly contributed to the growth of the retail food sector.

Given the fact that these retailers constitute the companies with the largest buying power,

they also act as importers and distributors for imported goods to other, smaller retailers

and vendors in the rest of the country. Rwanda’s population is rapidly growing at

approximately 3.2% annually. With improved income levels (resulting from the increase

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in private sector economic activities), better customer service policies, and continuing

inefficiency in local food production and processing, the Rwandese environment is

supportive of growth in retail sales of imported consumer-ready food products. Since the

Government of Rwanda is projecting, Rwanda as the gateway to the East-Africa sub-

region, opportunities exist for increased sales of U.S food products, since imported food

products are often exported as "new products" from Rwanda into the sub-region.

CONCLUSION

Profit Margins and pricing strategies are quickly reformulating the “rules of the game”

for competitors in this industry. To prepare competitors to take advantage of

opportunities and meet challenges requires special and immediate attention and a re-

design of retail strategy to secure a market share in the emerging industry of

supermarkets in Africa and Rwanda for that matter. Development agencies in this sector

must understand that “traditional product markets” will mean supermarkets.

Market-oriented programs and policies will have to be supermarket-oriented because in

any given economy three or four chains can command up to 50% or more of the

supermarket sector. Development programs and policies must learn to deal with just a

handful of giant companies. This is an enormous challenge, and demands an urgent

review and revision of current ideas, strategies, and practices.

There are only three supermarkets which have branches in more than one city or urban

centre. (Adade 2005) States that there are three large supermarkets with only one outlet

located in the capital city Kigali although there are several medium-sized independent

supermarket units were opened in the urban centers. Supermarkets served 10% of the

market size with full-line stock level and self-serve service method. There are several

areas therefore that Rwandese supermarket could be improved such as strategizing for

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better services for the customers, for instance, and by means of effective budgeting and

product pricing.

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CHAPTER THREE

METHODOLOGY

Introduction

The chapter elaborates on the type of research population, sampling design and sampling

technique, data collection procedure and method of data analysis. In an attempt to find

out how profit margins can be related to product pricing in the retail sector, this topic was

chosen. Guided by the principles of conducting surveys, several methods would be

employed in gathering the information and analyzing them.

Type of ResearchThe research strategy that the study will utilize is the descriptive method. A descriptive

research intends to present facts concerning the nature and status of a situation, as it

exists at the time of the study (Creswell, 1994). It is also concerned with relationships

and practices that exist, beliefs and processes that are ongoing, effects that are being felt,

or trends that are developing (Best, 1970). In addition, such approach tries to describe

present conditions, events or systems based on the impressions or reactions of the

respondents of the research (Creswell, 1994). This research is also cross-sectional

because of limited time. This research is a study of a particular phenomenon (or

phenomena) at a particular time. (Saunders et al , 2003) Accordingly, cross-sectional

studies often employ the survey strategy, and they may be seeking to describe the

incidence of a phenomenon or to compare factors in different organizations

Population

For me to proceed with the study, I decided on a population: an identifiable group of

elements that are of interest to the researcher and pertinent to the specific information

26



problem. (Hair, 2003). The target population for this study will be two supermarkets

located on the Spintex road.

Sampling and sampling technique

Convenient con-probability sampling would be used in obtaining forty representatives

amongst consumers from both supermarkets. Twenty customers from each supermarket

to prevent the selection from being biased, also two representatives from the management

of both supermarkets were selected to equip the researcher with a management

perspective of the issues at hand.

Data Collection

Type of Data

In this study, primary and secondary research will be both incorporated. The reason for

this is to be able to provide adequate discussion for the readers that will help them

understand more about the issue and the different variables that involve with it.

Source of Data

The primary data for the study will be represented by the survey results that will be

acquired from the respondents. The secondary sources of data will come from data

collected from other sources for other purposes that are of relevance to this research like

the website of of the supermarkets and their reciepsts.

Instrument of Data collectionData will be collected through administering of questionnaires

27



Instrument validity

In General validity refers to the degree to which the instrument measure the constructs

that are intended to measure. My questionnaires was validated by giving it to my

supervisor to read through it for approval.

Instrument Structure to meet Research Objectives

From the consumer questionnaire: Questions 7 to 9 is structured to meet research

objective 1, question 10 satisfies research objective 2. From the management

questionnaire: Questions 7 to 10 is structured to meet research objective 1, questions 11

to 14 is structured to meet research objective 2, questions 15 to 19 are structured to meet

research objective 3

Procedure for data collection

This will require me to obtain a letter from my university introducing me as a student to

the two supermarkets for them to give me approval to conduct a research at their

premises by handing in questionnaires to consumers and management. When permission

is granted I will then proceed to acquiring the Data by going to the supermarkets and

handing in questionnaires to the consumers and management.

Method of data analysis

Figures, table, charts and percentages would be included in analyzing the result of the

study after administering the questionnaire with the aid of Microsoft Excel. This would

help for easy understanding of the data collected.

Conclusion

To elicit the views of both consumers of supermarkets and management of supermarkets

I will carry out this survey by preparing two main set of questionnaires for both

consumers and management to create a perspective on what drives consumers to shop at

28



supermarkets and how management seeks to attract consumers. The researcher hopes to

deduce reformed recommendations as to what best practices by the diffusion of these two

perspectives.

29



References

www.thepricingpractice.com

www.thepricingpractice.com

www.LSBF.org.uk .

www.netmba.com

www.LSBF.org.uk

www.marketingteacher.com

www.investopedia.com

www.financial-dictionary.thefreedictionary.com

www.lvthesis.typed.com,

www.lvthesis.typed.com

www.12manage.com























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