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Jim O Brien Case Summary

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Summary: Jim O’ Brien made an observation that a portion of Hardee’s customers have a higher profit rate than others. Hardee has a history of using discounts and published tariff taxes to establish their prices. Although discounts are attained through freight volume, this may have to change due to the fact that the employees work volume is higher than the freight volume. Based off this information, Jim expects a new service demands for his consumer to be troublesome to cost and price because it will no longer be based on freight volume; the new demands will include but not be limited to merge- in-transit, event management, continuous shipment tracking RFID capability, and dedicated customer service personnel. With all this new found knowledge Jim and the pricing managers for Hardee Transportation, is attempting to find a new pricing method that will benefit their customers and themselves; they must find a pricing method …show more content…

When discussing cost of service, average cost would be the cost that Hardee should focus on. Choosing average cost over marginal cost is beneficial because, it contains the cost of both fixed and variable cost; which means that everything that pertains to production is addressed in the overall cost price. Hardee would benefit from using the cost of service method, because they would be able to break even or surpass their original cost of production. However, a disadvantage of cost of service, is that Hardee might lose customers because the customers don’t care about the cost of production. Value of service pricing is a pricing method that is established based on how valuable the service is to consumers in its market. The advantage of Hardee using value based pricing is that the customer will prices that are convenient to them, which could increase the number of their consumers. The disadvantage that Hardee will face from value

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