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“Today Shapes Tomorrow

 Published Every Monday    Volume  137 Special Edition August 3, 2009

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Chapter 11 – “Price War” Continues – Competitive advantage kick-in week-9

Last week we discussed details of the eighth week.  For week-9, you dropped the price of lemonade to $0.50 per cup to meet “Jack & Jill Lemonade” price.

Remember the price wars are bad for businesses but good for the customers.  Both your and “Jack & Jill Lemonade” business have been affected by the price war.  Price wars make it difficult for the business which does not have competitive advantage over others, for example, better costs.  Looks like your better negotiations with the Organic Farm to get lemons at one third less price gave you a cost advantage.  This advantage is not available to “Jack & Jill Lemonade”.

Let us discuss how week-9 worked out?

SALES – You sold 80 lemonades this week.  Looks like rumors of “Jack & Jill Lemonade” down the street of going of business is spreading.  It appears that at $0.50 per cup, “Jack & Jill Lemonade” cannot be profitable.

CUSTOMERS – You continue to see a loyal customer base.  Your customer base starts to increase and you start to see some of the “Jack & Jill Lemonade” loyal customers come to your stand.

PRODUCT AND SERVICES – You are still keeping the quality of lemonade good.

PRICE – You dropped the price to $0.50 per cup.  You can afford to keep the price low with your unique cost advantage.

NEXT STEPS – So far you have successfully dealt with the price war in a mature business person manner.  Now let us see if the rumors are real and if “Jack & Jill Lemonade” will close.  In addition, you have to start thinking about what if more of “Jack & Jill Lemonade” customers start to show up at your stand?  Are you prepared to handle a large volume, say of over 100 cups a week?  Will you need to hire more help and how will it all work for your bottom line? 

In the next few weeks we will also start to discuss, what are you going to do with the profit and cash you have build?  How do you plan to pay your parents and friends who provided you with cash to start the business? How do you plan to exit the business when your school opens after Labor Day?

Keep up the good work!  This is how your Week-9 numbers look:


Learn more about…

What is Credit History?  Why is it important to have a good credit history? Volume 12.    

What is Economy, Business, Workers, Goods,  Services,  Stock, DOW, S&P500, and NASDAQ in Volume 16. 

Does it pay to study hard? Volume 17.    

What is Currency and Foreign Currency Exchange rate? Volume 14What is stronger or weaker currency? Volume 20. What does the dollar slide mean? Volume 32.

How does money grow in a bank? Volume 21. 

What is Fed Funds rate and Discount rate? Volume 22

What does the interest rate cut mean for you? What is APR? Volume 23. 

How to read stock information? Volume 25. 

What is “Black Monday”…Crash of 87”? Volume 31.

Who are CEO, CFO, Shareholders, and the Board of Directors? What is SOX? Volume 33

What does “$4.95 + Tax” means?  Volume 47.

What is a Recession?  What is a Depression? Volume 48.

What is Mergers & Acquisition (M&A)?  What is a Merger?  Volume 49.

What is ADR?  Volume 62.

What does buying back of shares means?  Volume 63.

Why is consumer confidence so important?  Volume 64.


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