Friday, October 28, 2011

Analysis of Employee Empowerment Culture & the Theory of Penetration Pricing


Employee Empowerment Culture

            Today’s employee’s have a desire to have a say in the decisions that they make day in a day out. Management’s shift from primary decision maker to a facilitator is a process known as employee empowerment.  Osborne & Plastrik  (2000) describe employee empowerment as a push of the authority to make decisions down to the frontline employees. Instead of responding to the orders they are given, they achieve results by taking personal responsibility of their duties. “Cultures that support empowerment encourage managers to be catalysts, facilitators, coaches, enablers and developers of others rather than merely decision making authorities” (McCrimmon Ph.D., 2011).

Issues, Outcomes & Analysis

            Whole Foods wanted to boost employee morale and create an overall happier workforce. They decided to implement team interviewing, which calls for a diversified panel of employee’s interviewing applicants. The team member participation empowers the culture at Whole Foods because employee’s feel they have a say in the types of people that are hired by the company. They also promote hiring from within. The results achieved an added benefit in that “the process educates both the interviewers and the candidates by giving insight into all the expectations and challenges of the job” (Shelly, 2011). If I were involved in the management of Whole Foods, I would probably not utilize this technique. I think that it was a very profound move for the company to make as well as a very good idea. My personal management style would leave me wanting more control over the type of people that I was hiring. If a few bad apples were able to penetrate the system, they could potentially end up hiring more like them. The idea is a bit too modern for my taste but it very interesting to consider.

The Theory of Price Penetration

            When a company is trying to introduce goods or services that are new into the marketplace, the theory of price penetration is often implemented. It involves the price of the new product being set lower than the company intends to sell it for in the future. The purpose of the low price is to penetrate the market by securing a significant amount of the market share. Price penetration is usually used when the market of people willing to pay a premium for the product is insignificant in regards to the market share of customers looking for a good deal. One of the most important goals of price penetration is to discourage any competitors from attempting to enter into the market that you are selling in. “A penetration policy is even more attractive if selling larger quantities results in lower costs because of economies of scale” (Hillstrom, 2002). Pricing is the most important element of a company’s business strategy because it is the only factor that produces revenues. All the other elements of the marketing mix represent incurred costs.

Issues, Outcomes & Analysis

            Wal-Mart is always looking for ways to give their revenue a boost. Wal-Mart utilizes penetration pricing on the new products that they offer in their stores. The new products price will beat any other store that you could purchase the product at, and the hope is that you will end up buying other products once you have been drawn into the store (Hainer, 2011). Although they are actually losing money selling you the new product, they usually make up for it many times over by the other sales they make once the customer is through the door. Wal-Mart also uses penetration pricing when they open stores in new geographic markets. They lower prices intending to undersell the local, better established competition in the new area. As their loyal customer basis gradually increases over time, so do their prices. “A recent pricing issue is that of everyday low pricing, where the retailer charges a constant, lower price at all times, with no temporary price discounts. Wal-Mart has led the trend toward everyday low pricing” (Allen, 2001). Wal-Mart has used the theory of penetration pricing as their brand building strategy and they have been very successful in doing so. I think that Wal-Mart has done an exemplary job employing the theory and I wouldn’t have changed a thing had I been part of the management team.


References

Allen, G. (2001, May). Witiger. Retrieved October 28, 2011, from Pricing Objectives: http://www.witiger.com/marketing/pricingobjectives.htm

Hainer, S. (2011). chron. Retrieved October 28, 2011, from Penetration Pricing Examples: http://smallbusiness.chron.com/penetration-pricing-examples-18365.html

Hillstrom, K. (2002). Encyclopedia of Small Business. Retrieved October 27, 2011, from Pricing Penetration: http://www.enotes.com/small-business-encyclopedia/

McCrimmon Ph.D., M. (2011). Leadersdirect. Retrieved October 28, 2011, from Empowerment: http://www.leadersdirect.com/empowerment

Osborne, D., & Plastrik, P. (2000). The Reinventor's Fieldbook. San Francisco: Jossey-Bass.

Shelly, J. (2011, October 2). Human Resource Executive Online. Retrieved October 28, 2011, from Innovative Hiring at Whole Foods: http://www.hreonline.com/HRE/story.jsp?storyId=533341639

No comments:

Post a Comment