Pricing Project

Running head: CLASS PRICING PROJECT

Introduction:

As a requirement for the fulfillment of the course, I had undergone a research on class pricing project.  I have conducted a research on the prices of one retail establishment with the other retail establishment. In this manner, I have collected the price of same products and brands from two giant retail stores, Wal-Mart and Meijer located in Columbus. I have compared the prices of the product from the sample size of 31 in a manner that I could determine various factors that are related with the pricing and significant difference between the prices of the product sold by two giant retail stores Wal-Mart and Meijer.

Wal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue and is founded by Sam Walton in 1962. It is the largest private employer in the world and the fourth largest utility or commercial employer. Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S.

Meijer is a regional American Hypermarket based in Walker, Michigan. Founded in 1934 as a supermarket chain, Meijer is credited with pioneering the modern supercenter concept in 1962. About half of the company's 188 locations are located in Michigan with additional locations in Illinois, Indiana, Ohio, and Kentucky. The chain was ranked No. 10 on 2006 list of "America's Largest Private Companies” and 19 in Fortune's 2008 "The 35 largest U.S. private companies". Supermarket News ranked Meijer No. 12 in the 2007 "Top 75 North American Food Retailers" based on 2006 fiscal year estimated sales of $13.2 billion.

As we had to conduct a research on pricing of two retail stores, I collected the sample from Wal-Mart on the Bethel Rd, Columbus and Meijer located in Sawmill Rd, Columbus. I collected the prices of 31 different products which is the sample size for my project.

Data presentation and analysis:

S.N	Items	Price in Wal-Mart	Price in Meijer	difference (d)	d-d bar	(d-d bar)2
1	PowerAde fruit punch	0.78	0.79	-0.01	0.13	0.0169
2	White Hamburger bun	2.38	2.99	-0.61	-0.47	0.2209
3	Pringles	2.63	2.89	-0.26	-0.12	0.0144
4	Doritos	3.98	3.99	-0.01	0.13	0.0169
5	lays classic	2.5	1.89	0.61	0.75	0.5625
6	Grape tomatoes	2.38	2.95	-0.57	-0.43	0.1849
7	organic apple	1.47	1.29	0.18	0.32	0.1024
8	red onion	0.88	0.99	-0.11	0.03	0.0009
9	white onion(bag)	1.5	1.99	-0.49	-0.35	0.1225
10	egg	0.98	0.98	0	0.14	0.0196
11	Milk(half gallon)	1.5	1.19	0.31	0.45	0.2025
12	Potato Idaho	4.77	5	-0.23	-0.09	0.0081
13	Cilantro	0.68	0.89	-0.21	-0.07	0.0049
14	Serrano Peppers	2.44	2.69	-0.25	-0.11	0.0121
15	Banana	0.49	0.49	0	0.14	0.0196
16	Roma Tomatoes	0.98	1.69	-0.71	-0.57	0.3249
17	Green Grapes	1.78	1.69	0.09	0.23	0.0529
18	Green cabbage	0.58	0.54	0.04	0.18	0.0324
19	Baby carrot	1.78	1.99	-0.21	-0.07	0.0049
20	Bud light beer	5.29	5.29	0	0.14	0.0196
21	Classic coke	1.5	1.49	0.01	0.15	0.0225
22	Pepsi	1	1.39	-0.39	-0.25	0.0625
23	Hawaiian Punch	1.97	2.36	-0.39	-0.25	0.0625
24	Ramen Noodles	0.17	0.2	-0.03	0.11	0.0121
25	Ramen Cup Noodles	0.28	0.32	-0.04	0.1	0.01
26	Olive Oil(250 ml)	3.22	2.99	0.23	0.37	0.1369
27	Crisco Vegetable Oil	3.24	3.98	-0.74	-0.6	0.36
28	Orange Juice Small	2.67	2.69	-0.02	0.12	0.0144
30	Tide(Small)	5	5.89	-0.89	-0.75	0.5625
31	Downy liquid	4.26	3.69	0.57	0.71	0.5041
32	Hanger Tabular 10 piece	1.34	1.69	-0.35	-0.21	0.0441
				-4.48	-0.14	3.7354

Statement of Hypothesis:

In general, the price of product in Wal-Mart, discount department stores is considered to be lower than the price of various products in Meijer. In my research, I have assumed the mean price of Wal-Mart as µ1 and the price of Meijer as µ2.

Therefore, I have set the following hypothesis for these two retail pricing.

H₀: µ1≥ µ2

H₁: µ1< µ2 (claim)

Here, H₁ is the claim.

Prediction of final result:

We have,

Mean price in Wal-Mart =2.07806

Mean price in Meijer =2.22258

Mean difference in price of Wal-Mart and Meijer =-0.14452

As Wal-Mart has mean price of 2.07806 and Meijer has the mean price of 2.22258 and the mean different in price of –0.14452, I made an assumption to set the hypothesis that the prices of the product in Wal-Mart is less expensive than that of Meijer.

Calculation:

Here,

Sample size (N) =31

Degree of Freedom, (df) = n-1 = 31-1 = 30

Significance level = 0.05

Critical region = 1.697

If the T calculated is less than -1.696 or greater than then 1.697 than we will reject the null hypothesis.

We have,

d-bar = ∑d/n = -4.48/31 = -0.1445

Now, s_{d =}  √[∑(d-d bar)²]/[n-1] = √[3.7354/30] = 0.35286

Hence,

t_calculated=d-bar/[sd/√n] = -0.1445/[0.35286/√31] = -2.28

Since, the t_calculated doesn’t lie within the critical region we reject null hypothesis which is H₀. This means the mean prices of the two retail stores Wal-Mart and Meijer are not equal and the price of Wal-Mart is comparatively lower than that of Meijer in the given sample of product.

Comparing Results with the Hypothesis:

I claimed my hypothesis on the basis of my understanding of price of product in Wal-Mart was lower than that of Meijer. As the calculated t falls in the rejection region or outside the critical region, we reject the null hypothesis which means that the price of Wal-Mart is lower than that of Meijer and our claim that price in the Wal-Mart is lower than Meijer is true. The hypothesis testing of the paired sample test also suggests the same.

Conclusion:

In the given sample of 31 products I have taken so far, the price of products in Wal-Mart is lower than that of Meijer. The claim I made is supported by the hypothesis testing on the paired sample. As, we reject the null hypothesis the claim we made is proved to be true. However, some products like milk, apple, lays and downy liquid on Meijer had low cost when compared to that of the Wal-Mart.

In overall, this final paper on the pricing of two retail stores provided me with the detailed understanding about the implication of statistics and statistical tool in the real world scenario. In the given sample of product, the price of the products in Wal-Mart is lower than that of Meijer.

References:

Basic Statistics for Business and Economics, Douglas  A Lind, 6^th     edition, 2009, McGraw Hill Higher Education.

WWW.Walmartstores.com

www.meijer.com

      

Data:

S.N	Items	Price in Wal-Mart	Price in Meijer
1	PowerAde fruit punch	0.78	0.79
2	White Hamburger bun	2.38	2.99
3	Pringles	2.63	2.89
4	Doritos	3.98	3.99
5	lays classic	2.5	1.89
6	Grape tomatoes	2.38	2.95
7	organic apple	1.47	1.29
8	red onion	0.88	0.99
9	white onion(bag)	1.5	1.99
10	egg	0.98	0.98
11	Milk(half gallon)	1.5	1.19
12	Potato Idaho	4.77	5
13	Cilantro	0.68	0.89
14	Serrano Peppers	2.44	2.69
15	Banana	0.49	0.49
16	Roma Tomatoes	0.98	1.69
17	Green Grapes	1.78	1.69
18	Green cabbage	0.58	0.54
19	Baby carrot	1.78	1.99
20	Bud light beer	5.29	5.29
21	Classic coke	1.5	1.49
22	Pepsi	1	1.39
23	Hawaiian Punch	1.97	2.36
24	Ramen Noodles	0.17	0.2
25	Ramen Cup Noodles	0.28	0.32
26	Olive Oil(250 ml)	3.22	2.99
27	Crisco Vegetable Oil	3.24	3.98
28	Orange Juice Small	2.67	2.69
30	Tide(Small)	5	5.89
31	Downy liquid	4.26	3.69
32	Hanger Tabular 10 piece	1.34	1.69