Professional Documents
Culture Documents
CASE 8: Dollar General and Family Dollar Buy Low and Sell Low
Synopsis:
Dollar General and Family Dollar are exemplars of the retail category known as value
retailers. The case describes the target market, location, merchandising, buying and
operations strategies of value retailers and also identifies some trends.
CASE 10: American Eagle and Abercrombie & Fitch Battle for the Teen/College Market
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Synopsis:
American Eagle and Abercrombie & Fitch are rival retailers vying for a competitive
leadership position among the same segment of the teenage/college student market. Each,
however, pursues a slightly different strategy, even though some similarities have been the
issues for legal contestation. The case details the strategies, merchandising, operations,
and competitive positions of the two retailers.
Home Depot is the largest home improvement specialty retailer in the world and the second
largest retailer in the United States. The case documents recent changes at the Home
Depot after the installation of a new CEO. The case highlights Home Depot's growth
plans, competitive considerations and shifts in corporate culture.
Avon, the largest cosmetics firm in the United States, sells primarily through the direct
selling method using about 3.5 million sales representatives in about 143 countries around
the world. The case describes Avon's turnaround strategy since the 1970s when it started
actively promoting diversity, by including more women and minorities in the top and
middle management levels.
Enterprise is the largest and the most profitable U.S. car rental business. Enterprise's
primary target customer segment is the in-town renter. Its human resource strategy is key
to its success. The case describes the human resources strategy at Enterprise.
Sephora is a beauty products retailer, headquartered in France and operating retail stores
in multiple countries in Europe and the United States. It has expanded rapidly in the
United States since the first store opening in mid-1998. The case describes the
phenomenal success of Sephora retail stores, its philosophy and strategy as well as the
success of its Internet retail site.
Nordstrom is an upscale department store known for its superior customer service. The
case details several aspects of Nordstrom's philosophy and strategy of providing superior
customer service and demonstrates how customer service is the cornerstone as well as the
primary source of Nordstrom's competitive advantage.
Owner of a specialty shop (hypothetical company) must decide whether she wants the
business to grow and how to achieve growth. This case can generate a discussion of
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organizational and personnel issues associated with running a small specialty store. It can
also illustrate strategic and implementation decisions made by a retail entrepreneur.
Nike, the manufacturer of the leading brand of athletic shoes, has opened retail outlets to
showcase their products. These outlets have a unique and highly entertaining store
environment.
fictitious company. The development of the case was guided by the author's administrative
experience in department store retailing.)
Describes changes made by Toys "R' Us to its retail market strategy and explores issues of
adaptation to changing consumer needs and growth strategies.
The case helps to illustrate marketing philosophy, positioning decision, and geographic
location. The case also supports that a low cost strategy is not always the most profitable
avenue on a long-term basis.
The case is based on the experiences of the authors, who spent several weeks in the
Shanghai Suzhou area of China in summer, 1995. During this time, they met with the
managers of several department stores in the area. The First Department Store is an actual
store in Suzhou, but the name has been changed. Suzhou is considered to be a secondary
market in China, meaning that the local authorities and individual entrepreneurs determine
business conditions. In contrast, a city such as Shanghai is considered to be first tier
economic area, and receives extensive support from the central government to develop its
economy and stimulate business.
Ancillary Case A15: Winn-Dixie Stores, Inc. and Dillard Department Stores, Inc.:
Comparing Strategic Profit Models
Synopsis:
Winn Dixie, a supermarket chain, and Dillards, a regional department store chain, have
different retail strategies that result in the firms having different financial performance
standards. Can be used with computer disks accompanying the textbook.
Wolf Camera was founded in 1974. It is now one of the two largest specialty photo
retailers in the country. Its growth has been the result of a steadfast commitment to
customer satisfaction providing the best selection of photo and video products and
accessories, followed by the best service at the lowest possible prices.
VIDEO CASES
Video Segment 1: Wal-Mart: The Largest Retailer in The World
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Teaching Use:
Featured Retailer:
Wal-Mart
Summary:
Wal-Mart is the largest retail merchant in the world. This segment discusses the history of the firm up to the
present. Sam Walton started his retailing career by opening a Ben Franklin franchised variety store in a
small town in Arkansas. Then he attempted to convince Ben Franklin to allow him to sell his merchandise at
lower prices so he could open discount stores in small rural communities. When Ben Franklin decided not
to support his concept, Walton proceeded on his own to open his first discount store in 1960 in Rodgers,
Arkansas. This store, store #1, is still open.
The video then traces the evolution of Wal-Mart national expansion of general merchandise discount
stores, the launching of Sams Club warehouse clubs, and international expansion. The video stresses the
importance Wal-Mart places on people, both customers and employees.
Featured Retailer:
Rainforest Cafe
Summary
Rainforest Cafe is a theme restaurant in which the customers are seated in a tropical rainforest
environment. The video shows the unique design of the restaurant, the types of food served, and the
merchandise sold in the restaurant. The use of proprietary animal figures on the merchandise and in the
restaurant design is discussed.
In December 2000, Rainforest Caf was purchased from the founders by Landrys Seafood Restaurants.
At the time, Rainforest Caf was experiencing some financial problems due to over expansion. The growth
strategy of Rainforest Caf focused the development of Rainforest Caf restaurants in both high-profile
concentrated tourist areas, and in enclosed shopping mall locations. Most of the mall locations had high
initial revenues that was followed by prolonged revenue declines. (The repeat business was not high.)
While these mall locations generate revenues significantly greater than typical casual dining restaurants,
they also had higher operating costs. This video complements Case 1 in the textbook.
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Featured Firm:
Build a Bear Workshop
Summary:
Build a Bear Workshop is a national mall-based specialty store retailer with over 100 locations in the U.S.
The stores target children and sell store stuffed animals. The unique aspect of the firms retail
offering is that children can create their own unique animals and clothes them. The video discusses
the critical issues such as employee training and human resource management for a retailer that
provide a high level of customer service. This video complements Case 2 in the textbook.
Featured Retailer:
Starbucks
Summary:
By 2002, Starbucks was the leading retailers of specialty coffee beverages, beans, related food and
merchandise. Its annual sales were $3.8 billion, and increase of 29% over the previous year. Starbucks
owned and operated 3,500 retail stores and licensed an additional 300 airport stores in the US, Japan, and
Great Britain. In addition to its direct retailing activities, Starbucks had formed strategic alliances with
Dreyers Grand Ice Cream, Barnes & Noble Booksellers, Capital Records, Pepsi-Co, and Nordstrom to
expand its product and distribution portfolios. Howard Schultz, Chairman and CEO, and his senior
management team were focusing on how to sustain their phenomenal growth and maintain their market
leadership position. Fortune Magazine selected Starbucks as one of the 100 Best Companies to Work For.
The major portion of the video is an interview of Howard Schultz. The video complements Case 31 in
the textbook.
Featured Retailer:
Sears
Summary:
Sears is really an icon of U.S. retailing. During most of the 20 th century, the company was the largest
retailer in the world. It pioneered the movement of department stores into suburban enclosed malls. But,
Searss market share began declining in the 1970s due to the growth of discounters such as Kmart and
Wal-Mart and various specialty retailers. In 1990, Wal-Mart overtook Sears to become the largest retailer
in the country. Over the last 10 years, the company faced the challenge of regaining its position of
leadership and prominence in American retailing. This segment presents the views of Alan Lacy, the current
CEO, about how Sears needs to build the image of its brand. The video also emphasizes the importance in
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Sears human resource management efforts in reinforcing the brand image. This video can be used with
Case 4 in the textbook.
Featured Retailer:
McDonalds
Summary:
McDonald's is truly a global company. It is the world's leading food service retailer with more than 30,000
restaurants in 121 countries serving 46 million customers each day. It is one of the world's most wellknown and valuable brands and holds a leading share in the globally branded quick service restaurant
segment of the informal eating-out market in virtually every country in which it does business. Some of
offerings also are well-known brands themselves -- Serves Big Mac, Quarter Pounder, Chicken McNuggets
and Egg McMuffin. This video demonstrates how McDonalds adopts its approach in different countries
specifically India.
Featured Retailer:
Richs/Goldsmiths, a division of Federated Department Store
Summary:
Richs/Lazarus/Goldsmiths (RLG) is a regional department store chain headquartered in Atlanta, Georgia,
and owned by Federated Department Stores. It employs 17,200 people in 76 stores located in nine
Midwestern and southeastern states with annual sales of $2.2 billion. The division was formed in 1995
when Federated Department Stores merged three regional department store chains. While the stores in each
region continue to carry the name of the regional chains, theres only one headquarters office. Rather than
using the full name of the division. The video shows the former CEO, Arnie Orlick, outlining the new brand
strategy for the division.
Featured Retailer:
Burdines
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Summary:
Burdines is a regional department store chain division of Federated stores located in Florida. Burdines
long-term strategy always included the possibility of expanding into other Southeast states either through
acquisition or by opening new stores. However, in 1988, a new department store competitor entered the
south Florida market. When Macys opened two stores, Burdines began to re-evaluate its long-term
strategy. Note that in 1992, Federated acquired Macys; however, both Macys and Blooomingdales,
divisions of Federated, compete against Burdines in Florida.
Burdines decided to position itself as The Florida Store and concentrate just on the Florida market. By
identifying itself as the Florida store, Burdines sacrificed the opportunity to expand into other states. To
strengthen its position in Florida, it has developed unique private-label FLA merchandise tailored to the
needs of Floridians. Burdines is repositioning its regional department store chain as The Florida Store.
This repositioning is communicated to customers through the merchandise mix, store design, and
advertising.
Illustrate steps that retailers can take to develop competitive advantage based
on high quality customer service.
Featured Company:
Host Marriott
Riverside Methodist Hospital
Summary:
This video describes the approaches used to develop a competitive advantage based on service by two
service retailers. The video begins with a discussion of Host Marriotts operation of retail outlets (food and
gift/book stores) in airports. Host Marriott focuses on set standards for high quality services that are
communicated to employees. Thus it focuses on closing the Standards and Delivery GAPS in the GAPS
model shown in Chapter 19.
The second half of the video focuses on Riverside Methodist Hospital, a 1,100-bed hospital in Columbus,
Ohio. At the beginning of the video, Eric Chapman, the President, describes the hospital strategy has
providing the best health care service, not developing innovative treatment for curing patients. Then the
video outlines some programs used by the hospital to implement this strategy including market research,
listening to patients and employees, and understanding the jobs performed by employees. Thus this part of
the video devotes more attention to the Knowledge GAP and motivating service providers to close the
Delivery GAP.
COMPUTER EXERCISES
Market Position Matrix
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ANNOTATED OUTLINE
INSTRUCTOR NOTES
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A. Customer Loyalty
See PPT 5-17, 5-18, 5-20
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1. Positioning
B. Location
Discuss.
F. Vendor Relations
See PPT 5-22
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G. Customer Service
See PPT 5-23
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A. Market Penetration
B. Market Expansion
D. Diversification
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2. Vertical integration
Why is vertical integration a diversification?
B. Keys to Success
operations strategy?
2. Adaptability
Wal-Mart has stumbled in some international
markets because they underestimated the
differences in cultures, e.g., Argentina.
C. Entry Strategies
returns.
2. Joint Venture
3. Strategic Alliance
4. Franchising
1. Market Factors
a. college textbooks,
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VII. Summary
Appendix 5A: Using The Market
Attractiveness-Competitive Position
Matrix
in that market.
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For each of the four retailers discussed at the beginning of the chapter, describe their strategy
and basis of competitive advantage.
Kohl's Corporation attempts to utilize the best feature of department stores with those of discount
stores. The merchandise and brands offered are those that may be available at department stores,
but the convenience, including location and store design factors are similar to those in discount
stores. They retain a competitive advantage in terms of attracting customers to locations away
from the mall, and thereby precluding consumers from price comparison shopping. However, in
order to keep on attracting customers to such away-from-mall locations, Kohl's ensures that access
to the store as well as to the merchandise within is as convenient as possible.
Restoration Hardware target a niche market of wealthy consumers willing to spend money on
nostalgic and high price home furnishings. The merchandise assortment of whimsical, nostalgic
and retro items ensures competitive differentiation from other retailers in the area.
Chico's specializes in comfortable, easy-to-wear apparel designed for women in the age group of
35-55 years old. The company sells only its own brand and has complete control over its supply
chain. The emphasis on private labels, a strong customer loyalty program, and a high-quality
customer service with emphasis on person-to-person relationship with each customer, differentiate
the retailer from other competitors, and ensure not only repeat sales, but also a higher transaction
size among its loyal patrons.
Starbucks target market are those people who appreciate gourmet coffee and a certain caf-style
lifestyle. Their primary retail format remains their retail stores, either individually located or
located within other stores, such as Barnes & Noble, and other nontraditional locations, such as
airports, college campuses and within airplanes. They have a competitive advantage with their
loyal customers, but also provide service to customers by informing and educating them about
coffee and related products.
2.
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Human Resource Management: Since retailing is a labor-intensive business and also has high
levels of contacts between employees and customers, retailers need to develop programs to
motivate and coordinate employee efforts. These are usually done by providing appropriate
incentives for employees, fostering a strong and positive organizational culture environment, and
managing diversity.
Distribution and Information Systems: Retailers can achieve significant operational efficiencies
through developing sophisticated distribution and information systems. Efficient operations reduce
retailer costs, and thus, enable retailers to provide same or similar merchandise at lower prices as
compared to their competitors.
Unique Merchandise: Retailers can develop sustainable competitive advantage by offering privatelabel brands.
Vendor Relations: Retailers may gain exclusive rights to sell merchandise in a region, to buy
merchandise at lower prices, or to receive popular merchandise in short supply.
Customer Service: Retailers can build competitive advantage by offering excellent customer
service. This involves instilling the importance of good customer service in employee training and
performance and consciously developing a reputation for good service.
Retailers should not rely on just one single approach to gain a sustainable competitive advantage,
but instead, should use multiple approaches.
3.
4.
Draw and explain a positioning map, like the one shown in Exhibit 5-3 for the retailers and
customer segments (ideal points) for your favorite retailer.
Students answers will depend on the market in which they live and their preference of retailer. For
a bicycle retailer, the dimensions could be: High price/service and low price/service for one
dimension and broad assortment (mountain bikes, road bikes, tandems, kids, lots of accessories)
and narrow assortment (road bikes only) on the other dimension.
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5.
Do a situation analysis for McDonalds. What is its mission? What are its strengths and
weaknesses? What environmental threats might it face over the next 10 years? How could it
prepare for these threats?
McDonalds' mission is to provide hygienic food with the minimum waiting time to customers
through conveniently located outlets.
Its strengths include:
Well known brand name with a loyal group of customers.
Consistency in offering over time and at different location. They might not have the best food, but
you know what you are getting when you go to a McDonald's.
Excellent systems for delivery a limited menu with consistent quality and low cost.
Excellent locations across the US and world.
Some weaknesses include:
Narrow menu option
Limited customization option patrons typically do not have the option to customize a specific
item (e.g., a hamburger with more onions, less lettuce, more beef, etc.)
Fast foods, in general, may not be perceived to be nutritious or healthy by some consumers,
therefore limiting future market expansion.
Environmental Threats
People become more health conscious about what they eating.
To prepare for this, McDonald's might add more healthy items to the menu like veggie burgers and
salads.
The quality and convenience of frozen food might make it easy for people prepare a quick frozen
meal at home or at the office. To prepare for this threat, McDonald's might sell frozen
meals in grocery stores.
6.
What are Neiman Marcus' and Saks Fifth Avenue's bases for sustainable competitive
advantage? Are they really sustainable?
Neiman Marcus and Saks Fifth Avenue offer extensive service and stock fashion merchandise that
could be called "fashion forward," since these may be offered first and/or exclusively at these
retailers. Their prices are higher than those charged by other retailers for similar product
categories, but both Neiman Marcus and Saks Fifth Avenue cater to a wealthier than average target
market of customers for whom fashion and service may be more important than low price.
The multiple bases for competitive advantages used by Neiman Marcus and Saks are unique
positioning, location in upscale malls or neighborhoods so as to be closer to target market
segments, unique merchandise, and a heavy emphasis on customer service. The combination of
these sources of competitive advantages make their strategy quite sustainable.
7.
Assume you are interested in opening a restaurant in your town. Go through the steps in the
strategic planning process shown in Exhibit 5-5. Focus on doing a situation audit of the local
restaurant market, identifying alternatives, evaluating alternatives, and selecting a target
market and a retail mix for the restaurant.
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(1) Define the Businesss mission: Looking to be in the Italian restaurant business, my target
market would be those customers in the my local town and surrounding towns interested in paying
money for an authentic Italian meal in a romantic setting. The mission of this restaurant would be
to have high quality food, in a romantic setting, while avoiding being too expensive for those
interested in a special meal.
(2) Conduct a situation audit: Market Factors include, the size of the market interested in Italian
food and the growth potential of this particular market. Competitive factors include how hard it is
to enter the Italian Restaurant Market including the start up costs, and the amount of other Italian
Restaurants in the area along with alternatives. The environmental factors would include the social
and economic. A section of the restaurant business focuses on the social aspect of dining out. Is
there a growing trend in those people eating out? With the shifting roles of women in society, there
is often less time for cooking, which may in turn increase dining out. The economy is also in a
boom, and people have extra money to spend on dining out. The analysis of strengths and
weaknesses allows a retailer to judge their potential success. The strengths and weaknesses in this
situation could include my financial resources, the availability of a good location, my restaurant
management experience, my need to build customer loyalty, and my prospects of good operations.
(3) Identify Strategic Opportunities: Market Penetration: Can I increase the variation on my menu,
open another restaurant in another neighborhood.
Market Expansion: Open a to-go style restaurant, open a restaurant in another geographic area
Retail Format Development: Sell candles with the restaurant name on them, or develop an online
ordering format for to-go style meals.
Diversification: Manufacture Spaghetti Sauce under the restaurant name, or open an Italian food
grocery store.
(4) Evaluate Strategic Opportunities: In evaluating the alternatives, we must look at both the
market attractiveness and the competitive position. Retailers can maximize their growth
opportunities by investing in areas that have high market attractiveness and a low competitive
position. In the restaurant business, this might include opening additional restaurants, opening a
to-go restaurant, and manufacturing their own food products, like spaghetti sauce.
(5) Establish Specific Objectives and Allocate Resources: After finding growth opportunities,
resources must be allocated to each opportunity. This is done by looking at the performance sought,
the time frame needed, and the level of investment needed to accomplish the objective.
(6) Develop a Retail mix to implement strategy: (Merchandise and services offered, merchandise
pricing, advertising and promotional programs, store design, and convenience of the stores
location): The restaurant will offer a large variety of Italian dishes with a large experience waiting
staff, the pricing will be medium to high to attract the upscale customer and show the value of the
food, the advertising will start with publicity on the opening of the business and then focus on word
of mouth, promotional programs may be implemented to those frequent eaters, store design will be
small, elegant, and romantic with many tables for two and private tables, and the location would be
in a downtown area. After this strategy is implemented, a retail mix can be developed for the
growth opportunities.
(7) Evaluate Performance and Make Adjustments: The final step of the planning process is
evaluating the results of the strategy and implementation program.
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8.
Walt Disney Co. is splitting its Disney Stores chain into two separate retail concepts. The first
group, Disney Play, is aimed at kids. The second group, Disney Kids at Home, is targeted
toward parents, with a greater focus on apparel and lifestyle goods like sheets, furniture, and
mirrors for kids. Do you believe this is a good strategy?
Advantages of such a strategy includes a focused attention on merchandise at each store, which
enables the target market for each to self-select the store they need for the merchandise they desire.
Moreover, a focused merchandising strategy would help Disney train and assign employees most
familiar with the specific types of products toys and clothing for kids, versus home decorating
and furniture for kids. Better and focused customer service could be provided at each location and
Disney would be able to track and manage distribution, operational efficiencies and customer
purchasing information better for each of these broad product types more easily. However, the
disadvantage includes the fact that frequently customers may wish to obtain both types of products
at the same time, i.e,, toys as well as furniture for their kids. The strategy would provide enhanced
convenience to customers if both stores are located adjacent to each other. For example, Gap and
Gap Kids are frequently located closer to each other in most markets.
9.
Identify a store or service provider that you believe has an effective loyalty program. Explain
why it is effective.
An example that would readily come to mind to most students are frequent flyer programs of
various airlines. Many airlines not only award frequent flyer miles on airline travel but also carry
out these programs in partnership with credit card companies and retailers. For example,
consumers can earn Delta SkyMiles when they charge their purchases to American Express, or dial
long distance using AT&T. The effectiveness of such programs depend on the extent to which there
are various levels of rewards and bonuses and the multiple opportunities to earn points towards a
reward. On these scores, Delta has several tiers to its program, with the more frequent users
elevated to higher levels where the reward points offered are higher.
10.
Choose a retailer that you believe would be, but is not yet, successful in other countries.
Explain why you think it would be successful.
A nonstore retailer such as Amazon.com is poised to be successful globally with the increasing
spread and prevalence of the Internet and World Wide Web. Since the costs associated with entry
and set up are less than in conventional retailing and most products carried by Amazon.com are
quite standardized and hence, less susceptible to varied customer tastes in different countries,
Amazon.com could pursue a cost-efficient and effective global expansion strategy. However, such
an expansion strategy would have to await infrastructure development in various countries. The
success of Amazon.com's global strategy would come from utilizing technological and global
efficiencies in scale, lower costs of operations, enhanced customer service at lower costs due to
better customer information and relationship management, and better adaptability to local tastes
and preferences due to superior information collection and analysis.
11.
Amazon.com started as an Internet retailer selling books. Then it expanded to music, DVDs,
electronics, software, and travel services. Evaluate the growth opportunities in terms of the
probability they will be profitable businesses for Amazon.com. What competitive advantages
does Amazon.com bring to each of these new businesses?
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First, at the time of writing, Amazon.com has only shown modest profits. So the issue of
profitability will be discussed in relative terms.
Music, Electronics and DVDs: These growth opportunities will most likely be profitable because,
like books, they do not need to be touched and felt to buy them. Most customers will feel very
comfortable ordering these two categories over the Internet without previous viewing or experience.
Amazon.com will bring a competitive advantage to selling these items mainly through their name
recognition over many other dot.com companies. Also, Amazon has an amazing database system
that will be able to better target their customers and keep track of their purchases. Amazons
distribution system will be able to deliver the goods in minimal time at a minimal cost.
Software: Since software is an information product, even the distribution of the product could be
over the Internet. Thus, instead of costly packaging and stocking at retail stores, Amazon could
simply offer the product for immediate download, thereby also providing the immediate
gratification that is typically lacking for most products purchased over the Internet. The lower
costs of distribution coupled with the already lower costs of operations, could render this category
quite profitable for Amazon. However, larger software manufacturers, such as Microsoft, Adobe,
Real Networks, Broderbund, etc. already have their own retail and distribution site and may use
Amazon only for expansion to market segments that they are not currently serving.
Internet Travel Site: This market expansion to a new service has its strengths and weaknesses.
Amazon may attract a larger customer base by offering this new service. However, most travel,
including airline travel is now viewed as a commodity, with consumers often deciding more on
price than on brand name. There is more intense competition and the prices may not be much
lower on Amazon's site as compared to those offered directly by the service providers.
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Question
Potential Responses
good locations
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NOTES
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