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Spreadsheet supplement for case 500021.

ETrade pioneered the electronic deep-discount brokerage business and experienced phenomenal growth by making extensive use of technology to achieve significant cost advantages over traditional firms. ETrade's strategy has been to pass these cost savings from automation on to its customers as it amortized its fixed costs over a greater number of accounts. By 1996, a flood of new competitors are establishing Internet sites and ETrade has been dethroned as the price leader. While some executives within ETrade believe they should continue to lower prices and go head-to-head with eBroker, others believe the company faces a larger challenge from Charles Schwab's entry into the market. Defending against Schwab would require focusing resources on enhancing its product/service offering, which might jeopardize ETrade's low-cost position. ETrade must decide where it can create a profitable and sustainable position along the price/quality (service) trade-off.

Executive Vice President Durk Jager was convinced that the huge sums being spent on trade and consumer promotion could be put to better use, and that P&G should overhaul its pricing strategy to one of consistent list prices with little, if any, promotional spending. Two category managers (for hand-dishwashing liquids Dawn, Ivory, and Joy, and for Folgers coffee) were considering the potential consequences of putting their products on the "value pricing" bandwagon. Should they implement value pricing? And if so, how much should they reduce list prices for these national brands? Major changes to the original budget and marketing plan would be required, and these changes would have to be accomplished without compromising the profitability of the category.