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HONG KONG GOOD FOOD COMPANY LTD. (B): APPLICATION OF STRATEGIC MANAGEMENT ACCOUNTING IN PRICING POLICY

Reference No. 15/006BC Publication Year 2015
Author(s) Joseph Yau
Company Hong Kong Good Food Company
Industry Food and Beverage
Geographic setting Hong Kong
Functional Area Accounting and Control, Marketing

Synopsis

During the early 2010s, the Hong Kong Good Food Company Limited (HKGF) adopted strategic management accounting tools and techniques in formulating business strategies for managing its original and core business: producing ready-made lunch boxes to Hong Kong primary and secondary schools, supermarket chains, and convenience store chains.

One of HKGF’s key, on-going business strategies was its pricing policy.  Product or service pricing is crucial for every business in earning revenue and making profits.  However, price setting is a very difficult task and a sensitive issue for management, since many internal and external factors affect pricing levels.

Learning Objectives

In general, there are two broad approaches in product or service pricing, namely (1) cost base pricing; and (2) market base pricing.  This case study demonstrates the market base pricing approach.

Student will learn

1. The market base pricing dilemma in the daily-consumables retailing industry.
2. The prerequisites for market base pricing for consumable products.
3. The importance and characteristics of market surveys in market base pricing.
4. How do internal business and external market environments affect market base pricing?

Suggested Questions:

1. If you were the management consultant employed by HKGF in the above case, what selling price would you recommend for its new fresh milk product?
2. As HKGF’s management consultant, what selling price would you recommend for “Happy Fruity Yogurt”?

This case was fully supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (UGC/IDS12/14).