Question

Cherokee Cable Corporation, sells heavy wire cable to large construction companies around the country. Customers pay shipping from a central warehouse in Dallas. Recently, a new competitor in Atlanta has been taking away some of Cherokee Cable's southern customers. If Cherokee Cable wants to compete in those distant markets, but not increase the cost of its product to other customers, it would probably switch to _________.a. zone pricing.

b. specifying "F.O.B. Dallas" in its contracts.
c. uniform delivered pricing.
d. freight absorption pricing.
e. None of the above would help Cherokee Cable Corporation with its problem.

Answer 1

D) freight absorption pricing.

Step-by-step explanation:

Freight absorption pricing strategy is a type of geographic pricing strategy, where the company absorbs some or all of the freight costs for specific geographical markets.

In this case, Cherokee Cable knows that they are having trouble in southern states near Georgia, so they will probably start absorbing some of the freight costs to clients located in those states. The problem wire cable sellers face is that besides being heavy loads, they are also large, so the freight costs are probably high. The Atlanta competitor has the advantage of being closer, and therefore, the total costs for the clients are much lower.

Answer 2

The correct answer is d. freight absorption pricing.

Step-by-step explanation:

The freight absorption pricing means Cherokee must charge the price increase by a factor so that the customer does not perceive that they are paying a higher price for the cables. This strategy is effective when you want to compete directly in the market, achieving sustained demand behavior. If Cherokee Cable does nothing in this situation, it is most likely that it will lose a large part of the market due to product price issues.