Strategy Management

Porter (2002) states that root of the problem lies in the lack of distinguishing between operation effectiveness and strategy. The expedition for productivity, quality and speed has resulted in management tools and techniques, total quality management benchmarking, time based competition, outsourcing, partnering, reengineering, change management. In any organization, strategy management is the key to its success. There are many theories based on this assumption that without a proper strategy and planning, it is difficult for any industry to survive irrespective of its size. It is necessary to understand here that all the major corporate organizations have established themselves, thanks to superior strategic planning and implementation. The retail industry is making news everywhere with not only the traditional industries increasing their outlets but some major corporate industries also intruding into this industry like Fresh @ Reliance of Reliance Industries, More of Aditya Birla Group in India. Wal-Mart, a US based retail industry, which is known as the giant in the retail industry has survived and is still the huge enterprise in the world which deals with almost all the F&B products, apparels, etc. It is not only the largest company in world but also the largest company in the history of world.(Fishman, 2006) The present paper is divided into four sections to understand and answer as what makes Wal-Mart the best in the industry, 1) retailing industry at the time of Wal-Mart's innings, 2) Wal-Mart's Competitive advantage and key components, 3) Wal-Mart's Strategy and 4) Sustainable growth of Wal-Mart.

Strategic decisions are ones that are aimed at differentiating an organization from its competitors in a way that is sustainable in the future. (Porter, 2002) Porter strongly advocates that decisions in business can be classified as strategic if they involve some innovation and difference that results in sustainable advantage. According to Patrick Hayden et al (2002) the retailing industry adopted the style of discounting on its merchandise after the Second World War. It is learnt that discount retailing was not the strategy at the time Kmart, Target and Wal-Mart first started operating their business. Frank (2006) states that when Sam Walton was franchising for Ben Franklin's variety store, invented an idea of passing on the savings to his customers and earning his profits through volume. Prior to Wal-Mart's entry into the market, Sidney and Hebert from Harrison founded Two Guys discount store in the year 1946 which dealt in hardware, automotive parts and later on groceries. Two Guys was the forerunner as compared to today's retailers like Super Target, Wal-Mart which succumbed to the economic recession. Another discount store set up by Eugene as E.J. Korvette, which is often cited as first discount store which did not raise from 5 & 10 cents roots and eventually declared bankruptcy due to inability to compete with the new entrants.

Porter (2002) states that combination of operational effectiveness and strategy is essential for superior performance which is the primary goal of any organization. He also says that a company can perform its rivals only if it can operate in different ways which are not in practice. Much emphasis had been laid on strategic positioning like variety based positioning, needs – based positioning and access based positioning.

Along with Wal-Mart, other stores that started operating were Target, Woolworth (Woolco) and K-Mart. However, Target has been functioning successfully, courtesy Wal-Mart, but other two failed in their operations and filed bankruptcy.( Michael Bergdahl, 2004) Porters five forces model explains what strategic decisions should be made and on what basis. The model explains the basic strategies to be considered while starting a business like bargaining power of suppliers. While franchising of Franklin he always looked for cheaper deals and thought of passing his savings to the customers and earning through the margin on volume of bulk purchases. Through the way of discount stores, shoppers were given the cheapest price as compared to any other store. In regard to threats of new entrants, Wal-Mart has been constantly in the news for acquisition of other small retail shops in view of its expansion. But nevertheless it has stiff competition from likes of Super Target, Tesco, etc. it is the world's biggest retail industry.

Wal-Mart is the leader in retailing industry with fiscal revenue of $244.52 billion in 2003 making it the world's largest corporation. Mike reports that Wal-Mart as of 2002 had 1,283,000 employees growing at 11.2%. The above data explains that strategy of Wal-Mart is extraordinary which manages and operates over 4150 retail facilities globally.The key components of Wal-Mart (The Value Chain), which offers cheap prices than its competitors includes firm infrastructure like frugal culture, no regional offices and pleasant environment to work. Managements take lots of visits and it is learnt there are no rehearsals before any meeting which is usually scheduled on every Saturday. In any organization, human resource is the key to development and Wal-Mart efficiently manages its sources. Wal-Mart terms its employees as associates. Manager compensation is linked to the profit of store operated by him, within promotions, compensation offered to associates depending on company's profits and also offered some incentives on their performances. The workforce at Wal-Mart is not unionized as the company takes all the measures of their benefits and provides them training on related issues. Technology plays a vital role in development of the organization and Wal-Mart is well equipped with technological innovations like POS, store performance tracking, real time market research, satellite system and UPC. Wal-Mart procurement measures like hard-nosed negotiations, partnerships with some vendors, centralized buying, planning packets, etc. helps at large the cause of providing the goods and services on cheap prices. The other factors that increase the margin of profit for Wal-Mart are inbound logistics with frequent replenishment, automated DCs cross docking, pick to flight, EDI, hub and spoke system. Wal-Mart strategy of operation is innovative with big stores in small towns with monopoly in the market at low rental costs, local prices, concentric expansion, merchandising in brand name, private labels, little space for inventory, store within store, etc. In relation to marketing and sales, merchandising is tailored from locals, spent less on advertising and the prices are fixed low and it depends on the store manager to fix the latitude of pricing. All the above factors combined together form the key components of Wal-Mart which not only increase the margin of profits through bulk sales but also boost the confidence of the customers with services like point of sale information system and everyday low prices.

Wal-Mart dominates the American retailing industry due to number of factors like its business model which is still a mystery and its effectiveness in not letting the rivals let know about the weaknesses. Wal-Mart made strategic attempts in the its formulation to dominate the retail market where it has its presence, growth by expansion in the US and Internationally, create widespread name recognition and customer satisfaction in relation to brand name Wal-Mart and branching into new sectors of retailing.

It is learnt that Wal-Mart strives on three generic strategies consisting of Focus Strategy, the Differentiation Strategy and overall cost leadership. Managers strive hard to make their organizations unique, distinctive and identify key success factors that will drive the customers to buy their products.Thus, firm specific resources and capabilities are crucial in explaining the firm's performance. The Resource Based View (RBV) explains competitive heterogeneity based on the premise that close competitors differ in their resources and capabilities in important and durable ways. The company's capability can be found through its functionality, reliable performance, like Wal-Mart superior logistics. (Helfat, 2002) Wal-Mart has firm infrastructure, well equipped in human resource with management professionals and technologically too.

Any organizations thrive hard to be successful for which it needs to have better resources and superior capabilities. Wal-Mart has strong RBV with economically and financially very strong enough to stand still in the time of crisis. Pereira states that dominating the retail market is its key strategy. Wal-Mart operates on low price strategy which is operated as every day low prices (EDLP) which builds trust among the customers.(Brunn, 2006)The strategy lies in purchasing the goods at lower prices and selling the goods to customer at much lower prices, cutting the price as far as possible and increasing the profit by increasing the number of sales. This ferociously increases the competition in the market and Wal-Mart competes with all its competitors till it is dominant it the market.

Wal-Mart is expanding seriously and rapidly which is also its strategic goal. Wal-Mart employs over 1.3 associates, owns over 4000 stores out of which 3000 are in US and serves around 100 million customers weekly. Wal-Mart has acquired many international stores and merged with some super stores like ASDA in UK. Wal-Mart far flung network of retail outlets has ensured that Wal-Mart interacts with and has impact on virtually every locality within US. (Helfat, 2002) The expanded strategy has led the hunger of Wal-Mart to many European Countries. It is learnt that three countries with no Wal-Mart stores became part of corporation's international presence wherein the domestic retail chains were taken over by Wal-Mart including 122 Woolco stores in Canada, 21 Wertkauf stores in Germany and 229 ASDA units in United Kingdom. The takeover strategy by Wal-Mart keeps the company at forefront when entering into the new market and the number of competitors is also minimized. The strategies have helped the Wal-Mart to rein in number one position in international countries making it the largest retailer in the world.

It is seen that Wal-Mart has significantly the Porters five force model wherein through proper strategic planning and strategic implementation has led to removal of barrier entry, rivalry from competitors and pricing norms. In regard to substitutes, Wal-Mart in order to achieve its aim of customer satisfaction has selling goods under its own legal brand. Wal-Mart's big box phenomenon has changed the retailing industry in the United States which is often considered as discount stores and makes profit through high volume of purchases and low markup on profits.(Parnell, 2008)Wal-Mart with its low cost and ever expanding strategy has made a dramatic impact since 1962 when Sam Walton first started his business. With this strategy, Wal-Mart has now over 4000 stores and outlets in US and other countries through acquisition and mergers.

According to Porter, (2002) operational effectiveness and efficiency are the key elements of success in any organization. A company can outperform its rivals or competitors in the market only with superior management and efficient control creating a difference from the others which eventually attracts customers. Porter defines operational effectiveness as performance of similar activities as its rivals but better than them. In a study, it is stated the Wal-Mart is expert in manipulating perceptions. It is termed that low price is not the strategy of Wal-Mart but the advertisement manipulates the consumer perceptions by making them think that its prices are lower than its competitors' price using ‘price spin'. Wal-Mart makes the consumer addicted coming to its stores by convincing them the prices are lower than in the other stores by selling itself cheaper by advertising that ‘we have lower prices than anyone else' and placing a ‘opening price point'. The ‘opening price point' is the lowest price in the store which is kept at high visibility which makes consumer believes that the products in this store are really cheaper. (Race Cowgill, 2005)

The SWOT analysis of Wal-Mart reveals that it is most powerful retail brand, reputation for money, value, commitment, and provides wide range of products. It is growing at a brisk pace with expanding its horizon to other parts of world through acquisition and merger. Wal-Mart has good opportunities in markets of Europe and China and focuses on acquiring the market through acquisition of smaller stores and merger with leaders in the specific markets. Wal-Mart is always under threat to sustain its top position in market nationally and internationally. Global leader in the industry leaves the organization vulnerable to many socioeconomic and political problems of the country.

Sustainability at the top place is the most important job that makes its managers strives hard to frame the policies and strategy to compete with its rivals in the market. Slack, Imitation, Substitution and Hold-up are some of the threats to any organization in retail industry. However, Wal-Mart with its visionary goal of attaining zero waste status and reaching 100% renewable energy has planned to launch number of sustainability initiatives. (GreenBiz, 2008) Imitation increase profits by increasing the supply. But imitation puts reputation, relationship at stake. James Hall reports that Wal-Mart is planning to open convenience stores as Tesco has started and operating in US called Fresh & Easy Neighborhood Markets. (James, 2008) Such tactics will create mixed response among the consumers while degrading the reputation of the leader in market. Substitution reduces the demand for what a firm uniquely provides by shifting the demand elsewhere due to changes in technology. The threats of substitution can be subtle and unexpected like minimizing expenses through videoconferencing instead of air flights to long distance meetings with its managers of other stores, etc. Therefore, substation is an especially effective way of attacking dominant rivals in the market. Substitution offers mixed responses after identifying and understanding the threats. The organization should fight the threat and merging with them, switching to different options of substitution to be in the market. Hold-up diverts the value to customers, suppliers or complementors who have some bargaining leverage which results in tough negotiations, contractual agreements and vertical integration.

Wal-Mart is having great network with almost over 7800 stores and Sam's Club locations in 16 markets worldwide. It employs more than 2 million associates and serves more than 100 million customers every year. According to Fishman (2006) Americans spend $26 million every hour at Wal-Mart which makes it believable that Wal-Mart is financially very strong and is capable of combating any threat from its rivals in the market. Wal-Mart is ever expanding its boundaries by way of acquisition and mergers. Thus Wal-Mart with such a vast network of stores and alliances in the forms of ASDA, Target and many other stores is well protected enough to sustain its top position in the retail industry.

Firehouse Subs is a 16-year-old restaurant chain based in Jacksonville, Fla. It emphasizes a firefighter theme and has more than 390 restaurants that serve specialty submarine sandwiches.

THE CHALLENGE Facing declining sales throughout its system, the chain sought a new marketing strategy in the depths of the recession.

THE BACKGROUND Robin and Chris Sorensen, brothers and former firefighters, opened their first Firehouse Subs restaurant in 1994. They emphasized their firefighter heritage by featuring red furnishings, colorful murals of firefighters in action and sandwiches like the hook-and-ladder sub.

By 2001, the chain had grown to 30 company-owned restaurants in Florida and switched to a franchise model to expand into new markets. By early 2008, the company had expanded to 300 locations in 17 states, mostly in the South and Southeast. But then growth fizzled.

That March, comparative sales for the entire system declined from the previous March. “In our entire history, we had never had a period like that when our entire system was running negative sales,” said Don Fox, the chief executive. “It was something completely foreign to us.”

At the time, in addition to a 6 percent royalty, Firehouse Subs was collecting a 3 percent advertising fee from franchisees, including 2 percent for local advertising. As sales fell, the company’s executives grew dissatisfied with their advertising agency and started groping for a new strategy. But with no answers on hand, Robin Sorensen, the chairman, floated an unconventional suggestion: Why not give the local marketing dollars back to the stores?

“Some people thought it was insane to give the money back,” Mr. Sorensen said. “We didn’t have an ego about who has this money. We want results. We could feel the onus on our shoulders. We’re the leadership team, and we’ve got to do something.”

In a meeting with franchisees that June, the corporate leadership unveiled the new strategy: franchisees could keep the 2 percent of royalties that normally went to the local marketing fund. In return, franchisees were expected to do their own marketing.

The company used the honor system, with no mechanism to verify that the local stores actually did any advertising. “It was something pretty radical,” Mr. Fox said. “I’m not aware of any franchiser ever taking that step, and I’ve been in the business 35 years.”

But things only got worse. When the company stopped collecting marketing royalties in July 2008, comparative sales were off 3.4 percent from the previous July. By the end of 2008, systemwide sales were running 6 percent behind the previous year — far below the industry average, which was off 2 percent. “We didn’t feel our brand deserved this kind of disproportionate loss,” Mr. Fox said.

In downturns, consumers often trade down to less expensive restaurants, and Firehouse Subs should have been positioned to capture some of these customers. For some reason, the chain was being bypassed. Its executives became convinced the problem stemmed from a lack of brand awareness.

THE OPTIONS One option was to continue the local marketing efforts. But Firehouse had tried that for six months. Mr. Fox and Mr. Sorensen estimate that only about a third of their franchisees made meaningful efforts to market themselves.

Another option was discounting, a common tactic to increase sales. But the leadership team quickly dismissed that. The chain’s gross margins were already modest compared with those of its competitors — the consequence, the leaders contended, of large portions, more expensive ingredients and low prices. Mr. Fox and Mr. Sorensen also rejected the idea of reducing portion sizes or using cheaper ingredients.

So they turned to a new marketing campaign. “I knew our brand was stronger and deserved better than negative 6 percent,” Mr. Fox said.

As the experiment with local advertising had failed, Firehouse Subs began looking for a new agency to handle the corporate account. It chose Zimmerman Advertising, which is based in Fort Lauderdale, Fla., and whose accounts include Papa John’s Pizza and Nissan. In its presentation, the agency promised an 8 percent increase in sales, a bold move in the grim economic climate of early 2009.

But it would not come cheaply. To do a proper campaign, Zimmerman insisted that the company not only reclaim the 2 percent local marketing fee but double it, — asking franchisees to pay 4 percent. That would increase the combined royalty and advertising fees to 11 percent from the original 9 percent when most franchisees were struggling.

At first, Mr. Sorensen balked. But when the ad agency laid out data showing that some competing chains were spending more on advertising per store, he began to change his mind. Subway franchisees, for example, pay an 8 percent royalty and a 4.5 percent advertising fee; Quiznos franchisees pay a 7 percent royalty and a 4 percent advertising fee, according to those companies. Firehouse hired Zimmerman to do a test campaign in three cities.

Zimmerman developed a creative campaign and radio ads that emphasized the food and the portion sizes, but offered no discounts. The agency used the Sorensen brothers as spokesmen. The slogan: “Our way beats their way. If you don’t agree, it’s free.”

In June 2009, the corporate executives made the case for “investment spending” at the annual meeting with franchisees. Firehouse and Zimmerman showed results from the three test markets. Augusta, Ga., Jacksonville, and Knoxville, Tenn., had all had double-digit sales increases after the test campaign.

Franchisees were allowed to vote on whether to take part in the new marketing program in their markets. About two-thirds of franchisees agreed to pay the 4 percent marketing fee. The ad program ran only in markets where all franchisees agreed. Those who did not agree paid the 2 percent fee.

With a new marketing war chest, Firehouse Subs and Zimmerman started an $8 million advertising campaign in September 2009.

WHAT OTHER OWNERS SAY Other business owners with similar experiences were asked to comment.

Kevin Reddy, chief executive of Noodles & Company, a chain of fast food restaurants based in Broomfield, Colo.: “I would commend Firehouse for investing in their system long-term through a brand-building campaign focused on differentiation, not short-term discounting or reducing food quality. Although I favor the long-term approach, it puts greater pressure on the near-term financial results of the campaign.”

Bob Fiddler, founder of the Fiddler Group, a brand development firm in Annapolis, Md.: “The right call? Absolutely. And a brave one, too. It’s not easy to go to your franchisees and ask for more money, especially when times are tough. Most franchisers take the easy road, discounting to drive a little extra traffic and keep their franchisees happy.”

Burton D. Cohen, managing director of a franchise consulting firm, a retired senior vice president and chief franchising officer for McDonald’s, and an adjunct professor at the Kellogg School of Management at Northwestern University: “Allowing the franchisees to do their own local marketing is generally a good idea if there is a monitoring mechanism in place, and if the franchiser provides guidance, expertise and creative support. This did not happen here, and the franchisees were left to fend for themselves. They either didn’t spend the money, or spent it ineffectively. The new advertising agency filled that gap, confirming that Firehouse waited too long to change agencies.”

THE RESULTS On the You’re the Boss blog at nytimes.com/boss, you can offer your own thoughts on Firehouse’s strategy.

HONEST TEA makes juices and teas with natural sweeteners, including the pouch drinks Honest Kids. In early 2008, Coca-Cola took a 40 percent interest in the Bethesda, Md.-based company, which had revenue of $47 million last year. Coke has an option to buy the whole company next year.

THE CHALLENGE Maintaining Honest Tea’s integrity while adjusting to a new relationship with a financial backer that has a different way of doing business.

THE BACKGROUND Seth Goldman, now 44, left a mutual fund job in 1998 convinced that he could develop a wholesome alternative to sugary drinks that never seemed to quench his thirst. He joined forces with Barry Nalebuff, a professor he knew from the Yale School of Management, to start Honest Tea.

For Mr. Goldman, coming up with new products and flavors like Pomegranate White Tea or Black Forest Berry is the entertaining part of the beverage business. The grittier part is getting the product distributed on a profit-making scale. Mr. Goldman scored Honest Tea’s first notable sale, to Whole Foods Market, by carting in several insulated containers of teas and a sample bottle — an empty Snapple container with a makeshift label — that persuaded the grocer to order several cases.

Then Mr. Goldman spent nearly a decade trying to build distribution. That meant lots of trade shows, cold calls and nights at modest motels, where he and other Honest Tea employees doubled up to save money while they marketed the company’s drinks and signed up independent distributors. “You can build a great brand, but you can’t ship this through the mail,” he said. “Beverages have a high turnover, and you’re out of the game unless your product is being restocked and on the shelf.”

Then, in early 2008, Honest Tea sold a minority stake, for $43 million, to Coca-Cola’s Venturing and Emerging Brands group, which was expanding Coke’s ability to meet consumer demand for lower-calorie drinks. Honest Tea products soon got much wider distribution, through Coke, on grocery shelves and college campuses across the country.

But meshing Honest Tea’s socially responsible, ecologically aware, small-company sensibility with the huge international brand of Coke has not always gone smoothly. A few months after the deal, Coke started vetting Honest Tea’s ingredients to make sure they complied with federal requirements and noticed Honest Kids’ packaging had prominent lettering that promised: “no high-fructose corn syrup.”

Executives at Coke construed the phrase as an implicit rebuke of its products, some of which contained the controversial factory-produced syrup. “We got a strong request to change the wording,” Mr. Goldman said.

THE OPTIONS Under its deal with Coke, Honest Tea retained control over its products and contents. Mr. Goldman believed that drawing attention to the absence of corn syrup was crucial to being true to the Honest Tea brand. The packaging, he said, was designed to highlight attributes — low sugar content and organic ingredients — that attract purchasers, typically parents, to buy this kind of product.

Honest Kids is expected to account for about one-third of Honest Tea’s projected $70 million in sales this year. “We were not going to drop Honest Kids, so we had to figure out how to handle this,” Mr. Goldman said.

At the same time, Coke had been facing declining demand for its soft drinks, which was why it had been investing in small beverage companies like Honest Tea and the fruit-smoothie maker Innocent Drinks. In late 2008, Mr. Goldman traveled to Coke headquarters in Atlanta to seek a solution. “I met with various people in the company who explained their belief that high-fructose corn syrup is comparable to sugar in its health impact.”

Mr. Goldman decided against trying to resolve the scientific point. “Our point of view was that we were not going to get into the debate over whether high-fructose corn syrup is the same as sugar,” he said.

One option Coke presented, he said, was simply to eliminate the “no high-fructose corn syrup” banner. But Mr. Goldman argued that including the notification was a key signal to buyers that there were no hidden ingredients in the drink, an important issue given the growing chorus questioning whether high-fructose corn syrup contributed to the risk of obesity in adults and children. (One Honest Kids competitor, Kraft Foods, announced in April 2008 that it was eliminating the syrup from its Capri Sun juice pouches.)

Coke also suggested that Honest Tea delete the corn syrup reference and substitute, “Sweetened with organic cane sugar.” But that, Mr. Goldman said, went against Honest Tea’s tenet that the consumer “does not want a product that is highly processed.”

Another option Coke floated was adding the phrase “No fake stuff” to the packaging. Honest Tea rejected that, Mr. Goldman said, because it was subjective and would not persuade people to buy their products.

A Coke spokesman, Scott Williamson, said the company would not comment publicly on its differences with Honest Tea. He did note that the smaller company’s “decisions were made on their understanding of their customers” and that Coke maintained that “sugar is sugar is sugar.”

At the time Honest Tea’s partnership with Coke was announced, some of the smaller company’s customers complained publicly that its new financial ties would compromise the brand’s integrity. On the other hand, Mr. Goldman understood that taking too combative a stance might damage Honest Tea’s relationship with Coke. That relationship could culminate in a total sale of the company to Coke next year, an outcome that Mr. Goldman said is “very probable,” but not guaranteed.

WHAT OTHER OWNERS SAY We solicited comments from several business owners who have had similar experiences:

Tony Hsieh, chief executive of Zappos, who has remained with the online shoe retailer since it was bought by Amazon:

“When Amazon acquired Zappos in 2009, we co-created a document that described our working relationship together, which we refer to internally as our ‘Five Tenets’ document. It states that Amazon recognizes the value of the Zappos culture and will seek to protect it. More importantly, it explicitly states that we will make our own decisions independent of Amazon. The document has proven to be a helpful ongoing reminder of both sides’ understanding.”

Gary Hirshberg, chief executive of Stonyfield Farm, who has remained with the yogurt company since it was acquired byGroup Danone (Mr. Hirshberg is a member of Honest Tea’s board):

“My advice to C.E.O. Seth Goldman: Stick to your knitting. Keep the honest in Honest Tea. If you don’t, you’ll regret it. And so will Coke. I would argue that Honest Tea is providing more value to Coke by blazing its own trail than by adapting to Coke’s.”

Steve Munford, president of ActiveState, an antispam software development company, who stayed on after selling it toSophos, an antivirus software maker. He is now chief executive of Sophos:

“Both Coke and Honest Tea bring value to this partnership, but they also have shortcomings. In fact, this is what probably encouraged them to join forces: Coke is seeing slumping sales in sugary drinks and wants to expands its portfolio, while Honest Tea needed a strong partner to grow their brand visibility and sales. The worst outcome is that both parties lock horns and refuse to come to a decision.”

The Company: Crispy Green of Fairfield, N.J., a maker of freeze-dried fruit snacks sold in silver packages that has seven employees and had 2008 revenue of $2.2 million. The snacks are a gluten-, dairy- and nut-free alternative to chips.

The Challenge: To increase sales aggressively. Crispy Green wanted to get its snacks on the shelves of major national food chains. But it didn’t want to sacrifice profitability by doing what chains generally require: discounting products steeply and paying expensive fees in exchange for shelf space. The company lacked the cash to “pay for play” the way Kraft or General Mills might. And it feared that discounting its product would undercut its premium image and hurt relationships with its existing customers.

The Background: Since 2005, when Crispy Green introduced its freeze-dried slices of apples and pears, the company has stuck to a “transparent” pricing policy, giving wholesale customers, large or small, the same rates. Among other things, Angela Liu, the company’s chief executive and founder, feared that choosing to discount or to pay fees might represent a slippery slope that would undermine the company’s long-term prospects. A first-time entrepreneur who had left a chemical engineering career in pharmaceuticals to start Crispy Green, Ms. Liu knew she was going against the grain.

Early buyers included mom-and-pop stores and gourmet grocers like Central Market in Houston and Balducci’s in New York. By the start of 2008, having built relationships with some 200 independent groceries and small chains across the United States, Crispy Green was growing at a year-over-year clip of 80 percent. But as Ms. Liu prepared to approach buyers and distributors at bigger chains, a Crispy Green consultant, Alan Levitan, a 30-year veteran of the grocery industry, warned that her pricing policy could become an impediment.

She remained optimistic — until a meeting in late October 2008 between her sales staff and UNFI, a specialty foods distributor that works with Hannaford Supermarkets, a grocery chain with more than 150 stores in the northeastern United States. UNFI seemed to view Crispy Green favorably but said Hannaford’s corporate policy required discount terms — 10 to 15 percent lower prices than the Crispy Green would offer other wholesale customers — to fuel special sales throughout the year. UNFI wouldn’t even show Crispy Green products to Hannaford buyers unless Ms. Liu agreed to the discounts.

Ms. Liu responded that selling Crispy Green at 15 percent off one week and at the suggested retail price the rest of the season could actually drive shoppers to buy less often, encouraging them to wait for specials and thereby hurting sales volume for Crispy Green as well as for Hannaford. She concluded that offering “high-low” pricing to please a distributor was too much of a sacrifice — no matter how desirable the relationship.

As it happened, however, sales at Crispy Green’s largest retail partner to date, the Northeast division of 7-Eleven, were slowing. Ms. Liu’s buyer contact there suggested the fruit snacks were getting lost among a huge variety of items. He believed that, after a great debut, the snacks needed to be “refreshed.” Maybe special sales could do that.

Ms. Liu began to wonder: Was it time for a new pricing strategy? Or was it time to abandon the hope of growing through major chains?

The Options: Ms. Liu and Mr. Levitan deliberated over the pricing strategy for weeks, but she continued to follow her instincts. “I think like a shopper,” she said. “What I don’t want in the middle of a recession is for prices to go up on a favorite snack.” Whatever she did, she didn’t want to give major chains a huge advantage over the smaller outlets whose loyalty had helped her establish the business.

One was to cut operating expenses enough to create a new layer of lower, bulk wholesale prices that could be extended across the board. This would be intended to satisfy the major national groceries — but not to favor any one chain. To cut expenses, Mr. Levitan suggested scaling back plans to refresh the brand’s packaging and Web site.

The second option was to forget the big chains entirely and try to expand within existing channels. To sell a higher volume of Crispy Green where it was already known, Ms. Liu thought, she’d probably have to introduce and market new flavors and pack sizes to stimulate shopper interest. This could get expensive, she feared. Or worse, it could tax Crispy Green’s fruit supply chain.

(To see what other business owners think Crispy Green should do or to share your own thoughts, click here.)

The Decision: In the end, Crispy Green decided to try to have it both ways: It would offer a new discount that would attract, it hoped, some national chains, but it would also introduce new products that it hoped would increase sales in existing channels.

It was risky — Crispy Green would have to achieve enough operational savings to pay for the initiatives while still preserving profitability. And trying to do both within its established budget could lead to too-slight discounts or too-few new products to make a difference with new prospects and old customers alike.

But Crispy Green introduced improvements to packaging and Web pages, as well as new snacks — banana, mango and strawberry. It didn’t ramp up spending on advertising as it had once considered. Instead, it focused on garnering positive reviews from blogs and other media outlets.

To cut costs, Ms. Liu negotiated deals with growers and shippers, and postponed hiring a national sales manager. She dedicated savings to meet national chains and their distributors halfway on pricing, and extended the same type of pricing, under different terms, to smaller accounts.

The Results: With her new discount pricing layer and flavors, Ms. Liu won meetings with distributors and buyers for the likes of Target, Giant Eagle (a grocery chain with 223 stores in the eastern United States), and ShopRite. The new pricing and flavors, however, weren’t enough for 7-Eleven, which discontinued sale of Crispy Green.

Demand online, and in test store locations of ShopRite and Giant Eagle helped offset the blow to the bottom line, Ms. Liu reports. But over all, the company has failed to make a national deal with a major chain in 2009. And it failed to increase its volume of sales greatly within existing, smaller accounts. As a result, it has so far achieved less revenue growth than it had sought for the year.

The company set out to increase sales by at least 50 percent but eventually reined in its goal to 33 percent. It expects to meet these diminished expectations and has preserved margins and its premium image in a challenging economy.

L.P.I. Consumer Products makes and distributes patented ShaveMate all-in-one razors that feature shaving cream dispensed from the handle. The company, which has been in business since 1987, has been developing its line of razors since 1997.

Titan 6, for men, and Diva 6, for women, which have six in-line blades, are the newest products. The company employs four people and had revenue of about $2 million in 2009.

THE CHALLENGE To crack the $2.6 billion United States razor and blade market, which is dominated by Gillette and Schick.

THE BACKGROUND Louis D. Tomassetti and Peter C. Tomassetti, known as “the inventor brothers” in Pompano Beach, Fla., created and sold a line of marine signaling devices under the Safety-Sport brand. More recently, they homed in on razors because they believed shaving was getting “complicated.” They concluded, Louis said, that “the common sense thing to do is to combine the shaving cream with the razor.”

After years of research and development, engineering and patent work, the brothers took their razors to the military in 2002 because they had heard that soldiers in Iraq and Afghanistan were dry shaving. That first product was rugged and featured two blades, with the shaving cream in the handle. The military became a repeat customer.

Still, the Tomassettis found American retailers reluctant to take shelf space from Gillette and Schick. Store managers encouraged the brothers to improve their product — add more blades, they suggested. So the Tomassettis did. With six blades, ShaveMate offers one more in-line blade than its competitors, and it is the only all-in-one razor on the market with shaving cream in the handle.

When Titan 6 and Diva 6 were in prototype, the brothers took the razors to trade shows. While retailers were intrigued, they said that ShaveMate lacked brand awareness. It became clear that the brothers needed to stimulate demand by building name recognition and educating consumers on the benefits of their razors.

They could go head-to-head with Gillette and Schick with a national print, television and radio advertising campaign, supplemented by store promotions and coupons. Because the cost could easily exceed $150 million, the brothers dismissed this idea out of hand.

They could market ShaveMate on their own through shavemate.com and specialty retailers like hotels, airport stores and cruise ships, using their tagline, “The future of shaving is here.” This was the most affordable option, costing an estimated $100,000 to produce razors for the initial stock, displays and promotions, but it would take a while to build the brand and increase sales.

Finally, they could initiate a two-pronged marketing attack for about $1 million, looking for a big splash with a low-cost specific public relations effort to put ShaveMate in front of print editors and TV producers. Then they could begin a national, as-seen-on-TV campaign on cable channels to educate consumers via two-minute commercials on how their product could simplify shaving. The goal would be to have a well-known spokesman promote the razors.

THE DECISION The Tomassettis picked the two-pronged attack. All new revenue would feed the marketing beast, and the brothers hoped to build recognition quickly.

The blitz to send out samples and promotional material paid immediate dividends: ShaveMate Diva 6 appeared in the Love That section of O, the Oprah Magazine. Local news stations tested ShaveMate razors on the air. “Live With Regis and Kelly” featured Diva.

Producers of the Discovery Channel program “PitchMen,” heard about ShaveMate, and in February 2009, they invited the brothers to California to try out for the show. Billy Mays, the face of OxiClean, and Anthony Sullivan, also a pitchman, were the hosts who would decide which inventors had a marketable product.

“When we auditioned, they literally went crazy,” Louis recalled. “They said this is a monster hit.” The brothers would be included on the show and Mr. Mays and Mr. Sullivan were both going to be spokesmen. Mr. Mays said, according to the Tomassettis, that he loved the product so much he was going to shave his beard with a ShaveMate on national TV. He would be the face of ShaveMate.

But last June, Mr. Mays died. His death knocked the Tomassettis off Season One of “PitchMen,” and, Peter said, “took the wind out of our sails.”

Several months went by. Mr. Sullivan assumed that “the avenue to market had expired with Billy.” Then, last fall, Mr. Sullivan said, the brothers called him back and asked if he would be their pitchman. He agreed, and his company produced the infomercials.

THE RESULTS The media attention and product exposure caught the eye of retailers like Walgreens.com, Target.comand Meijer Stores. On Feb. 1, Walgreens decided to sell ShaveMate in its stores nationally.

The first Anthony Sullivan two-minute commercial, which cost about $40,000 to produce, is scheduled to be shown on cable TV in test markets starting Monday. The Tomassetti brothers were added to Season Two of “PitchMen,” which will appear in August.

Meanwhile, Gillette and Schick are introducing their latest products: the Gillette Fusion ProGlide and the Schick Hydro, in what some analysts are calling “the razor wars.” The Fusion ProGlide, which features five blades and seven “high-precision advancements” (but no shaving cream in the handle) will be introduced June 6 in a manual version ($10.99) and a power version ($12.99). The Schick Hydro 5 ($8.99), which offers a hydrating gel reservoir (but, again, no shaving cream in the handle), hit store shelves April 6. The Hydro also sells a three-blade version ($7.99).

The Tomassettis hope their product, which costs $9.99 for a three-pack of all-in-one razors (and shower hook), will help win over customers who are paying more than that for replacement cartridges alone.

The direct marketing approach allows the brothers to pay as they go. If the test in May is successful, they expect to spend up to $100,000 a week on air time. The goal is to sell a few million of the three-packs in one year (sales are currently at about 250,000), Mr. Sullivan said, adding, “In the grand scheme of razor blades, that’s probably a drop in the ocean.”