Tweeter Case

Group 6

RU Consulting, L.L.C

Nick Morgan

Laura Pynn

Jennie Ramberg

Brenna O' Regan

James Morrison

Tweeter, etc. is an audio/video company that faced pricing strategy problems in 1993 that made the history books for adverse pricing strategies. Sandy Bloomberg formed the company in 1972 and the company faired well in the 1970's and 1980's. It grew to 13 stores when they implemented the Automatic Price Protection pricing strategy. This strategy nearly drove the company into bankruptcy. The company still faces unremitting problems which this paper will address. This is our proposal as RU Consulting, L.L.C.

First, we will examine how the company evolved. Second, an analysis of the company's strengths, weaknesses, opportunities and their threats will be considered and an analysis of their corporate strategies will be given. Third, we have included our solutions and recommendations for this company. Last, we would like to give our recommendation to you as the stockholder on what you should do with the stock you are holding.

Tweeter started out as a small retailer of high-end audio/video equipment right outside of Boston University. This store was a success and soon expanded into 13 stores through out New England. It began to get a reputation for its excellent service and quality products and sales soared. However, in the late 1980's, the bottom fell out of the electronic market and caused two things: price wars with local competition; and Tweeter then joined the Progressive Retailers Organization, in 1988. This organization combined the buying power of small high-end consumer electronic retailers across the United States which allowed them to negotiate with manufacturers to obtain prices which were competitive with larger retailers. In short this organization kept the retailer's market from dropping out from under them. They did this by setting price standards up that nobody who sells certain brands and models of products can sell them below a given price at which they all agreed to.

In the early 1990's, Tweeter's sales were dropping. They conducted focus groups to figure out where the problem was. Their surveys said the customer understood that they had excellent service, but they didn't like the high prices. So Tweeter's management staff came up with Automatic Price Protection to combat the perception of high prices. Tweeter would monitor the weekly sales ads of all the major local papers and cross reference that with sales within 30 days; and if a customer paid more for a product than the sale price, Tweeter would refund the difference. At first, this strategy was good, but as larger competition moved in, Tweeter began writing more and larger checks. By December, 1995, Tweeter in total had written 29,526 checks to the tune of $783,863. This nearly drove the company into bankruptcy and later led them to be studied as adverse pricing strategies.

Tweeter began to shift its focus from APP pricing strategy to making money by acquisition of other small high-end retailers of electronics. Like the APP, this strategy worked well at first and then failed. Here is a listed breakdown of their acquisitions (listed only for historical relevance):

* "1996 Bryn Mawr -13stores

* 1997 HiFi Buys- 10 stores

* 1998 made their first public offering of stock, $40 a share and

changed their name to Tweeter Home entertainment Group, Inc.

* 1999 Home Entertainment of Texas- 7 stores

* 1999 DOW Stereo/Video, Inc. - 9 stores"

* "2000 Douglas TV- 4 stores

* January,2001 House of Blue Concerts to rename the Lakewood

Amphitheatre to HiFi Buys Amphitheatre

* April,2001 E-Center in Camden, NJ to rename it the Tweeter

Center at the Waterfront

* May, 2001Big Screen City- 4 stores

* June, 2001 Audio-Video Systems - 3 stores

* August, 2001 Sound Advice- 33 stores

* March 2002 Hillcrest High Fidelity

* April, 2003 Coral Sky Amphitheatre to Sound Advice

Amphitheatre

* July, 2004 NOW! Audio Video- 6 stores"

The purpose of listing all the acquisitions is to emphasize how the company has grown into 154 stores in 13 states and it is crucial to know where we have been so we know where we are going. Each of the companies that they acquired were small retailers with a reputation for high quality service and installations. This is a rapid evolution in 10 years. It changed its strategy to focus on becoming a national retailer. They were trying to become a household name through the 'back door' of people's minds.

In the second section of this paper, we would like to focus on the SWOT analysis and the company's corporate strategy on how to position itself in the consumer's mind. The company honestly has quite a few good things going for them to differentiate themselves from other competitors in the same market. For one; the vast array of custom installation services and applications that are offered are simply un-beatable. When you want to have a home theater built specifically for you in your own home Tweeter definitely has the right people to get the job done the proper way. The products that Tweeter offers are also a strength that they take full advantage of. Various brands that they carry such as Denon; JL Audio, and Sennheiser are not carried by any other national retail chain stores, so Tweeter basically has this small niche market all to itself. Tweeter also does a lot of community-service type charity drives for children in the local areas surrounding the stores. The company seems to really care about children by donating money to the Make a Wish Foundation, and the Children's Hospital. Tweeter also offers a Music Education Scholarships for a select few people who have an interest in furthering their education on