Starting a Business: High Margin vs. High Volume


In this lesson, students think about and discuss the relationship between volume/quantity of products sold and the markup for those products. The class discusses the concepts of revenues, pricing and markup, and students break up into small groups to discuss and answer questions about profit, markup and volume. Students then read the Knowledge@Wharton article: “Best Buy vs. Wal-Mart: Is There Room for Both, and Others?” and compare the pricing/markup strategies of the two companies. Then students break into teams to come up with an inventory/stocking plan for a new bike store. Students choose between and strategically combine high and low margin items to maximize profits. The class finishes with students sharing their plans for stocking the store and generating maximum profit, and as a class, students reflect on the different strategies and the reliability of predicting consumer behavior.

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