H 110 11 12 Jones Company is a producer of high quality, branded products. Its brand is a household name synonymous with quality for over 25 years. Recently, a discount store began to compete in the territory by offering low quality products at cheaper prices. While Jones believes its customers value quality, Jones was reluctant to let the discounter gain a presence in the marketplace. Jones reacted by significantly reducing the prices of its products to match those of its new competitor and cut certain costs to minimize the effects on its profit. The results of this strategy can be seen in the financial statements of Jones Company below. 13 14 15 16 17 18 2014 2015 19 2016 20 Units 21 9,950 10,500 10,800 22 Sales 89,550 23 100% 89,250 100% 86,400 100% 24 49,750 50% 44% 37,800 56% 44,625 Gross Profit 25 26 1196 6% 696 9,453 5,250 5,390 27 Advertising Chant 2014 2015 2016 Units 9,950 10,500 10,800 Sales 89,550 100% 89,250 100% 86,400 100% 1 22 23 24 25 26 27 28 Gross Profit 49,750 56% 44,625 50% 37,800 44% Advertising 9,453 11% 5,250 6% 5,390 6% Product Development (1) 29 13,925 16% 10,500 12% 5,410 6% 30 Administration 31 11,448 13% 15,750 18% 16,200 19% 32 14,925 17% 13,125 15% 10,800 Net Income 13% 33 34 35 (1) Research, new products, innovation 36 Based on the limited financial and other information above, please answer the following questions: 1. Do you agree with Jones product pricing strategy? 2. Do the financial statements indicate the strategy was successful and why? 3. Unit volume increased and certain operating expenses decreased over the period. Do you agree these are positive developments and why? 4. Which trends in the financial statements are most concerning in addition to the decrease in profit? Are the effects likely to be only temporary ip nature? 5. What competitive strategy would you recommend and why