Mr. Nakamura has a the business of making lacquer ware. He got expansion options from Mr. Phil Rose and Mr. Sammelback to expand his business from Japanese market to United States market. Now his problem is to expand or not and continue to do well in Japanese markets as the market leader. And if he decides to expand then he should choose which offer
Main cause of this problem is that if he doesn’t choose the offer from both of the potential investors then they might give the same offer to his competitor which would suddenly become big and which may in future eat up his own market share. And if he decides to go for an offer then both are very big orders much more than his production capabilities, so he has to decide about the expansion of his current setup. Once he decide about expansion then he has to choose should he go for confirm order and higher margins or go for brand name which could be carried out through up life.
Long term and short term goals associated with problem:
* Has to substantially increase his present production capacity
* Has to go for lesser risk as he would be taking finances on debt
* Requires high margin
* Should think of high profits
* Continuously have large orders even after contract are over as in Japan labour once hired is not fired
* Higher the risk higher would be gain and he would think of long term gains
* Requires high demand even after contract is over
* Should think of long term survival of the organization
* Should create a brand value with USA market.
As we could see there are few long term and short term goals that could be there for Mr. Nakamura are contradicting each other. So he needs to decide about tradeoff between each and go for the one which he can think in his vision of the company for next decade.
Decision to be made:
Mr. Nakamura has to decide that which offer he should accept and whom can he make partner to supply goods for next few years.
Decision Criteria & Alternative solutions:
Mr Nakamura should accept orders from Mr. Phil Rose and have a contract for next three years for supply material for US markets. Salient features of the deal would be:
> Mr. Phil Rose’s company “Nation China Company” is largest manufacturer of good quality dinnerware with brand name “ROSE CROWN”.
> He would introducing the Nakamura lacquer to a small but discriminating public in US.
> He has order of three years for annual purchase of 400,000 sets at 5% more amount than the current rate.
> All merchandise would be sold under trademark “ROSE & CROWN”.
> Mr. Nakamura will not sell any merchandise to USA client’s during the contract period of next 3 years.
> 100% surety of orders for next 3 years.
> Higher margin with high demand.
> If contract is not renewed then company would have large production capacity but no demand in the market.
> Company would not be able to create brand value for itself even by suppling large number of lacquer ware.
> All the work done in past 3 years would be zero.
> Government policies would pose hurdle again after 3 years.
> Dilution of brand name with Rose & Crown brand.
Mr Nakamura should accept orders from Mr. Walter Semmelback and have a contract for next five years for supply material for US markets. Salient features of the deal would be:
> Mr. Walter Semmelback from Sammelbach and Whittacker is largest supplier of hotel & restaurant supplies and buyers of dinnerware.
> He has predicted a forecasted of 600,000 sets of lacquer ware a year and millions in five years.
> His proposition in accordance with the Government policies of Japan.
> He is willing to pay a budget of 1500,000 for next two years for introduction and promotion.
> Wants exclusive representation authority for “Chrysanthemum” brand for five years at standard commission rates.
> First 20% in all the sales would be used to pay off the money for introduction and promotion.
> Brand equity would increase.
> No brand dilution.
> Expansion into U.S. markets.
> Plan in accordance with government policies.
> Sale of 600,000 sets a year according to forecasts.
> Risk higher than previous proposition.
> Sharing of profit margin.
> Payment of commission rates.
> 5 year term period.
At present scenario I think he should go for preposition 1 because
* He would get his sufficient profit which won’t be there on second preposition.
* He would reduce his risk.
* He might not have any brand value at maturity of contract but he can try to resign the contract or during the period he would get competency that he could go for product individually or get another investor.
* If he goes for proposition ll then he might get market value after 5 years but before that he can’t justify his expansion to meet the demand as all his margin would be eaten by American’s.
* After nuclear bomb blast it won’t be good to directly trade with Americans. So he might consider to bring Chinese in between the deal.