Mr. Schwartz, the president of RCI was currently facing multiple problems and needed to make decisions to them. 1) Component Manufacturing, a long term relationship partner, informed Mr. Schwartz that they want to alter the arrangements so that RCI would lose the exclusive distributor. 2) Another suppliers, Masato Corp., demanding that RCI purchase 23,000 units or lose their exclusivity for that product. 3) The company needs a longer term strategic direction in the future to survive in such intense industry.
1) Component Manufacturing problem
a) “Threaten” Component Manufacturing that if they give the products to other distribution to sell, RCI will stop the partnership with them. Instead, RCI need to tell Component Manufacturing that they will start looking for a new supplier to manufacture their contactors.
b) Accept the proposal and alter the distribution arrangements. In this way, RCI will lose their exclusive distribution and need to compete with Component Manufacturing as well as other distributors.
2) Masato Corp. problem
c) RCI could purchase the 23,000 units and keep them as inventory. This would maintain RCI to be exclusivity, but could just delay the inevitable if the market did not accept the products at $250.
d) RCI could give up exclusivity and allow Masato to distribute the products to RCI and then sell at cost. In this way, it will keep out other distributors and then buy their inventory at discount.
e) RCI could give up its exclusivity and co-exist with other distributors albeit at a lower gross profit margin.
3) Long run strategy will discuss later.
1. Relationship with Component Manufacturing
Without doubt, RCI was the most important company for Component Manufacturing. Not just because RCI helped them to start up the business with financial capital, but also RCI was the only customer for Component Manufacturing in the past few...