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This report addresses the issues related to the contract offered by the mass-merchandise department store.

Extracts from this essay...

Introduction

This report addresses the issues related to the contract offered by the mass-merchandise department store. The following recommendation is offered: Do not pursue the contract with the department store chain. Rationale EFFECTS ON BUSINESS Contracting with the department store chain will have several negative effects on the nature of the business. The core competency that has been established since the beginning will now change. The buyers will no longer use their knowledge and expertise to find genuine artifacts. Instead they must develop negotiation skills to deal with mass merchandising of replicas. Delivery, pricing, and quality will all have to be confronted. Tripling replica production means increasing the search for artisans with quality re-creations.

Middle

Furthermore, replicas are bought as gifts and for decoration. There is a large demand for these items. This changes the market from a niche group made up of collectors and traders to a mass market of gift buyers. If artifacts and replicas are sold next to each other, the market will be affected. In the eyes of the collector, the idea of an artifact will be "cheapened." If the market is affected, than Sorzal is indirectly affected. The reputation of authenticity has now diminished. The product, company, and market no longer line up, which is why the contract should not be accepted. EFFECTS ON DISTRIBUTORS Current retailers may react negatively to this change.

Conclusion

It is also possible to make $4 million dollars in sales with this contract. However, an initial $1 million dollars is needed in inventory by the end of the month. With the change of the business scope, it may be difficult for the buyers to come up with quality replicas in this amount of time. Current gross sales are $25 million and with the 20% annual growth will be $30 million next year. $4 million is a small amount of this total and is only possible if the maximum sales potential at the department store chain are reached. Extra money may even be needed to train employees to negotiate delivery, price, quality, and other aspects of the replica business. Replicas are also subject to fads and "fancy" which change over night.

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