2. ASSIGNMENT 4 QUESTIONS
TOTAL POINTS FOR ASSIGNMENT 4: 50
(1) The following questions are based on the HBS FISHER-PRICE BENELUX (FP) Case.
(a) Based on your assessment, what is the central problem facing FP? EXPLAIN your answer in detail.
Fisher-Price toy executives discussed how to improve the company's distribution methods in the Benelux
countries. The director for Europe presented several options: the first continues to work with independent
distributors as before, one in Belgium, and the other in the Netherlands. The second possibility is to set up
your own sales company as quickly as possible, which will take a year to set up this company and will not come
into force until the beginning of 1979. The last option is a compromise between the two commission
agreements of 1978. Based on the market size, sales, and market share forecast of major European courtiers,
Fisher will hold a significant market share. Therefore, managers must choose one of the ways to improve their
distribution approach, as distributors can set their selling prices, but in practice, they have little freedom. The
company fixed the retail prices of fish products and did not reduce that price. Distributors have made no effort
to promote Fisher-Price toys. However, Fisher-Price itself has not invested in advertising its products. All the
main competitors used independent distributors in the Benelux and other European countries. Additionally, if
Fisher begins to set up his own sales company, or if Fisher proposes to change the order of commissions but is
refused by distributors, the company runs the risk of legal liability. The liability issue in the Netherlands was
not important, all this had to be communicated to the distributors a year in advance. But the problem in
Belgium will be serious. The law required manufacturers to notify their intention to terminate the distribution
contract within a reasonable time.
3. (b) IDENTIFY AND EXPLAIN in SUBSTANTIVE DETAIL EACH OF the 3 alternative distribution options being
considered by FP management.
Proceed with the new arrangement: -
The organization could then continue to use independent distributors as before, using Comptoir
Boismanu and Tiamo as exclusive distributors for them. If they chose this way, they do not need to do
anything or make any adjustments. What they have to do is try to sign a deal with local retail
distributors. As this is a simple method, the regulatory issues or additional capital spent in the
development of new distribution firms do not need to be tackled.
Establishing its own Benelux distribution business immediately: -
The second alternative seems to be to create a distribution business as soon as possible in the Benelux
region. It would take some time for the new sector to complete, which is expected to be 1 year, and it
would only take place in early 1979. Based on the revenue and earnings projected for this action in
Exhibit 7, it is evident that the profits of the wholly owned sales business will be larger than those of the
seller. However, since Fisher-Price Company had to acquire a different distribution company structure, it
would cost a lot of money, the liability incurred for the new league could not be skipped. For 1979, the
nucleus of General & Administrative Expenses will be 26.2 million BFI. To achieve more, even more
spending on promotions could help the higher degree of revenue targets. As seen in Exhibit7, BFr 72.5
million could be spent in brand operations, advertisement, and merchandising practices in the first year of
a new sales business. The expense of 8 submitted sales staff and 2 sales managers will be compensated by
the money invested. The two sales managers are from Holland and Belgium at the local level. Once it was
an investment, it could not be scaled down. If this approach is to be used by Fisher-Price Firm, it had to
make sure the distributors were able to cooperate with them in the year 1978.
Between the Two Extremes balance: -
In the two extremes, Muirhead indicated being corrupted. The steps include a "phased takeover" forcing
all distributors to switch to a tribunal settlement for services rendered in 1978. The Fisher-Price Business
is expected to be able to take over the top 90 accounts in Holland and Belgium under this method. The
business will directly offer service to the consumers and increase the efficiency of the service offered. In
1980, the company would erect its steel mill and office and in 1981 it would create its distributorship.
Both the viable suits for the Fish Company and the client will be diminished by this tactic.
To solve the issue of being viewed by merchants in Belgium and Holland as an international entity, the
question of the different languages within these areas is also discussed. They uphold up showrooms in
local areas and recruit Dutch nationals in Holland as sales agents, while in Belgium and Holland they use
French-speaking advertising.
4. (c) IDENTIFY AND EXPLAIN as exhaustively as possible the ADVANTAGES and DISADVANTAGES of EACH of the
3 alternative distribution options being considered by FP management?
PROS FOR PROCEED WITH THE NEW ARRANGEMENT CONS FOR PROCEED WITH THE NEW
ARRANGEMENT
The commitment needed will be limited so there is
no requirement for them to make any
improvements or develop new organizations.
The dealers were not interested in the
company's name, because it did not supply
consumers with good quality service, which
could lead to a lack of future customers.
As they have already built strong relationships with
dealers, there would be fewer credit risks.
The dilemma of credit risk will often be faced by
Fisher Business because dealers were always
out of stock as they did not want to keep so
much inventory.
They will take advantage of the local distributors'
business awareness and expertise so that they
could make more money.
The manufacturers were not prepared to spend
money on ads or promotions.
For the Fisher-Price Firm, this is the East
Alternative.
To make matters worse, the manufacturers
were free to pick their retail price, which could
lead to cross-border competition.
5. PROS FOR ESTABLISHING ITS OWN BENELUX
DISTRIBUTION BUSINESS IMMEDIATELY
CONS FOR ESTABLISHING ITS OWN BENELUX
DISTRIBUTION BUSINESS IMMEDIATELY
The Fisher Company will own the new distillery so
that it could in the future manage sales in the
Benelux gulf.
It would cost a lot to start up a new distribution
agency.
On their own, they will be able to generate disc
ions, which infers more effective management.
The expected General & Administrative expense
expenditure would be BFr 26.2 million. Not the
only expense was this.
If credit menaces from local distributors are
manifest, they may prevent the problem.
That will entail a larger marketing budget for the
new division.
Projected profits will be better than the
continuation of manufacturers' agreements.
BFr 72.5 million should be spent in the areas of
sales, advertisement, and merchandising.
It will cost 1.1 million BFr for wages, benefits,
and expenditures.
Both the costs were stable, and in the future,
there will be further spending.
The sponsorship of the distributors in 1978
would entail both of these acts.
So, they should be noticed by the Fisher Firm in
1977, otherwise, it will face the problem of legal
problems.
As the laws of Belgium mandate the producers
to give fair notice to cancel a sales arrangement.
If this law was not observed by the Fisher Firm.
In place of warning, the Boismanu could sue for
'only compensation.’
Boismau may be entitled to complementary
payments and Fisher would have to pay for the
damages suffered by the seller by the
termination of the fair warning initiative.
6. PROS FOR BETWEEN THE TWO EXTREMES BALANCE CONS FOR BETWEEN THE TWO EXTREMES
BALANCE
From Fisher Company's trajectory, if they take
action following agreement extremes, they must
inevitably produce their own sales force and in the
future take over a significant part of the Benelux
market.
Because the single distribution business is
unfamiliar to the local population, due to the
recommended sales company position in
Belgium, it may be regarded as an international
entity by local customers and retailers.
The accruals in the rationalization will be better
than the other two substitutes. The spillovers can
provide, in the next year, an immediate increase in
the profit margin.
The selling could damage this freshly developed
partnership.
The profit margin for the dealers in the
commission will be lowered to 20 percent.
As the position will be in a Flemish-speaking
region, the relationship with the French-
speaking regions would be troublesome.
The Fisher-Price Corporation will be able to
monitor the product line and pricing.
Holland is an entirely different county, but
Belgium is not a homogeneous county, so it is
very difficult to choose a venue.
Also, it would take several years to complete the
transition, the corporation would have plenty of
time to gain experience, which would allow the
new company to be built up progressively,
meaning it could have enough time to build up the
required cost.
The change of partnership with local retailers
and the cost expected are any other issues
resulting from this fresh sales business.
The service given to consumers will be
strengthened by the wholly owned distribution
firm.
While the alternative would offer some
advantages over time, it would be much more
expensive than maintaining the traditional
practices of independent distributors.
7. (d) EXPLAIN IN DETAIL what do the financial metrics indicate for each of the 3 options being considered by
FP management?
Proceed with the new arrangement: -
There will be no added expenses and no new distribution firms, or showrooms will be built. The money spent
will amount to BFr 39.7, 446.8, 55.9, 60.0, and 69.1 million over the next five years, according to the expected
investment in Exhibit 6.
Establishing its own Benelux distribution business immediately: -
Since Fisher hoped to develop the new wholly owned dissemination firm as fast as possible, BFr 26.2
million for general & administrative fees could be spent. A publicity deficit of BFr 72.5 million will have to
be spent in the first year of 1979. It will also be sensible for Fisher to arrange BFr 1.1 million for the
wage, impetus and cost of 8 sales members and BFr 1.9 million for two sales managers.
Between the Two Extremes balance: -
Many of the fiscal tweaks would be the same as the immediate adjunct, the difference being that the
option of compromise would allow for a more aggregate need for outlays. Since the Fisher Company
envisaged to abruptly induce the wholly owned sales company in 1981, they would have plenty of time
to arrange the insights into the financial. By that the gross margin of dealers from 33 percent to 20
percent, there would be an immediate increase in the gross margin in 1978.
8. (e) Which option would you suggest being implemented by FP management? Why? Fully defend your
suggestion.
The third alternative, which is a balance between the two extremes, is my doctrine. The third alternative
will be the better one from a financial point of view. The financial burden is high, but the first one will be
the least risky since the company has to take the distributors' credit risk. The business would have to
take heavy pressure to take the second option and in a short time, they needed to budget a huge sum of
capital. The third possibility is as lucrative as the second, buying it will give Fisher a longer time to get the
money required, which is 3 years, for the new business firm. The budgetary pressure will be relieved by
this.
Fisher-Price should have its own manufacturing business for toy production. Only in this manner does it
have a powerful ability to influence local markets. The risk of immediately constructing the distribution
company, though, would be too high. They could face the issue of litigation, which would cost them a
great deal of money. They also need to prove in the year 1978 that the current distributors are willing to
work with them. Transiting gradually would be less risky because, during the phase-out, its independent
distributors would be given a commission that would motivate them to persist adequately involved in FP
electrified.
9. (f) Without the efforts of the distributors, FP would not have been able to gain a market presence in the
BENELUX markets. In your opinion, is it ethical or unethical to “use and then dump” the intermediaries that
have helped a company gain presence in international markets. EXPLAIN your answer in detail.
I don't contend there's a dichotomy in this turmoil between ethical and barbaric. The delineation is
either between the wrong and right perks, and the legal or illogical thing because business ethics are the
most discussed subjects. Fisher-Price has formed a strong relationship with the local market's
independent distributors. There was no question that the distributors made great gains from the sale of
the Fisher good, while Fisher also acquired local distributors' advantages and relationships. It was a
condition dubbed "WIN-WIN." In our lives, corporate ethics are more than moral principles and values,
as it applies to economic practices that have to be extended to all facets of the enterprise. The company
will use all the tools of society for its functioning, thereby obliging it to the welfare of society, as a
common aspect. Anyway, fortunately, the essence of all corporations is to make a profit, many firms,
particularly the MNCs, will seek to influence people's assistance to open up new markets. So, to use the
distributors as intermediaries to help them establish a foothold in the foreign market, Fisher-Price would
not be false or immoral.
A business should pursue an extremely ethical business approach to develop an upright image to discourage
dishonest business practices. "Immoral activities include distorting information to deceive or confuse,
emotionally abusing people by leveraging their vulnerability, greed for undue gains, damaging the atmosphere
by violating the emissions levels set by the government." The action Fisher will do is illegal if it complies with
the legislation and would not be morally reprehensible.
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10. (2) The following questions are based on the HBS MINOLTA Case.
(a) Based on your assessment, what is the central problem facing Minolta? EXPLAIN your answer in detail.
Minolta's core challenge is the conviction of the gray market. Metric tons of Minolta cameras were taken from
illicit eateries from Hong Kong to western counties such as Germany, being sold on official distributor
distribution channels at prices well below Minolta's retail prices. In this informal gimmick, the cameras sold
account for 10% of overall revenue and the figure is still growing at a fast pace. As a result of the cameras
coming from the anomalous paradigm from Hong Kong, this analogy makes the interim Minolta distributors
face unfair market competition. Since they do all the jobs through the Chinese sailors, Hong Kong merchants
doing this grey market hoarding are not illegal. Only one camera and multiple lenses at a time will be bought
by one sailor, so they do not need the import or export paperwork. While the price of the Minolta camera
floats based on local consumer demands, the gray market still has a significant profit left. Companies who are
not genuinely worried about tarnishing their brand name will only do business with smugglers to spur the
selling at bargain prices of their camera. Sellers of the Hong Kong grey market often deal with irregular
cameras directly to overseas retailers. The bottleneck of market differentiation between Hong Kong and
western countries was caused by this rehabilitation. The Minolta Corporation uses a standardized product
strategy, even though the warranty is applicable globally on its products. The nucleus for the gray market is
given by this feature. The grey markets are increasing at a considerable pace, leading to a reduction in the
number of non-profits for official dealers in the Western Counties, but there are no useful solutions to this
issue. The explicit distributor in the country of the distributor moaned of this problem, millennials also have
some viable solutions, but none of them are now considered to be prolific.
11. (b) IDENTIFY AND EXPLAIN in SUBSTANTIVE DETAIL EACH of the several different strategies that Minolta can
use to reduce the gray market problem—as discussed in the case. Discuss in SUBSTANTIVE DETAIL the
various ADVANTAGES and DISADVANTAGES of each strategy being considered?
Better Sales Management or forming a wholly owned subsidiary in Hong Kong: -
For Minolta, affect the network and procurement are pertinent acts. Mr. Izuhara said during the
discussion of the gray market dilemma that Goddard in Hong Kong didn't care where the cameras were
headed, he was just worried about selling more goods and making more money. So, it's a smart idea for
Minolta Corporation to do all of Hong Kong's retail jobs on its own.
Privileges: Minolta has a company in Hong Kong and does not compel any other individuals to do retail
work there. It would be high on the Hong Kong market and it will not be possible to sell Minolta cameras
to vendors on the gray market. So, to solve the gray market dilemma, this is a smart option. Besides,
Minolta could be able to boost its sales from western markets, such as Germany and the United States.
Since buyers would not be able to purchase cheaper cameras from the grey market in western countries,
they have no remedy but to buy the cameras at the full retail price. This will increase the company's
profits if the number of goods produced did not decline.
Disincentives: the market share of "occasional photographers" will decline, which is already a major market for
them. As the gray market offers the buyer more options, the official store is the only place for individuals to
purchase Minolta cameras if the grey market ends. In comparison, if Minolta wants to remove the partnership
it has with Goddard, wisdom that is inserted from Mr. George Ho to Mr. Kazao Tashima might be lost. Now
they have a good interpersonal relationship and Mr. Ho will share some lucrative local government details.
They face the possibility of not being able to locate any subsidiary that could offer the same business and have
vast volumes of retail accounts if they end the articulation with Mr. Ho. Therefore, they would have to create a
subsidiary of their own, which would cost more capital.
Competitive tweaks: -
Mr. Kusumoto of the US opined that the cameras could be operated in the Far East under different
names than in the Far West. Under this trait, consumers would not be likely to purchase cameras under
the name of the east in western regions, since they would think that a lower quality camera with a
cheaper price would be affordable. He also envisaged that the jubilee warranty program should be
tweaked to make it possible for all cameras to receive free service during the warranty. He insisted a
refurbish fee of $25 may be levied on cameras not being ordered from nearby stores. (The local
definition is based on the middle east).
Privileges: Amendments to the area tag and warranty could be useful to inhibit global smuggling. As
international versions would be easier to distinguish, minimizing the influx of grey imports would be
helpful.
12. Disincentives: This east and west model schism will decrease market visibility and brand popularity. To achieve
a favorable location for a "new brand" would entail different marketing campaigns. Revisions to the warranties
are not desirable because international rates are already cheaper than $25 and not of significant importance.
The alternate version of the east and west may be a kind of segregation for the consumer. People would
wonder if the output of the camera at a cheaper price in the Hong Kong market would not be good. Also,
residents are not going to Minolta and are inching to other brands. Tactical changes can lead to a consumer
decline. The warranty policy could trigger the same issue.
(c) Other than those already considered in the case, IDENTIFY AND EXPLAIN IN DETAIL further strategies
which you suggest that be used in ADDITION to curb the gray market problem faced by Minolta. Discuss the
ADVANTAGES and DISADVANTAGES of each strategy you suggest in DETAIL.
In Eastern and Western, Program Funded Impervious: -
If the business decided to revisit the same gross margin for the eastern and western economies, there
would no longer be space for the gray market.
Privileges: If the same price is denied to consumers in western and eastern countries, they would not
care whether to purchase the beverage, since there is no way for them to save money. It would be good
to equalize the price to address the epidemic of the grey market.
Disincentives: If the quality is affordable, they might lose certain markets, or if the price is low, they can
lose income. Since people cannot spend that kind of money on a camera in developing eastern countries
as people in developed areas can. The organization may lose any money if the price in developed
countries is as low as that in developing countries since the valuations in affluent nations are twice as
high.
Incur Costs on Customer Feedback: -
The premium charged on the gray market would be simpler if Hong Kong smugglers were paying more
money when they smuggled cameras in Japan. If the price difference between the grey market and the
official distribution outlet is narrower, it would reduce the scale of the market.
Privileges: The extra fees paid will minimize sellers' earnings on the gray market and boost Minolta's
sales. To make the gray market smaller, this step could be useful.
Disincentives: If the extra costs paid were minimal, the action would not be successful, so the smugglers
would still have future income. However, because the money paid is too high, the number of individual
customers who want to purchase the camera will be limited.
More Deeply, Track Camera Sales: -
13. The organization should make more effort to calibrate the cameras they have sold. This also suggests
further control of cameras' resales. Via the monitoring job, they would know whether or not the
cameras they sell went into the gray market. To figure out the smugglers, they could save customer
details because in the future they plummeted to sell cameras to them.
Privileges: This step could be beneficial in reducing the measurement tool of the gray market, as quoted
above, by scrutinizing the goods traded, fugitives may be detected.
Disincentives: If they intend to monitor the cameras they have sold, there is so much work to do. This
meddling would not be vital since the normal sellers and pimps are difficult to discern.
(d) Based on the identification and discussion of the ADVANTAGES and DISADVANTAGES of various
strategies in (b and c) above, which strategy(ies) would you recommend being implemented to resolve
Minolta’s gray market problem? Why? Fully defend your suggestions in DETAIL.
From my point of view, a more legislated distribution channel or even the dissemination of a wholly
owned subsidiary in the Hong Kong region is the most suitable option for the grey market. As far as I am
concerned, other options such as strategy shifts, or extra costs paid, and market price variance tactics
may both lead the business to lose future buyers or income. If different editions of products are offered
by the firm, the consumer can worry about the quality of the existing models. Although real payments
are paid by the service or individual customers, some types of the camera might be bought by
individuals.
For them, the first and safest option is to bring work into regulating the delivery of commodities. To have
them take seriously where the product is headed, the company should bargain with the Hong Kong
retailers. Because some of Minolta Camera Co.'s main management have a strong friendship with Mr.
Ho, they might negotiate together to try to fix the issues. The company should end its arrangement with
Goddard and set up a wholly owned Hong Kong subsidiary. For Minolta, Hong Kong is a big market, and
both the company and Mr. Ho will make money from it. However, in the absence of an agreement
between the two sides on a subsidiary, Minolta can, on its own, create a wholly owned subsidiary. The
gray market can quickly vanish as a subsidiary is formed.
14. (e) Based on the various readings as well as the video lecture, do you think it is possible for firms to
standardize price for all the country markets they operate in? Identify and discuss some factors that prevent
the standardization of pricing on a global basis. EXPLAIN your answer in DETAIL.
I do not insist the MNCs will standardize yields for all markets in various countries after parsing the
offenses and recitations. Several variables preclude foreign businesses from standardizing their pricing
policies internationally, most of which are caused by variations between host and domestic countries.
Nutshell, the rates between counties are different, making it difficult to standardize prices. If the items
offered in higher-cost areas are at the same price as the lower-cost areas, the income from the higher-
cost areas will be lower.
Conversely, the buying power of the consumer is dependent on the number of profits. The level of
wealth of developed countries will be significantly higher than that of developing countries. The amount
of money that clients are prepared to spend on the camera is very different. It is also difficult to establish
a single price for clients at varying levels of income.
Interestingly, all over the world, government administrative frameworks are different. The government
may charge higher taxes in some countries to protect the local economy. So, the price will be higher
because of the tax in those regions.
There are several other influences, such as history, the economy, that may affect price strategies. All
considerations should be focused on price policies, so it is not a good idea for multinational firms to
develop a standardization pricing strategy.
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