After enjoying years of success as a master distributor, RCI was now facing challenges adapting to the needs of the changing 1990’s environment. The problems RCI faced, as a distribution company was three-fold:
Firstly, Component Manufacturing wanted to alter their distribution arrangements so RCI would no longer be an exclusive distributor for Component Manufacturing. RCI aided the company to become what it is today. Removing RCI’s exclusivity meant that RCI would be losing on margins of the selected products.
Secondly, Masato Corporations demanded that RCI purchase 23 000 units of leakage detectors or risk losing their exclusivity. This marked a huge decision for the company as leak detectors posed the single highest gross margin product for RCI.
Lastly, the company needed a long-term strategy for the company to survive the intense competition in the industry.
• Long standing relationship with Component Manufacturing
• Exclusivity with certain replacement parts
• Strong brand equity • Explore downstream option
• Explore upstream option
• Merge with other master distributors
• Threat of Component Manufacturing removing exclusivity
• Threat of Masato Corporations removing…show more content… As wholesalers have essentially taken the role of the distributor at a lower cost to manufacturers, shares of the market are shifting. Due to this channel evolution, exclusivity is disappearing. Therefore, due to this changing nature, RCI should give up exclusivity and allow Masato to distribute the products to competing distributors with hope to gain the units at cost. In this way, it will keep out other distributors and then buy their inventory at discount. It is not wise for RCI to simply purchase al 23 000 units as from Exhibit 2, RCI only sold 20 755 units. It is a huge financial and inventory risk for RCI to accept all 23 000