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Case Study Analysis

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Problem:

What Should Mr. Nakamura do? Whether to go with Mr. Phil Rose or to go with Mr. Sammelback or

need not expand and continue to do well in Japanese markets as the market leader.

Causes of the problem:

If Mr. Nakamura decides not to expand and continue in Japanese market then potential investors might

give that offer to competitors and hence Mr. Nakamura may lose its market leadership identity in

homegrown market to any of competitors.

If Mr. Nakamura decides to go with expansion then he has to decide which offer to choose considering

his long term & short term goals.

Long term And short term goals

Long Term Goal Short Term Goal

To have sustainability in the business

Have high market share

Higher brand value

To have high margins

Increase production capacity with low debt

Reduce risk

Statement of Options:

The options that Mr. Nakamura has at the present moment are:

1. To remain focused in the domestic sector.

2. To opt for National China Company for partnership in its globalization strategy.

3. To opt for Semmelback, Semmelback and Whittacker for partnership in its globalization strategy.

OPTION EVALUATION

Deal with National China Company-Rose & Crown Brand

If Mr. Nakamura opts to deal with National China company then following would be its effect.

yMr Nakamura brand would get no global representation as his products will be sold under Roseand CrownyHe would have fix and confirm orders for next 3 yearsyHe would get 4,00,000 order each yearyHe would get higher margin of 5 %

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Advantages

yHigher profit margin of 5 %yConfirm orders for next three yearsy Large expansion opportunity

Disadvantages

yNo brand presence.yRuns huge risk with increasing production capacity and not renewing of the contract.yHave to start from scratch after 3 years if own brand has to be created.

Deal with Walter Semmelbach of Semmelback,Semmelbach and Whittacker,Chicago

If Mr. Nakamura opts to deal with Semmelback then following would be its effect.

yWill lead to global promotion of the brand Chrysanthemum in U.S. market, leading toincreased brand equity and brand image.

y Time duration of contract is 5 years, a long term investment for Nakamura Lacquer Company.yOrder quantity is at least 600,000 sets per year and expected to increase to a couple of million in

next 5 years, leading to huge investment cost for Nakamura Company.

y Full cost of introduction and promotion for the next 2 years to be borne by Sammelback.y Profit margin will be used to pay off the expenditure of introduction and promotion by

Nakamura Comp. to Sammelback

Advantages

yCreation of brand identityy Expectation of larger orders even few millions in coming yearsy Till the time contract will be expiring the brand would have its own name, so can move without

help of any substitute.

y Introduction risk is taken by Sammelback, so risk factor is lowyWill get first mover advantage in American marketyCompetitor could not directly come to America due to local government laws

Disadvantages

y Profit margin would be eaten by Sammelback to pay back advertisement expenditure.y Low profit generation to pay back expenditure occurred due to expansion in production

capacity

yNot have a fix number of orders for bad time.y If products fails then hired labor will be added liability on the company.

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Continuing with the current market

Under this option, Nakamura will concentrate in the domestic market and try to improve that market

penetration to gain higher profit. But, product may not enter into the global market.

Advantages

yUncertainty about the future demand in America is removed.yNo debt would be require for expansion, so cost of financial distress would be eliminated from

action

Disadvantages

yWould give competitor a chance to growyCompetitor after acquiring economies of scale can eat up local share alsoyWill not be number one in marketyCan be good target for future acquisition for competitor

Recommended Solution

After studying all the points I would suggest to with Sammelback, Semmelbach and Whittacker

Company. Because of the following reasons:

y Future base in new market will be createdy Initial investment and low margin can be accommodated by local marketyWith rise in capacity economies of scale come into play, so production cost will go down. As a

result we can make up for low margin.

y In other option he has to start from beginning and all over again bbut in this option his marketbase would be created for further actions.