aca assignment_191181

8/7/2019 ACA ASSIGNMENT_191181

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ACA ASSIGNMENT

CASE ANALYSIS:

THE STRUCTURE OF A BUSINESS DECISION

SUBMITTED BY:

VARUN BHATIA

191181

FMG 19C



CASE SUMMARY:

This case is about The NAKAMURA LACQUER COMPANY of Tokyo who are one of the

largest producers of lacquer ware in Japan. Mr. Nakamura has over the years transformed his

family business of handicrafts by introducing various changes in the process such as simple

methods of machines coating, machine polishing and machine inspection. The brandChrysanthemums of Nakamura Lacquer ware Company of Kyoto, Japan has became the

bestselling brand in Japan. Now he wants to expand his business in abroad. He is going

through a phase where it has explored every possibility in the domestic market and has

reached an optimum level. Globalization of the product is a policy decision, which needs to

be taken.

In this situation he receives offers in a rapid sequence from two highly recommended US

companies.

Each of them is credible and both have offered exciting opportunity to Mr.Nakamura.Heneeds to decide as to which of these offers to choose.

PROBLEM IDENTIFICATION:

PROBLEM STATEMENT

Mr Nakamura is faced with a difficult decision to decide between the two lucrative options

that have been given by the Americans. He needs to decide whether to promote his product

under his own brand name µChrysanthemums¶ or go according to Mr rose and promote it

under the name of µRose Crown¶.

CAUSE OF PROBLEM

y He has till now only served the Japanese market and hence does not have any

experience in exporting his product.

y Each of the American has got very good credential making the decision all the more

difficult to take.

y Japanese market was almost saturated.

y Chrysanthemums is a leading brand in Japan, but they have no business outside Japan,in spite of the fact that people in America like the lacquer ware they make, which is

evident from the sales of the lacquer ware to American tourist and army people in oldtimes.

y The government of Japan did not at that time allow any kind of investment outside the

country. So if Nakamura wanted to penetrate into US markets, he would have to getinto an alliance with a US company.

y If he selects the National China Company for a partnership, he will lose his brand

name Chrysanthemums. They are demanding an order which is less than the fullcapacity of his company which could be a loss for Nakamura. Also according to the

contract, he will not be able to do business with anyone else in US during that period.

y If he selects Sammelbach, Sammelback and Whittacker Company¶s offer claim for an

exclusive representation of the brand Chrysanthemums, he will not be able to do

business with other parties in US during the contract period.



OBJECTIVE STATEMENT

To maximize gains for the Nakamura Lacquer Company

ANALYSIS AND EVALUATION

DECISION CRITERION

y Investment: Investment can be one of the criterions to solve this problem i.e. tounderstand and calculate the return on investment. But, as given in the case, the

government of Japan doesn¶t allow to invest outside its country. There are restrictionsimposed.

y Capacity: Another criterion to solve this problem will be to check operationalfeasibility i.e. to analyze whether company has the capacity to produce the desired

amount of lacquer ware or not.

y Government Policy: Government of Japan has a policy which does not allow

companies of Japan to invest any money abroad. So, is it possible to negotiate with

the government in this respect.

ALTERNATIVES AND THEIR EVALUATION

Alternative 1: Accept Phil Ross¶ offer which gives Mr. Nakamura a firm order for three

years for annual purchase of 4,00,000 sets of lacquer dinner ware.

Pros ±

y Firm order for three years for annual purchase of 400,000 sets of lacquer dinner ware

and will earn 5% more profit.

y This will generate additional income as he will get additional 5% profit.

y He will be able to expand his business in global market.y And as we can deduce from the case, Mr. Nakamura¶s strength is in manufacturing

but not in marketing so he will be able to utilize his strength to fullest without

worrying about marketing strategy.

Cons ±

y To produce these sets he has to increase his production capacity which will require

additional investment, land, machines, skilled labor.

y If he increases his capacity and employs more skilled labor then on later stage, when

contract will expire, he cannot fire them. The reason he could not fire them is because

of Japanese culture which believes in lifetime employment.

y There will be no brand name as US based company will sell Nakamura¶s Lacquer

ware under their brand name.

Alternative 2: Accept Sammelback¶s offer i.e. to give his firm an exclusive representation

for the ³Chrysanthemum´ brand for five years.

Pros ±

y Huge order of 600,000 sets of lacquer ware and prospect of growth in demand in

future.



y Mr. Nakamura¶s strength is in manufacturing but not in marketing so this can be agood option to outsource your marketing to other firm.

y It can be good marketing strategy for Mr. Nakamura as it will cater to different

customers i.e. Hotels & Restaurants and Consumers. Hotels & Restaurants will be

bulk buyers with stable demand.

y As it is B2B model therefore analyzing the demand will be easy as order will be given

well in advance and thus planning of production can be done accordingly.y Expansion in Global market with brand name.

Cons ±

y Mr. Nakamura¶s business is of manufacturing traditional handicrafts of Japan. So it isdifficult to predict the whether this product will be accepted in US market or not.

y He has to increase his capacity which will require an additional investment.

y Initial order depends upon the demand which at this stage cannot be predicted so there

is no firm order.

Alternative 3: Reject both the offers and do not take any action.

Pros ±

y No additional investment required to increase the capacity.

y No negotiations with government on this front.

Cons ±

y These two people can approach Mr. Nakamura¶s competitor hence his competitor will

get the opportunity to expand his business

y He may lose his number one position.

y No expansion thus no growth

y May lose his market share Alternative 4: Reach out to some third person for investment or some favorable deal and put

your own terms and conditions.

Pros ±

y Mr. Nakamura can put his own terms and conditions rather than following othersconditions.

y He will get an opportunity to expand his business globally.

y He can increase his capacity or also can have flexible manufacturing schedule as he

has to decide about the quantity he wants to supply and when.

Cons ±

y Mr. Nakamura¶s has to spend time to search for a prospective partner.

y A lot of risk is involved as he is not aware of the US market.

y Additional investment of money required to search for the partner.



Alternative 5: Invest Yourself Pros ±

y Mr. Nakamura can increase his global presence under his own brand name.

y Increasing of production capacity will depend upon his company¶s policies.

y He does not have to abide by terms and conditions of other players in the market.y He does not have to share his formula of success i.e. his practices as well as his

procedures with others.

Cons ±

y He has to deal and negotiate with government on their policies.

y He does not have any knowledge of US market

y Additional investment and time required to study the global market and to identity

potential areas and buyers.

y Additional money required to invest

RECOMMENDATIONS AND JUSTIFICATIONS

In my opinion, Mr. Nakamura can initially accept the offer of Mr. Phil Ross as this will help

him to generate additional income as the order is pre-decided. This will also give him time to

study the US market so that if in future he want to collaborate with some other players he is

well verse of the trends and demand in market. By this time he will be able to generate

contacts in US market. He will get time to negotiate with government on its investing abroad

policies. And still remain leader in his market. He will be able to expand his business and

employees will find an opportunity in his company to grow thus satisfying their self-

actualization need.

IMPLEMENTATION

The major problem, if Mr. Nakamura wants to expand his business, is increasing theproduction capacity. To solve it creativity is required i.e. this problem can be solved by using

following steps:

y Outsourcing some portion of its production. But this has a problem as it is possiblethat they have to compromise with the quality and also technology has to be shared.

y Mergers and Acquisitions of their competitor can be another way to increase capacity.

y To form a network or cluster of suppliers can be again a very good step to increasecapacity.

TOTAL WORDS: 1501

aca assignment_191181

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