Charlestown Chemical, INC.

Charlestown Chemical, INC.By: Group 1Abhinav V. K. 12P121Ravi Goel 12P161Ravi Singla 12P162Vishal Agarwal 12P179Venkatesh Mahapatra 12P237BackgroundCharlestown Chemicals buyer of Muriatic Acid$1.2 bn sales and $60 mn PAT in 1984Puritan Chemicals Sole supplier of Muriatic Acid for Charlestown Chemicals$9 bn sales and $394 mn PAT in 1984Large customer of Charlestown Chemical with total purchase increased to $12.4 mn in 1984Lee Chemicals Charlestown Chemicals option alternative for Muriatic Acid

IssuesConsistent quality of supply from new supplierRelationship with existing supplier as it was also a huge customer alsoTotal quantity offered by Lee Chemical was not sufficient to fill the plants needFinding the supplier for the long term

Options Renegotiating deal with Puritan to procure from Puritan and Lee bothIn-House productionUnfavorable cost structureCancel Talks with LeeHampers relationship with Lee for future transactionIncreases bargaining power of Puritan

RecommendationRenegotiate the deal with Puritan ChemicalTightening supply and presence of Lee as a possible supplier has increased bargaining power of CharlestownCharlestown should make a deal to procure from both Puritan and Lee as it would give them bargaining power in deciding on supplier in futureBut by not taking deal from Puritan, Charlestown may lose some potential business

Thank You