Charlestown Chemical, INC.

By: Group 1 Abhinav V. K. Ravi Goel Ravi Singla Vishal Agarwal Venkatesh Mahapatra 12P121 12P161 12P162 12P179 12P237

Background
Charlestown Chemicals buyer of Muriatic Acid
$1.2 bn sales and $60 mn PAT in 1984

Puritan Chemicals Sole supplier of Muriatic Acid for Charlestown Chemicals

$9 bn sales and $394 mn PAT in 1984 Large customer of Charlestown Chemical with total purchase increased to $12.4 mn in 1984

Lee Chemicals Charlestown Chemicals option alternative for Muriatic Acid

15th June

Puritan raises prices from 97.50$ to 132.50$

Quotation invited from Lee Chemicals

17th June

21st June

Lee submits bid of $111 per ton, delivery by tank car, max 3500 ton per yr, must-take 3000 ton Meeting with Puritan representatives informing them of better offer

22nd June

23rd June

Lee Chemical reduces price to $105 delivered by truck.

1st

Puritan announces cancellation of price increase

July

August

Charlestown- Tulsa Plant confirms quality of the product sample from Lee chemicals Lee president indicated that they would be prepared to take a partial requirement contract and considered a price of $102.5 per ton

August

September

Puritans come forward to finalize the deal for entire requiremnet supply but was anxious to sign a contract for 1986

Issues
Consistent quality of supply from new supplier Relationship with existing supplier as it was also a huge customer also Total quantity offered by Lee Chemical was not sufficient to fill the plants need Finding the supplier for the long term

Options
Renegotiating deal with Puritan to procure from Puritan and Lee both In-House production
Unfavorable cost structure

Cancel Talks with Lee

Hampers relationship with Lee for future transaction Increases bargaining power of Puritan

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

Thank You