Annex I

Mr. Carlon is employed in the logistics area in Autopartes Formula 1 (AF1 in its Spanish acronym)
and is currently working on a special project commissioned by the company’s owner. The company
has been number one in its market for years, but it has been troubled by the entrance of
competitors that offer very cheap costs for certain parts. The strategy AF1 has followed has not
succeeded so far, and they are having an increasingly smaller market share because of these low
costs.

After some investigation, Mr. Carlon found out that the suppliers used by its main competitor are in
Italy, the United States, and China. All of them feature a level of quality accepted by the market.

Because of a traditional company policy, it had always marketed car parts made in Mexico.
However, the concerning situation they find themselves in has forced them to consider turning to
other options.

To test out the option of using foreign suppliers, Mr. Carlon determines that the product that has
decreased its sales the most because of foreign competition is generic hubcaps. They used to sell
800 per month and are now selling only 40 per month.

The current cost the local supplier offers is 500 MXN per rim, which is the price set for the product
displayed at the supplier’s facilities. In addition to this cost, the company must pick the product up
with a truck, spending 10,000 MXN to pick up 800 rims.

The company calculated that it spends around 15 MXN per rim in terms of sale location rent,
marketing, employee wages, and services. This was valid when the sales level was at 800 units per
month.

The sales price AF1 offers to the public is 550 MXN. Their competitor has started to sell these
pieces to the public for 505 MXN.

For AF1 to recover its sales level of 800, it has determined that it must offer a price of 499 MXN.
Hence, it has requested quotes from the three suppliers of excellent quality in foreign countries which
its own supplier uses. The company is still waiting for their response.

To anticipate a bit more, Mr. Carlon has researched the following prices:
• Sea freight from China to Manzanillo: 2500 USD
• Inland freight from Manzanillo to warehouse: 8000 MXN
• Sea freight from Italy to Veracruz: 2000 EUR
• Inland freight from Veracruz to warehouse: 8000 MXN
• Inland freight from the United States to Nuevo Laredo: 2833.34 USD
• Inland freight from Nuevo Laredo to warehouse: 8000 USD
• MXN/USD exchange rate: 12.00
• MXN/EUR exchange rate: 16.00

The capacity of the containers to import is 800 rims.

This work is owned by ENSEÑANZA E INVESTIGACIÓN SUPERIOR A.C. (UNIVERSIDAD TECMILENIO), (UNIVERSIDAD
TECMILENIO), protected by the Federal Copyright Law; the modification or distortion of a work, as well as its reproduction,
exhibition, or public performance without the consent of its author and holder of the corresponding rights is a crime punishable
under the Federal Copyright Law, as well as under the International Copyright Laws.
The use of images, video clips, footage of cultural events, programs and other material that is subject to copyright protection, is
exclusively for educational and informational purposes, and any other use such as profit, reproduction, editing or modification,
will be subject to prosecution and penalties by UNIVERSIDAD TECMILENIO.
No part of this work may be copied, reproduced, distributed, published, transmitted, broadcasted, or in any way exploited
without the prior written consent of UNIVERSIDAD TECMILENIO. However, you may download material to your personal
computer for personal or educational and non-commercial use only, limited to one copy per page. No Copyright markings or
any other legend stating the authorship of the material shall be removed or altered from the copy.