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NAME: AHSAN AZAM

ROLL NO: SU92-MBAOW-F22-007
DEPARTMENT: MANAGEMENT SCIENCES

PROGRAMME: MBA (1.5 YEARS)

SEMESTER: 3RD

COURSE TITLE: BUSINESS POLICY AND STRATEGY

COURSE INSTRUCTOR: DR. MUHAMMAD RAFIQ
TOPIC: DRAFT OF CASE STUDY
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Table of content
Case Study……………………………………………………………………………………3

Introduction…………………………………………………………………………………..4

Background……………………………………………………………………………………4

The Offers………………………………………………………………………………………4

National China Company (Rose and Crown):……………………………………………….4

Sammelback, Sammelback and Whittacker (SSW):……………………………………….4

Situational Analysis:…………………………………………………………………………..5

Risk Factors……………………………………………………………………………………5

Brand Identity:………………………………………………………………………………..5

Objectives:…………………………………………………………………………………….5

Short Term…………………………………………………………………………………….5

Long Term……………………………………………………………………………………..5

Evaluation of Options:………………………………………………………………………...5

Reject Both:……………………………………………………………………………………5

Accept Rose and Crown Offer:………………………………………………………………5

Accept SSW Offer:……………………………………………………………………………5

Recommendation:……………………………………………………………………………..6

Action Plan:……………………………………………………………………………………6

Contingency Plan:……………………………………………………………………………..6

Conclusion:……………………………………………………………………………………..6

Reference:………………………………………………………………………………………6
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NAKAMURA LACQUER COMPANY CASE STUDY:

The Nakamura Lacquer Company (NLC) of Kyoto, Japan, employed several thousand men and
produced 500,000 pieces of lacquer tableware annually, with its Chrysanthmum brand becoming
Japan's best known and bestselling brand. The annual profit from operations was $250,000.

The market for lacquerware in Japan seemed to have matured, with the production steady at
500,000 pieces a year. NLC did practically no business outside Japan.

In May 2000, (much to your chagrin!) the ambitious and dynamic, Mr. Nakamura (Chairman,
NLC) received two offers from American companies wishing to sell lacquer ware in America.

The first offer was from the National China Company. It was the largest manufacturer of good
quality dinnerware in the U.S., with their “Rose and Crown” brand accounting for almost 30% of
total sales. They were willing to give a firm order for three years for annual purchases of 400,000
sets of lacquer dinnerware, delivered in Japan and at 5% more than what the Japanese jobbers
paid. However, Nakamura would have to forego the Chrysanthemum trademark to “Rose and
Crown” and also undertake not to sell lacquer ware to anyone else in the U.S.

The second offer was from Sammelback, Sammelback and Whittacker (henceforth SSW),
Chicago, the largest supplier of hotel and restaurant supplies in the U.S. They perceived a U.S.
market of 600,000 sets a year, expecting it to go up to 2 million in around 5 years. Since the
Japanese government did not allow overseas investment, SSW was willing to budget $1.5
million for the next two years towards introduction and promotion. Nakamura would sell his
“Chrysanthemum” brand but would have to give exclusive representation to SSW for five years
at standard commission rates and also forego his profit margin toward paying back of the $ 1.5
million.
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Introduction:

The Nakamura Lacquer Company (NLC), a distinguished lacquerware manufacturer based in

Kyoto, Japan, faced a pivotal decision in May 2000. Mr. Nakamura, the enterprising Chairman,
found himself at a crossroads when two American companies presented enticing offers, opening
the door to potential expansion into the U.S. market. This decision was critical for NLC, known
for its Chrysanthemum brand, synonymous with quality and reliability in Japan. The annual
profit stood at $250,000, prompting Mr. Nakamura to contemplate international opportunities
due to the perceived maturation of the domestic market.

Background:

Founded in 1948, NLC, under the visionary leadership of Mr. Nakamura, evolved from a small
handicraft shop to a major lacquerware producer. The Chrysanthemum brand, named after
Japan's national flower, became an emblem of patriotism and excellence. With annual production
reaching 500,000 pieces, NLC's profitability remained solid. However, signs of saturation in the
Japanese market prompted exploration beyond national borders.

The Offers:

• National China Company (Rose and Crown):

Proposal: Purchase 400,000 sets annually for three years.

Conditions: Surrender the Chrysanthemum trademark, grant exclusive U.S. representation.

Returns: $720,000 over three years, but with limited long-term potential.

• Sammelback, Sammelback and Whittacker (SSW):

Market Potential: Envisages a U.S. market of 600,000 sets/year, expected to reach 2 million in 5
years.

Investment: $1.5 million for introduction and promotion.

Conditions: Relinquish the Chrysanthemum brand, exclusive representation for five years.
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Returns: Initial negative $467,000 over five years, but the potential for $1 million profit if sales
increase.

Situational Analysis:

Capacity Dilemma: The challenge of meeting the order entailed either significant capacity
expansion or sacrificing a portion of the domestic market share.

• Risk Factors: The uncertainty of U.S. demand introduced risks to both offers, making
the decision complex.
• Brand Identity: NLC had painstakingly built the Chrysanthemum brand in Japan, and
any decision should consider its preservation.

Objectives:

• Short Term: Expand into the U.S. market while safeguarding the reputation of the
Chrysanthemum brand.
• Long Term: Increase profit volumes by securing a viable share in the U.S. lacquerware
market.

Evaluation of Options:

1. Reject Both:
• Disregards the objectives of profit maximization and growth.
2. Accept Rose and Crown Offer:
• Ensures steady returns but risks excess capacity and potential loss of bargaining power in
the long term.
3. Accept SSW Offer:
• Offers flexibility, albeit with initial risks; has the potential for significant profits in the
long term.
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Recommendation:

Negotiate terms with SSW:

• Initial supply: Propose 300,000 pieces to minimize initial risk.

• Expand capacity based on U.S. market response.
• Manage debt repayment within a five-year horizon.
• Contingency: If U.S. demand is lower than expected, focus on consolidating presence in
the domestic market.

Action Plan:

1. Initiate negotiations with SSW to define favorable terms.

2. In the first year, supply 300,000 pieces, sourcing 125,000 from excess capacity and
175,000 from the domestic market.
3. Vigilantly monitor U.S. market response and adjust capacity expansion accordingly.
4. Strategically manage debt repayment over the next five years.

Contingency Plan:

If U.S. demand is lower than anticipated in the first year:

• Shift focus to strengthening the domestic market presence.

• Reevaluate U.S. market entry at a later stage based on evolving circumstances.

Conclusion:

Negotiating with SSW emerges as a strategic choice for NLC, aligning with its objectives while
balancing short-term risks with long-term potential. The flexibility inherent in this option allows
for adaptability to market dynamics, all while preserving the esteemed Chrysanthemum brand
identity. This comprehensive strategy ensures a judicious approach to entering the U.S. market
and navigating the complexities of international business expansion.

References:

https://brainly.in/question/40979970