Question

The Rose and Crown offer: The first offer was from Mr. Phil Rose, V.PMarketing at the National China Company. They were the largestmanufacturer of good quality dinnerware in the U.S., with their “Rose andCrown” brand accounting for almost 30% of total sales. They were willing togive a firm order for three eyes for annual purchases of 400,000 sets oflacquer dinnerware, delivered in Japan and at 5% more than what theJapanese jobbers paid. However, Nakamura would have to forego theChrysanthemum trademark to “Rose and Crown” and also undertaken tosell lacquer ware to anyone else the U.S. The offer promised returns of$720,000 over three years (with net returns of $83,000), but with littlepotential for the U.S. market on the Chrysanthemum brand beyond thatperiod.The Semmelback offer: The second offer was from Mr. Walter Sammelbackof Sammelback, Sammelback and Whittacker, Chicago, the largest supplierof hotel and restaurant supplies in the U.S. They perceived a U.S. market of600,000 sets a year, expecting it to go up to 2 million in around 5 years.Since the Japanese government did not allow overseas investment,Sammelback was willing to budget $1.5 million. Although the offer impliednegative returns of $467,000 over the first five years, the offer had thepotential to give a $1 million profit if sales picked up as anticipated.Meeting the order: To meet the numbers requirement of the orders,Nakamura would either have to expand capacity or cut down on thedomestic market. If he chose to expand capacity, the danger was of idlecapacity in case the U.S. market did not respond. If he cut down on thedomestic market, the danger was of losing out on a well-establishedmarket. Nakamura could also source part of the supply from other vendors.However, this option would not find favor with either of the Americanbuyers since they had approached only Nakamura, realizing that he was thebest person to meet the order.

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