Fenix Del Sur Case Analysis Essay

I. Problem Definition: Should Fe’nix accept the contract to broaden its position and potentially add $4million in additional sales, given the constraints of dedicating a large percent of their business to replicas – which may have an effect on their relationship with current dealers? II. Industry Analysis: According to the product-market matrix above, and after reading about the industry, it is apparent that Fe’nix del Sur competes in selling authentic artifacts to collectors. After some of their clients insisted on an expanded product line, Fe’nix del Sur started producing replicas of their authentic artifacts. The replicas, in return, have broadened the company’s market to include gift buyers and individuals looking for decorative items. III. Organizational Analysis: Fe’nix del Sur is a reputable importer of authentic Southwestern jewelry and pottery for collectors. They originally sourced Hopi and Navajo artifacts, but in recent years have expanded their product line to include pre-Columbian artifacts from Peru and Venezuela, along with tribal and burial artifacts from Africa. If Fe’nix del Sur accepts the contract, their business definition would change. Since the company’s main focus in currently on dealing authentic artifacts to collectors (exclusively through specialty dealers, firm-sponsored showings and a few exclusive department stores), the loyal collectors who continually purchase their products may start to look elsewhere if the company fully expands their product line to include many replicas. The company would no longer be in just the authentic jewelry and pottery business, but rather also in the â€Å"replica† business. Therefore, their new business definition would be altered to include being a producer of replicas for gift buyers. Through careful verification, Fe’nix del Sur is able to successfully determine the authenticity of South American and African artifacts. This skill has enabled Fe’nix del Sur to develop a national reputation as one of the most respected sources of these types of artifacts. Fe’nix del Sur’s distinctive competency, which sets them apart from department stores that sell only replicas, allows them to sell through suppliers with highly limited distribution. The company had originally established a solid relationship with the retailers that sold their products, often being the sole supplier to its clients. However, in more recent years, due to the increase in competition, Fe’nix Del Sur’s products are not the only products being sold at some of these retailers. In fact, some of the retailers are now sending out their own buyers to deal directly with some of the Hopi, Navajo and African sources – completely stepping past Fe’nix. Therefore, the company’s relationship with those retailers is not as strong due to an increase in consumer demand for both authentic artifacts and replicas. By accepting the contract, I feel that the relationship between Fe’nix del Sur and the retailers they currently deal with would change. Most of the larger specialty and exclusive department stores are now dealing directly themselves or with other suppliers. Forming this new relationship with the mass merchandiser chain, allowing them to buy at 10% below the company’s existing prices, would spell disaster for Fe’nix’s current business relationships. Once the other businesses that Fe’nix currently deals with find out about this 10% price cut, they will either find another importer of authentic artifacts and jewelry or they will demand the 10% price cut as well. If all businesses that they currently deal with demanded a 10% price cut, Fe’nix del Sur’s income statement would drastically change – probably not for the better. IV. Alternatives A. Accept Contract a. Advantages i. Fe’nix Del Sur can broaden their position in the replica segment ii. They can potentially add $4million in additional sales over and above their annual growth. iii. Fe’nix could become a competitor in the â€Å"replica† business b. Disadvantages iv. Fe’nix could lose their current clientele – such as the collectors they currently target v. Accepting the contract may affect their relationship with their current dealers by causing them to seek other importers that sell only â€Å"authentic† pieces vi. Being acquainted with a mass merchandiser could ruin the company’s image so loyal customers who frequently purchase Fe’nix’s items may start searching for artifacts that are imported through dealers that only sell â€Å"authentic† pieces vii. The 10% price cut for the mass merchandiser could hurt their reputation with all of their current suppliers. Cutting the price 10% for one type of retail outlet will cause all other stores to want the same treatment. This would be a disruptive change to Fe’nix’s business and their overall profit. viii. Fe’nix would have to increase their replica production almost three times B. Reject Contract c. Advantages ix. The company will maintain their current relationship with dealers and customers. x. Their current sales growth per year would more than likely remain constant. xi. They would not have to worry about a price cut for any retail outlet since they already have a solid clientele of suppliers who are buying their artifacts regularly. xii. Their production could remain constant – with no increase in the amount of replicas being produced. d. Disadvantages xiii. Fe’nix could lose the large increase in additional sales revenue that the mass merchandiser chain could help them achieve. xiv. The company could lose potential sales due to competition in the â€Å"replica† business if they don’t accept the contract. xv. They would not be able to capture a broader target market. V. Recommendation: After careful analysis and consideration of Fe’nix del Sur’s business foundations, I feel that it would be best to reject the contract at this point in time. Reviewing the advantages and disadvantages above, along with assessing Fe’nix’s current business definition led me to this conclusion. The company’s current sales revenue is about $25million, and has had steady sales growth for the past ten years with an annual increase of 20%. This large annual increase in sales can be greatly attributed to their core competency of being able to accurately verify the authenticity of South American and African artifacts. Over time, Fe’nix del Sur has established a national reputation as one of the most respected sources of these types of artifacts. Aside from their solid sales growth, Fe’nix has established great relationships with the specialty dealers and exclusive department stores that sell their products. Building solid relationships with clients is a process that takes a lot of time and attention. Without these relationships, Fe’nix’s sales would drastically decrease, possibly causing them to go out of business. Because the company has been selling to selective types of retail outlets, the end consumers (collectors) are very loyal to continually purchasing Fe’nix’s products. If Fe’nix del Sur accepted the contract, they would have to completely reposition their brand and business definition to include both replicas and authentic items. Because they are not in any danger of losing sales at this point in time, it would be wise for the company to continue business as they normally do. Just because an external opportunity exists does not mean that Fe’nix should take advantage of it. It seems as though the sales manager is very focused on the potential to add $4million in additional sales revenue. Although this may sound good at first thought, it is always wise to consider where the business stands at the present. Overall, the contract is too demanding on Fe’nix. The company’s prices seem to already be accepted by the specialty dealers and exclusive department stores; therefore, cutting their prices by 10% for one retail outlet will lead to relationship issues down the line. These long-term relationships that have taken years to nurture could be gone in a matter of months. Also, because Fe’nix is known for authentic artifacts, increasing their production of replicas three times would create a disruption in their normal way of doing business. Again, this would force Fe’nix del Sur to reposition its brand – possibly losing a lot of clientele in the process.