A special contract had been offered by an established company in kenya to serve as a partner for the regional AFRICAN market. The Kenyan partner will set up their extensive marketing chain stores in the Kenya and the whole African countries. They pledge to carry all the product line in Africa.

The African partner will bear all development costs and will take care of the operating overheads of the African operation. Transport costs will be borne by PENSONIC Malaysian. Transport costs work out to be about 1.5% of the sales value.

The African partner is asking for a commission of 12% on all sales in Africa. Sales volume is expected to begin at RM50 million in the first year and grow at 15% perannum for the next 5 years.

1.should PENSONIC take up the contract ? Show your calculation.

2. What are the qualitative considerations that must be taken into account in the decision?