I need help with a case study

the case study is 3 pages long and i need help with these questions:

Summarize this case in five sentences.

Prior to negotiations, what price will you ask for each unit of PT40?

What is the highest price you think you can get for PT40 (explained)?

What is the lowest price you would accept for PT40 (explained)?

What is the highest price you believe CHP will accept (explained)?

enclosed in a copy of the case study

Additional facts about this case:

CHP is believed to be close to a long-term contract to supply parts to Medit, a giant construction company with excellent government contracts in southern France and nearby Euro countries.

Mission?s price for the coupling in questions (PT40) is $1.26, FOB, Los Angeles. The target gross margin for exports is 30%

Mission has a reputation for high prices in the US, and running the factory below capacity limits will raise costs further.

International sales missed forecast for 1Q03 by 7%. 2Q03 forecast is $4.3 million, but early customer response is not encouraging. International sales are now 20% below target.

Key account sales force compensation: 70% salary, 15% bonus on sales quotas, 15% bonus on profitability targets.

In 4Q02, Mission?s sales to CHP were $83k ? 18% of CHP?s flexible couplings purchases.

A10-04-0022 Mission Rubber Technologies Corp. PY Stephanie Lundstrom hung up the telephone, leaned across the conference table, and looked intently at each member of the account team. \"Okay, Kirk, Pierre, Martha, and Cameron, they have agreed to a meeting in Paris during the TP Tech Show (Public Works Technologies Trade Show, March 22-24, 2003). The question is what approach should we take with this account? They bring a great deal of new business in France, but I am not sure how far we are willing to go with them.\" CO Kirk Esperanza, the company's country marketing manager for France, stood up and started pacing the floor with excitement. This was the first conference call between the company Chief Executive Officer, Ms. Lundstrom, and Perry Arnold, the Commercial Director for CHP (Chaud Froid Plombierie). Ms. Lundstrom's involvement with this international account had been of critical importance in reframing the relationship with CHP. NO T Kirk made the victory hand sign to his team, grabbed a company catalog, and turned to Ms. Lundstrom. \"What approach we should use isn't an easy question to answer. We know that CHP wants to do business with us. We've gotten the word that one of their top accounts has specified our Flex-Force couplings for a large water treatment project. But beyond that we don't know how much more they want to buy. Besides, competition for CHP's business has been really tough. Everyone wants to sign them as distributors. They've done very well in South France. So, I guess we'd better talk this one through pretty carefully, and prepare for some tough negotiating. These French guys are not easy, no way.\" Company and Industry Background DO Mission Rubber Technologies Corp. (Mission) was a wholly owned subsidiary of Southwest Ceramic Corporation, a major manufacturer of structural clay products for the construction industry. Mission was acquired in 1985 and showed steady growth in performance and profitability for fifteen years. By focusing on a narrow and well-defined product line and by investing heavily in market development and distributor support, the company built a solid position in California, then one of the largest construction markets in the country. The company operated one manufacturing facility in Fresno and served its distributors from warehouses in Sacramento and Los Angeles. Mission's flexible coupling line was designed to serve the needs of the construction industry. A flexible coupling is used for short misaligned connections between pipes and is defined as a fitting less than 12 inches in overall length. The pipes to be connected can be the same or different sizes. Buried pipe systems can consist of concrete, metal, plastic, clay, or a combination of these materials with other products. The proper installation of these structures is extremely important and is regulated by strict product and construction codes. These pipe systems carry storm water under residential driveways, roads, and walkways, and divert storm water into sewage or drain systems. Copyright 2004 Thunderbird, The Garvin School of International Management. All rights reserved. This case was prepared by Professor John Zerio for the purpose of classroom discussion only, and not to indicate either effective or ineffective management. Company name and participants have been disguised per request of the case sponsor. This case should be used in conjunction with the case CHPChaud Froid Plombierie. The product line includes clay to clay, clay to cast iron or plastic, clay to asbestos cement or ductile iron, concrete to concrete, concrete to cast iron or plastic, cast iron or plastic to cast iron or plastic, with a broad range of diameters and transition lengths. CO PY The construction supply industry is highly fragmented, both in the United States and worldwide. The largest manufacturer in the United States is estimated to command a market share of less than 2%. Mission Rubber Technologies, with sales of $103 million dollars, is the fourth largest manufacturer, and its share is estimated to be around 1.2%. Industry Perspectives for 2003 T The construction supply industry expected overall business to remain slow through the end of 2003, but then anticipated growth during 2004 and 2005 in the 3% to 5% range. Sales increases in 2004 were predicted for all major product groups, except those directly affected by Asian competition. Chinese producers were expected to make significant inroads in the fittings market due to their labor and raw material cost advantages. NO Construction supply manufacturers expected construction business in the United States to close out 2003 with about a 0.4% loss. Mission Perspectives for 2003 DO The predictions published by the industry trade association materialized with a nastier-than-expected impact on Mission's performance in the first quarter 2003. Sales for the quarter were 11% below forecast, and prices were suffering under pressure from imports. Profitability for the first quarter was an alarming 14% below the same period the previous year. These results, and more importantly, the trend that they might represent, were addressed by Ms. Lundstrom during the April performance review: \"We look for a second quarter general improvement in business conditions to positively impact the construction industry. For our business segment in particular, we expect the federal government to pass legislation that increases highway spending, and this should boost our sales. However, this may not be this administration's highest priority at this point because of the war in Iraq. \"The state of the general economy continues to be the overriding factor that will determine whether business returns to levels we had in 2001. Our customers in the United States have taken a wait-and-see attitude during the past few years as the economy has slowed. Therefore, it becomes increasingly important that we build our overseas business to diversify our revenues. While international sales represent just 14% of our business, we should challenge ourselves to bring it up to 25% in the next three years.\" Preparing for the Negotiation with CHP The Mission team will be coordinated by Kirk Esperanza and will include representatives from the Finance, Traffic and Customer Service, and Operations divisions. While the negotiations will be conducted in English, the presence of Martha Manes, customer service manager and former Geneva resi2 A10-04-0022 dent, should facilitate the social aspects of the meetings with CHP. In preparation for this very important negotiation, Mr. Esperanza has prepared a list of issues. 1. CHP (Chaud Froid Plombierie) is a French construction materials distributor with markets and distribution centers in France, serving primarily the central and southeast provinces. It operates warehouses in Clermont-Ferrand, and Marseille, in addition to Lyon where its central office is located. 2. Current market prices for the PT40 line vary between $1.20 and $1.60, from a peak of $1.95 in 2000. Order size, delivery schedule, and channel inventory play a significant role in negotiations. Prices have been relatively stable for two years, following a downward spiral created by a mild economic recession in France which forced manufacturers to cut their prices approximately 20%. PY 3. There are seven large producers on the Continent capable of producing products that deliver similar technical performance, although there are differences in finishing and packaging. End users, i.e., construction and plumbing contractors, consider Mission one of the top suppliers. However, contractors tend to be a price-sensitive group. CO 4. Because of different raw material, sourcing arrangements, and scale of production, competitors have different production costs, with the Germans at the high end, French and Italian in the middle, and Spain in the low end of the price band. 5. According to the French Construction Association, last month (April 2003) prices for this type of flexible couplings ranged from $1.67 (high) to $1.44 (low). NO T 6. Freight to Marseille, insurance, and other shipping and import costs amounted to 3% of invoice value. Import taxes on construction products of American origin represented approximately 5% of the FOB (Free on Board] price. 7. CHP has been a good customer; however, not an easy one. They pay bills 30-45 days late, and complain often about any minor delay or shipment problem. The company is financially sound but not very profitable. Mission Sales $ 34,000 est. $ 83,000 $ 21,000 $ 49,000 $ 11,500 $ 43,400 $ 15,600 $ 34,000 $ 21,000 DO 2003 Q1 2002 Q4 2002 Q3 2002 Q2 2002 Q1 2001 Q4 2001 Q3 2001 Q2 2001 Q1 Est. Share 11% 18% 11% 16% 06% 14% 09% 10% 12% 8. In recent negotiations with European customers, Mission has lost four bids to Birmingham (England) and Barden (Spain), two of the most aggressive competitors on the Continent. 9. You are aware that CHP's Operations Director, Mr. Etienne, has expressed some displeasure with Mission for some recent shipping problems caused by a wrong item classification that caused customs to impound a shipment, and for inadequate pallet strapping that led to product damages during warehouse stacking. Mission's management has accepted responsibility and is in the process of reimbursing CHP for the losses incurred (about $11,000). 10. You know that your company has a good product, that your customer service is competitive, but that your traffic department has had problems recently. A10-04-0022 3 11. CHP has made it clear that it expects the highest level of service and quality in addition to a very good price. They believe that the success of this transaction will greatly influence their ability to serve Medit and maintain a strong presence in other accounts. 12. CHP's yearly sales exceed $540 million dollars. Couplings and fittings account for approximately 5% of their sales. DO NO T CO PY 13. Last shipment of PT40 to CHP was priced at $1.59 CIF Marseille