Case Study - PEC PDF

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Case Study: Precision Electronics Corporation “Manufacturer’s Representative versus Industrial Distributors”March 2019I. Short Background of the CompanyPrecision Electronics Corporation (PEC) was established in Morristown, New Jersey, on October 1, 1974. It began with seven employees: 4 Americans an...

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Case Study: Precision Electronics Corporation “Manufacturer’s Representative versus Industrial Distributors”

March 2019

I.

Short Background of the Company

Precision Electronics Corporation (PEC) was established in Morristown, New Jersey, on October 1, 1974. It began with seven employees: 4 Americans and 3 Japanese. It is a wholly owned subsidiary of Seimitsu Denki Kogyo Ltd, Japan. PEC developed a electromechanical relay that represented a technological breakthrough. The goal was to attain a sales volume of $50 million through its own distribution network within ten years. They created their own industrial organization to become more heavily involved in the marketing process. The company had failed with two previous manufacturing firms in an attempt to market their relays. And the company discussed whether to use internal salespeople, but realized was not cost efficient.

II. Statement of the Problem

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Whether to use manufacturer’s representatives or industrial distributors to market their relay and reach their goal?

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Do you agree with John Slager’s statement that “it is now pretty obvious to all of us that using our own salesforce would be out of the question from the standpoint of costs”?

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Could a combination of manufacturers’ representatives and industrial distributors be used in the channel design?

III. Alternative Course of Action

1. Whether to use manufacturer’s representatives or industrial distributors to market their relay and reach their goal?

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Carry direct competitor’s products (PEC’s products lost in the shuffle)

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Require high margins

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Technical expertise lower than manufacturer’s representatives

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Quality of salespeople less than manufacturer’s representatives

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There is a possibility of using a combination of both industrial distributors and manufacturer’s representatives.

2. Do you agree with John Slager’s statement that “it is now pretty obvious to all of us that using our own salesforce would be out of the question from the standpoint of costs”?

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Yes, because there is no bearing when they will add up work loads to their employee because basically they are already paying for them.

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The company’s own salespeople can be very productive because they are available anytime exclusively for the company.

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The employees can devote themselves exclusively to its particular products and policies.

3. Could a combination of manufacturers’ representatives and industrial distributors be used in the channel design?

The management should hold a retreat to brainstorm about some of the issues involved in using an appropriate channel structure for distributing the relay in the US market.

IV. Areas of Consideration(SWOT Analysis)

STRENGTHS ●

PEP has the knowledge of local markets

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PEP has broad market coverage

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PEP buy stock in bulk quantities

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Taking title from manufacturer at the time of purchase

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Efficient at increasing customer base without having to worry about order processing or credit checking

WEAKNESSES ●

Carries the direct competitor’s products

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Technical expertise lower than manufacturer’s representative

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Require the high margins

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Quality of salespeople less than manufacturer’s representatives

OPPORTUNITIES ●

They could conquer the largest market of the world if they’ll plan it well.

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Companies’ reliable name

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Possible clients

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To sell new relay in the huge US market

THREATS ●

Insufficient money

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Insufficient manpower

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Possible loss of the company’s reputation and clients

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Possible loss of company's capital

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Not able to reach the appropriate target markets

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Lacked experience in the component business

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Lacked its own industrial marketing organizations

V. Conclusion and Recommendation

We therefore conclude that PEC should choose to use manufacturer’s representatives because of their higher knowledge of the manufacturer’s product and more focused coverage area. Also, we did not choose industrial distributors, because they carry competitors’ products and thus PEC’s products may not be able to be sold as well....