Nakamura lacquer Company (To be used for class room discussions by Prof Rajiv Taneja) Case study 1 The Nakamura lacquer Company of Kyoto, Japan was one of the many hundreds of small handicraft shops making lacquerware for the daily table use of the Japanese people when the Americans army began to buy lacqueware as souvenirs. Young Mr. Nakamura, who had just taken over the old family business in 2000, saw therein an opportunity, but soon found that traditional handicraft methods were both too slow and too expensive to supply this new demand. He developed ways of introducing simple methods of machine coating, machine polishing, and machine inspection into what had been purely a handicraft, carried out with simplest tools. When the American army’s souvenir-hunting disappeared in 2005 but by then. Nakamura had built a substantial business, employing several thousand men and producing 5, 00,000 sets of lacquer tableware each year for the Japanese mass consumer market. The Nakamura “Chrysanthemum” brand had become Japan’s best known and best selling brand of good quality, for middle class. Outside Japan, however Nakamura did practically no business, except for selling occasionally to American tourists through his established Japanese outlets such as big departmental store This was the situation when, in early in 2011 –US showed interest in Japanese lacquerware indicating signs of growth in demand-Mr.Nakamura received in rapid sequence two visitors from US ,both were very highly recommended and equipped with the very highest and best credentials. “Mr. Nakamura ”the first one said,“ I am Phil Rose of National China company, Vice President marketing. As you probably know, we are the largest manufacturers of good quality dinnerware in the US with our ‘Rose & Crown’ brand which accounts for almost 30percent of total sales. We think that we can successfully introduce lacquer dinnerware to a small but discriminating public in US. We have investigated the Japanese industry and found that you are by far the best and most modern producer. We are willing to give you a firm order for three years for annual purchases of 400,000 sets of your lacquer dinnerware at 5% to you, provided the merchandise is made for us with our trade mark ‘Rose & Crown’, and provided that you undertake not to sell anyone else in the US lacquerware either with your brand or with any other brand during that period”

Mr. Nakamura had scarcely recovered from this shock when the next visitor appeared “I am Waltwer Semmelbach”he said “Semmelbach, and Whittacher, are Chicago’s largest supplier of hotel & restaurant supplies in the States and buyers of dinnerware and similar goods for a number of departmental stores. We think we can successfully introduce goodquality, Japanese lacquer dinnerware to our market. In fact all our customers are willing to try it out. We think there is a market for at least 60,000 sets a year. Within five years it should be couple millions. We have investigated your industry and feel you are the only man in Japan who can exploit this opportunity. Now we know your Government does not allow you to invest any money abroad and we therefore don’t ask you for a penny. We

are willing to pay the full costs of introduction We are willing to budget $1,500,000 for the next two years for introduction and promotion. You don’t owe us that money. All, we ask of you is that (a) we get the exclusive representation for your ‘Chrysanthemum’ brand for five years at the standard commission rates. and (b) that the first 20 percent on all sales we make during that time-which we figure is roughly your profit margin-will be used to pay off the money we actually spend for promotion and introduction as certified by a firm of independent accountants which we want you to name” Question1 If you were in the position of Mr. Nakamura explain step by step the strategic process you would adopt in arriving at the decision. Question 2 If you were in the position of Mr. Nakamura what would you do?