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the “Express Parts Internet Distribution Service” Proposal.
Key Decisions to be taken by A/S group‐
1. How many customers likely to switch their purchase to Express?
Total Sales = 2310
Transactional Customer = 25% of sales= 577.5
Relationship Customers = 75% of Sales=1732.5
Optimistic Approach Pessimistic Approach
All transactional customers were assumed All transactional customers and 40% of
to switch to Express Relationship Customers were assumed to
switch to Express.
Sales from only relational customers i.e.
1732.5 Sales from remaining 60% relational
customers i.e.= 1039.5
2. What will be the impact on sales and profitability?
3. How it will affect its suppliers?
Through Express, suppliers are able to reach a greater number of customers.
The suppliers can reduce the margins of existing distributers by intentionally
reducing the product prices.
Express’s bulletin board provides inventory levels of other competitors which can be
used for forecasting demand.
Dis‐involvement of distributors in the whole process will pose difficulty in generating
demand.
4. Is Express a threat or an opportunity for A/S?
Opportunities‐
Express provides access to large database of customers
Reduced costs in terms of sales representative, transactional and transportation
Increased reach to customers
Minimization of time and effort to track newer customers
Threats‐
Increase price war due to increased competition
Dis‐involvement of distributors in the whole process will pose difficulty in
generating demand.
No direct customer relationship
Supplier control is reduced
Suppliers may take franchisee distribution
Express’s proposal acts as a bargaining tool for customers
Recommendations
The profit is declining both in terms of absolute value and profit percentage. So, we recommend not
to go ahead with the proposal.