Question

The sales manager for Tetsu, Inc., a Japanese maker of electronic components has just returned from the very price-sensitive USA market, searching for an exclusive distributor. The most promising USA prospect insists on a markup of 20% based on Tetsu’s selling price. In Japan, Tetsu is used to typical markup of 20% based on their distributor’s selling price to the distributor’s customers. What would you recommend, if Tetsu’s objective is a very competitive price, i.e., lower the USA exclusive distributor selling price the better?a. Abandon the USA market and intensify operations in Chinab. Accept the USA distributor demand. It is even better for Tetsu compared to Japanc. Appeal to the USA Government to intervened. Appeal to the Japanese Government to intervenee. Reject the USA distributor terms which are worse for Tetsu compared to Japan

Answer 1

The correct answer is letter "B": Accept the USA distributor demand. It is even better for Tetsu compared to Japan.

Step-by-step explanation:

Considering both the distributors in Japan and the U.S. request a 20% margin for the retails of Tetsu's devices, accepting the offer of the U.S. company represents a good deal. Businesses are not handled the same in Japan and the U.S. Both countries have different policies. Tetsu must consider that the U.S. is a bigger market and that its devices are imported in the U.S., implying there could be tariffs imposed. Tough, if the U.S. distributor requests the same margin a Japanese distributor does to start businesses, the deal will be in Tetsu's favor.