Sampson Products Case

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Sampson Products Corporation was a major manufacturer of electrical equipment used extensively by consumer goods manufacturers. The company sold most of its products to manufacturers of refrigerators, automatic washers, and electric stoves to be installed as original equipment that usually retained the Sampson brand name. In addition to the original equipment market, Sampson had obtained a significant portion of the replacement market for the products it manufactured. Sales of Sampson replacement parts were normally made through channels such as small hardware stores and other home repair retail outlets. Another substantial part of Sampson’s revenue was derived from manufacturing electrical equipment for large electrical supply houses under the brand names of those outlets. Sampson’s annual sales averaged approximately $400 million. Of this total, the production and sale of small electric motors accounted for over $100 million. Although Sampson was one of the largest producers of small motors in the United States, there were four other competing companies of comparable size, as well as several smaller manufacturers. Approximately one-fourth of the company’s production of motors was used to fill contracts with manufacturers of air conditioners, vacuum cleaners, and other power equipment for the home. These motors carried the brand name of the retailer; hence, Sampson referred to these contracts as “special brand business.” In 1997, Sampson Products obtained a special brand contract with General Company to manufacture $20 million of “General” motors. General was a major U.S. electrical products manufacturer with annual sales of approximately $750 million. Sampson had been awarded the contract after bidding competitively against one of the other large motor manufacturers and five of the smaller firms. Sampson’s sales manager believed his bid had been accepted because of the excellent quality and reputation of the firm’s motors, not because it...
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