Case 1 – Lancer Gallery
Lancer Gallery LLC is a company that sells South American and African artifacts, jewelry, and pottery. They originated as a trading post in the early 1900s and are now one of the most famous dealers in southwestern artifacts. They are headquartered at Phoenix, Arizona and distribute their product throughout the United States. In 2001 Lancer decided to expand their product lines by making replicas of authentic artifacts. Finally, Lancer is doing quite well financially, with gross sales of $35 million with an increase of 20% per year.
The primary problem that the Lancer Gallery has run into is whether or not they should reposition themselves into a company that mainly produces replica products. In January 2010, Lancer was contracted by a mass-merchandise department store chain and was offered at least $4 million annually to create triple the amount of artifact replicas. The head of Lancer Gallery has come to a huge dilemma. The company president Andrew Smythe has stated that it is a wonderful offer, as it will add $4 million in additional sales which is over their annual growth, which would help a lot due to the recession. However, becoming a company that mainly creates replicas can have a huge effect on their current dealers and customers as Lancer has created a reputation over the years for their quality artifacts. Accepting this contract may as well be sacrificing their image and eventually lose their current distributors. There is also secondary problems; Lancer has a limited supply of artifacts, competition has greatly increased in recent years, and their revenue has been declining because of the economy.
An alternative would be to create a sub division that only creates replicas. This way they can stay loyal to their current distributors as well as honor everything stated on the contract. Another alternative would be to simply re-negotiate the contract. If Lancer Gallery refuses to become a company that mainly creates and sells...
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