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Aztec's Strategic Deal with Desron Corp

Aztec is a plastic injection molding manufacturer that has historically relied on a small number of large customers for the majority of its sales. It now has three major customers accounting for 90% of its sales, with its largest customer Desron Corporation making up 65% of Aztec's output. Desron Corporation has proposed that Aztec become its sole supplier for a 3-year deal, which would involve Aztec producing a wider range of products at the same prices for the first year and a 5% reduction in price each subsequent year. Accepting this deal would substantially increase Aztec's total sales by 5% but increase its reliance on a single large customer.

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Aninda Dutta
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789 views10 pages

Aztec's Strategic Deal with Desron Corp

Aztec is a plastic injection molding manufacturer that has historically relied on a small number of large customers for the majority of its sales. It now has three major customers accounting for 90% of its sales, with its largest customer Desron Corporation making up 65% of Aztec's output. Desron Corporation has proposed that Aztec become its sole supplier for a 3-year deal, which would involve Aztec producing a wider range of products at the same prices for the first year and a 5% reduction in price each subsequent year. Accepting this deal would substantially increase Aztec's total sales by 5% but increase its reliance on a single large customer.

Uploaded by

Aninda Dutta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Aztec

Components
Suppliers
PRESENTED BY-
GROUP 4
Plastic injection mounding For 20 years focused on In the past they had 12
manufacturer for domestic few large customers customers that accounted
appliances for 80% of sales

Aztec

Now they have three Largest customer “Desron


customers that account for Corporation” accounting
90% of the sales to 65% of their output

Link: [Link]
Aztec to become
Prices same for
the sole supplier
Produce a wider they first year and
for Derson Co. as
range of products reduction of 5%
a part of 3-year
per year
deal

Proposition from Derson Corporation


Understanding the Proposition
•Low transaction costs
• Higher frequency of operations
• Involvement of highly specific assets
• Increasing measurability of outcomes
• Greater degree of monitoring and control to avoid information
asymmetry
• Difficulty in maintaining intimacy in large number of relationships
What this means for Aztec

Increase cost
Increase the Loose the capacity
Total sale increase reduction from 2-
variety of products to support other
by 5% 3% per annum to
by 40% customers
5% per annum

Purchasing new Upgrading their


Increase flexibility
machine ERP system
Old machines already need to be replaced

Investment is not an issue and the deal has high ROI

Help from engineers of Desron Corporation leading to


joint learning and better problem solving
Pros
Modernizing ERP system, with profitable deals for
upgrading in future

Be a part of New Product Development with Derson

Work with Derson Group that are 50 times bigger than


Aztec
Loose other customers and difficulty in attracting them
again in future if necessary

Increase cost reduction from current standards

Exposing Aztec to Derson Corporation’s scrutiny

Cons
As Ethan Condos said “Becoming a servant to large
corporation”

Leasing new ERP systems

Derson’s Quality and production planning people in


Aztec’s plant
Matching
Operations
Resources with
Market
Requirements
The company should go forward and accept Avoid a locked-in relationship Broker Future deals after the 3-year period
the deal keeping in mind to avoid traditional
contracts as well as vertical integration

Suggested Course of Action


Thank you!

Aztec Components Suppliers PRESENTED BY- GROUP 4
Aztec Plastic injection mounding manufacturer for domestic appliances For 20 years focused on few large customers In the p
Proposition from Derson Corporation Aztec to become the sole supplier for Derson Co. as a part of 3-year deal Produce a w
Understanding the Proposition •Low transaction costs • Higher frequency of operations • Involvement of highly specific assets
What this means for Aztec Increase the variety of products by 40% Total sale increase by 5% Loose the capacity to support
Pros Old machines already need to be replaced Investment is not an issue and the deal has high ROI Help from engineers of Des
Cons Loose other customers and difficulty in attracting them again in future if necessary Increase cost reduction from curre
Matching Operations Resources with Market Requirements
Suggested Course of Action The company should go forward and accept the deal Avoid a locked-in relationship Broker Future d
Thank you!

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