Case Study:
CROWN PULP AND PAPER LTD.
Bill Siddall had been promoted to the position of salesperson, and he was pleased when he received an order for nearly $10,000 for stainless steel fittings from the new pulp mill being built in his territory. Unfortunately, he quoted a price that was 40 percent below his cost.
“We have to honor the price quoted,” Bill insisted. “I know if you let me talk to Rory, he’ll let us raise the price,” replied Dave MacDonald, the Sales Manager. “Rory used to be the purchasing agent at one of my best accounts before he came to the mill.”
“No. You gave me responsibility for this account, and I want to build a good relationship with Rory myself. He gave us the order over two weeks ago. He can’t change suppliers now because he needs the material next week, and I don’t want to put him on the spot now because it would be unfair. Since this is our first order, I would like to supply it without any problems. We’ll get back the money we lost on this order many times if we can get their future business. This material is needed for a small construction job, and they haven’t even started to consider their stores inventory yet.
After much discussion, it was agreed that the order would stand, but Dave would call the fitting manufacturer’s Sales Manager, Chuck Knowles, as the two men were good friends.
“We need some help on that last order we placed with you. Bill sold it at 40 percent below our cost,” said Dave. “How could that happen?” Chuck seemed amazed. “Well,” replied Dave, “you give us a 25 percent distributor discount and we gave 10 percent to the customer due to the size of the order. What we forgot was to double the list price because the customer wanted schedule 80 wall thickness on the fittings instead of standard schedule 40. This was Bill’s first large inquiry and he made an honest mistake. He doesn’t want me to get involved with the customer, and I don’t want to force the issue with him, so I’m hoping you can help us on this one order. We expect to get a lot of business from this account over the next few years.
“I’ll split the difference with you. What you’re selling now for $0.90, you’re paying $1.50 for,
and if I give you an additional 20 percent discount, your cost will come down to $1.20. Can you live with that?” Chuck asked. “It’s a help. We appreciate it. We’ll see you on your next trip to our territory, and I’ll buy lunch.” “A deal. See you next month.” The conversation ended.
When it was over, Dave was feeling reasonably satisfied with himself, but he still felt somewhat uneasy. He promised not to call Rory, and he promised not to interfere with the account, but he still thought something could be done.
On Saturday morning, Dave went to the Brae Shore Golf Club. He was confident Rory would be there. Sure enough, at 8:00 A.M., Rory was scheduled to tee-off Dave sat on the bench at the first tee and waited for Rory to appear. Promptly, Rory arrived with Bob Arnold, one of his senior buyers. The three men greeted each other pleasantly and Rory asked who Dave was waiting for.
“Just one of my neighbors. He was supposed to be here an hour ago but I guess he won’t show.” “Join us. We don’t mind. Besides we might need a donation this fall when we have our company golf tournament. We’ll invite you of course, and we’ll invite Bill if he plays golf” “He doesn’t play often, but he’s pretty good. Beat me the last time we played. How is he doing at your mill? Is everything okay?” Dave asked.
“Checking up on him? Sure. He’s fine. He made a mistake the other day when he went to see our millwright foreman without clearing it through my office first, but he’ll learn. He’ll do a lot of business with us because we want to buy locally where possible, and you have a lot of good product lines. I think he’ll get along well with all 6f us as well. He seems a bit serious, but we’ll break him in before long. We just gave him a big order for stainless fittings a few weeks ago, but we told him to visit at ten o’clock next time and to bring the doughnuts.” “I know,” replied Dave. “Unfortunately, we lost a lot of money on that order.”
“Your price was very low. I couldn’t understand it because I knew your material wasn’t manufactured offshore. Did you quote the cheaper T304 grade of stainless instead of the T316 we use?” “No. We quoted schedule 40 prices instead of schedule 80. The wall thickness for schedule 80 is twice as thick, and the price should have been double as well.”
“Heck. Double the price. We’ll pay it. I’ll make a note on the file Monday. I know you’re not trying to take us and I can appreciate an honest mistake. At double the price, you might be a bit high, but you know we want to place the order with you anyway because you’re local.
Eventually we’ll want you to carry some inventory for us, so we might just as well make sure we’re both happy with this business.”
Q1. What is the company ethical issues?
Q2. What alternative actions can be considered?
Q3. What are the ethics of the alternatives?
Q4. What actions should be taken?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.