Question

Marriott currently buys its ice machines from a manufacturer in China. A representative from a company in Vietnam is offering to sell them for 20% less than cost from the manufacturer in China. Discuss the issues that you would consider in deciding whether or not to accept this offer.

Answer 1

Issues to consider whether to accept such offer or not?

1. Price: The seller offering lower price than another shall be selected as it will directly save the cost for company . Hence the country offering least price shall be selected.
2. After Sales Services: Product after sales services are as important as the price of product. Assuming a dealer sells the product at cheap rate but does not provides after sales services is not recommendable at all.
3. Currency: As there are two countries involved ie China and Vietnam, we shall also consider the exchange difference with the domestic currency. As it is possible that money saved in discount may be less than loss incurred due to exchange fluctuations.
4. Foreign relations: As we are purchasing the asset from foreign countries, the foreign relations of domestic country with such foreign countries shall alse be considered. Normally china’s policies are Anti-US but vietnam policy is US friendly. Hence it may provide advantages over the asset bought from china.
5. Quality: Quality of asset under consideration to be given due importance. As company’s future is dependent on sales/services provided with the help of such Asset, quality of product should be Top quality and in accordance with the industry Benchmarks.