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OVERVIEW

This case study is regarding a Taiwan based company named as PLASTICS R US LTD(PRUL).Mr. David chung is the president of PRUL .PRUL was established in 1983 withthe capital of TW$8.5million.from the last ten years and more PRUL is manufacturing plastic products which includes folding doors, bathtub covers vertical blinds etc. PRULexport its product to Japan, Europe, and to United States. The mission of PRUL includesthe innovation of products by aligning it with customer needs and satisfaction that is whyevery year almost 2 products are introduced in product line of PRUL.

In this case only the production of bathtub cover is discussed .As bath tub cover is one of the products manufactured by PRUL and in the market of bath tub cover the other competitors of PRUL are Murakami, nakajima, tkahashi, Nakai and others. Among of 

them Takahashi,Nakai and ABE is the distributer of PRUL.PRUL has business to business relationship it means it does not sell its product directly to ultimate consumer.PRUL market share in bath tub cover market is 15% and it wants to increase it from 15 to30 % in coming 3 years. Takahashi who is one of the competitor and distributer of PRUL proposed Mr.chung to jointly setup a factory in China to manufacture bathtub covers andto export them to japan. By doing so labor cost can be reduced and Takahashi can saveimport duty of 3.9% from Taiwan to japan.

Mr.chung is considering Mr.saijo proposal actively because PRUL is the highest pricecharger in bath tub market that could be a problem for PRUL in future, and by doingexpansion they can reduce overall cost but there are some risk also associated with this

 proposal.

After conducting some meeting 3 options are available regarding this proposal which are:

1. Turn down the proposal and expand as needed in Taiwan

2. Invest with Takahashi in building a new factory in china to produce bathtub

covers exclusively for takahashi and share profit based on the investment share by

each party.

3. Invest in building a new prul factory in china to produce bathtub covers and sell

them to all japanese customers without exclusivity.

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ISSUES

Following are the issues faced by the PRUL:

The labor costs in Taiwan were quite high and as the assembly line for the bath

tubs could not be automated so it was facing difficulty in competing on costs.

PRUL’S wanted to expand its business by improving its production efficiency

If it goes for a joint venture with Takahashi then there will be no confidentiality

of PRUL business.

As the political conditions were not stable so if PRUL went to china then there

was a great chance of blockage of funds.

When the products are imitated by the PRUL’S competitors then it had to offer 

 price discounts in order to maintain its market share.

DISCUSSION

As the production cost of PRUL is high in bathtub covers mainly due to labor cost so if 

PRUL accept the proposal of Takahashi the production and labor cost can be reduced andTakahashi can save import duty of 3.9% on export from Taiwan to Japan.

PRUL wants to expand its business by improving its business efficiency .PRUL can do it

  by transferring production of bathtub covers to new plant in china.PRUL can also

compete with existing manufacturer of bathtub covers in china who are enjoying cost

advantage.

Although there is a risk of sharing privacy with Takahashi if PRUL commit joint venture

 but the advantage is also there that is political clashes among china and Taiwan that can

 be reduced due to presence of Japan.

Now after seeing all things Chung had to make decision which is very either to go for this proposal or not. He has 3 options

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Turn Down the Proposal

The first option which he has is to turn down the proposal of Takahashi and leave thisinvestment and do expansion of his plant by staying in Taiwan. If PRUL do so itsrelationship with other customers who are distributers of PRUL will remain good but

with Takahashi it can be nastiest. PRUL won’t be able to achieve its objective of increasing market share.Joint Venture

The second option which Chung has is to do the joint venture with Takahashi by buildinga new plant in china and producing bathtub covers over there exclusively and to share the profits on the basis of amount invested by each party. By doing so the burden of investment will be divided among Takahashi and PRUL and PRUL will be able toincrease its market share from 15% to 30%.The major advantage would be the reductionin political clashes due to involvement of Japanese company but PRUL have to share privacy with Takahashi .Takahashi bargaining power can increase. The other flaw in thisoption is PRUL’s potential sales can decrease because Takahashi can say that not to sell

 bathtub covers to Nakai and other distributors as they are the competitors of Takahashi.Invest In China Solely

The third option which Chung has so to invest in china solely,by doing so it can save itsimport duty of 3.9%. Chung believed that he can still achieve his objective under thisagreement because Chung is confident that it can attract more new customers in china byhis vehement market position. If company alone invests establish factory in china then ithas to produce all bathtub covers in china with no reduced cost. By this the returns of PRUL will increase but risks will also increases. Takahashi may get annoyed on therejection of proposal. There could be a threat from Chinese Government.

RECOMMENDATIONS

We took a deep view of a case and analyzed all options that were available to PRULCompany with the reference to external and internal environment threats andopportunities. So after examining the each and every option we have reached at aconclusion and have certain recommendation with us.So here we are going to suggest third option which was PRUL Company should invest

in china to produce bathtub covers and sell them to all Japanese customers without

exclusivity. We are recommending it on certain grounds which are given below:-

Reduction of cost via import duty of 3.9%

PRUL Company would get itself safe from import duty, in joint ventures it was infavor of Takahashi but now PRULS can take benefit of it.

Opportunity of making new customers PRULS has opening to create new customers because he has good reputationglobally.

Sustaining old customers For PRULS it’s relatively easy to sustain old customers as the companyintroduced every year two new products to product line.

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Gaining trust of new customers

Gaining trust of new customers would be easy as it is written in the case thatPRULS get international organization for standardization (ISO) 2009 certificationfor total quality control so it’s easy to attract additional customers with little moreefforts.

Share of profitsPRULS would invest solely than he would be sole owner of profits this is other thing that he will bear all the risk. But this 100% share could enable him toincreases share from 15 to 30 percent.

Chance of growth

As this company is growing, and shangai has a pretty good figure of population sothere is potential in new market.

Low labor cost

It seems more attractive to produce in china due to low labor cost. Attitude towards imports

If we go for any other option than we knew it Chinese’s have negative attitudetowards import so if PRULS produce in china then people would tend to buy that product. But if PRULS would produce in Taiwan then it can’t grow further.

IMPLEMENTATION

After entering in the Chinese market PRUL would be able to know about the

needs of Chinese people and its market can be expanded.

As China is now moving toward capitalism so political risk is now reduced

Relationship with other distributers as well as with Takahashi can be maintained

 by doing meeting with them and realizing them that they are important.

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