Mission Rubber Technologies

| September 19, 2018

Subject: Case Preparation Assignment: Mission Rubber Technologies

The class will be discussing “Mission Rubber Technologies Corp.” It is likely that the material that we develop as a group will become the basis for our midterm exam, which will be held on October 4th.

To insure that all students are prepared and that our discussions are vigorous, I am assigning some written preparation for you to bring to class. This will be collected on the first day of discussion, and will be graded. Please prepare typewritten answers to the following questions.

Additional facts about this case:

1. CHP is believed to be close to a long-term contract to supply parts to Medit, a giant construction company with excellent government contracts in southern France and nearby Euro countries.

2. Mission’s price for the coupling in questions (PT40) is $1.26, FOB, Los Angeles. The target gross margin for exports is 30%

3. Mission has a reputation for high prices in the US, and running the factory below capacity limits will raise costs even further.

4. International sales missed forecast for 1Q03 by 7%. 2Q03 forecast is $4.3 million, but early customer response is not encouraging. International sales are now 20% below target.

5. Key account sales force compensation: 70% salary, 15% bonus on sales quotas, 15% bonus on profitability targets.

6. In 4Q02, Mission’s sales to CHP were $83k – 18% of CHP’s flexible couplings purchases.

Questions to answer:

1. Summarize this case in five sentences.

2. What is the major business issue facing Mission Rubber at this juncture?

3. Prior to negotiations, what price will you ask for each unit of PT40?

4. What is the highest price you think you can get for PT40 (explained)?

5. What is the lowest price you would accept for PT40 (explained)?

6. What is the highest price you believe CHP will accept (explained)?

Please be sure that your answers are justified by solid consideration of the case material. Please do not wander outside of the material, nor assume facts not included. Outlining your answers on a single sheet of paper is perfectly acceptable. Brevity, as always, is encouraged, but not at the expense of thoroughness. I am available by email if you find yourself ‘stuck’ on any of these issues. As usual in case discussions, there are no ‘right’ answers or ‘wrong’ ones. What matters here is YOUR answer, and the consequences we’d face if that answer became a decision.

Feel free to study collaboratively with your classmates, but your written submission must be your own work alone.

It is necessary for you to bring your CoursePack, notes, and a calculator to these discussions. I will be grading your participation in class.

Good luck!

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