Case Analysis on San Fabian Supply Company

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Case Analysis on San Fabian Supply Company (Philippines)

The San Fabian Supply Company is a building materials distributor which supplies the materials to the Philippine construction industry mainly on an exclusive-only basis. Now one of its suppliers MacDowell Corporation notified San Fabian Supply Company that the exclusive-distributor agreement would be terminated in four months. So the company has to make a decision whether to handle MacDowell Corporation’s products on a nonexclusive basis or to drop the line completely. As discussed in our group, we think San Fabian Supply Company and MacDowell Corporation should find a way to accomplish win-win, and selective distribution may be a good way.

The San Fabian
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If San Fabian Supply Company drops MacDowell Corporation’s product line completely, it will lose the profit of 833,130 pesos, which accounts for 13.75% of the total net income (6,058,000 pesos). For the case in San Fabian Supply Company, the overhead is 17% of the sales of MacDowell Corporation’s products. Take sales in 1986 as an example, the profit is for selling MacDowell Corporation’s products is calculated as below:
Dealer Sales: 9,768,000*(-2%)=-195,360 pesos
Retail Sales: 13,715,000*(20%-17%)=411,450 pesos
Government Sales: 20,568,000*(20%-17%)=617,040 pesos
Profit: -195,360+411,450+617,040=833,130 pesos
Since it is difficult to sign exclusive distribution agreement with other Cement-Based pressure pipe, corrugated sheets, and flat sheets with manufactures, and there is not suitable substitutes, the span of San Fabian Supply Company’s product line will be narrowed a bit, which probably will make customer satisfaction a bit down and the company’s image will be down as well.

If the MacDowell Corporation takes upon itself the wholesale distribution role and participates directly in large commercial and government projects, and the San Fabian agrees to be a non-exclusive distributor in the Philippines, it will not be a good news for