Ace Brokerage Company

Group 6

1. Manoj Gupta (25NMP27)

2. K.K.Tiwari-(25NMP50)

3. Ram Awtar Anand (25NMP52)

4. S.K.Sharma-(25NMP53)

Steel City is unique market for supermarket industry for food and processors and manufacturers and 80% of retail grocery sale through locally owned chains and cooperatives

Ace Brokerage Company is a large food broker located in Steel City, Alabama.

John Kline is president of the Ace brokerage company and concentrated on supermarkets in Steel city and never be in institutional distribution.

Ace represents the principal Morreaux Sugar Company now has a 70% market share of the retail grocery market in sugar sales.

After some time the away-from-home eating market has started to increase with one third of all meals consumed in the United States being away from home and about one-half meals consumed away from home being projected by 2005.

Morreaux has requested to Ace to put more emphasis on institutional business.

Kline now has to make the decision on whether to consider Morreaux’s request or refuse it.

Context

Distribution ChannelFood

Processor & Manufacture

Food Brokers

Local Chains Local Co-operatives

National Super Market

Chain

•More than 20 food brokers in the Steel city area. Ace Brokerage is one of three largest with commission $500,000 p.a.•Ace represent 25 suppliers and 25 manufactures•Over $80,000 comm come from Morreaux•Dependence of Brokers to market penetration•Ace Broker commission 1-5%

Morreaux’s Concerns

• The potential failure of Ace to solicit wholesale institutional distribution

• Lost sales• Growth of the away-from-home eating market.• Levelling off of sales in the Steel City area for

their 70% retail market share (with no substantial real growth projected).

• Distribution capabilities to interested restaurants.

Ace functions• Ace has 10 field personnel who:• Visit individual stores to help with counting stock• Replenishing shelf stock and help in display• Visit buyers periodically to present new products• Take orders• Give feedback about market change to suppliers• Ace also maintain small warehouse to meet

emergent requirement

Identification of the Problem

Ace Brokerage Company has to decide weather they should consider or refuse the Morreaux Sugar Company’s request to develop institutional business.

How can Ace keep their strong ‘Relational Exchange’ relationship with Morreaux, while achieving their own business objectives and interests

AnalysisSituation Pros Cons

Option-1:If they reject the proposal

Concentrate on the area of expertise that is retail grocery

Morreaux may find new partner which may mean loss of market share for Ace

Save on expenses and avoid further problems that come with the new market

Refusing the option may limit further growth and sales potential

May destroy the ‘Relational relationship’ with Morreaux

Option2:If they accept the proposal

Further strengthens relationship

Amount of time and money to start up new department

Increase in commission, profits and market share.Additional business

Inexperience (management capabilities) may lead to failure

Recommendations Ace Brokerage Company will accept the Morreaux Sugar Company’s

request to develop an institutional trade. With the growing trend of “away-from-home eating”, it would be wise for Ace to take advantage of that opportunity and market.

Although start-up costs may be expensive, it is a necessary investment for the future growth of this company.

This decision will also further develop the strong relationship that Ace has built over the past 4 years with Morreaux and gives Ace the opportunity to achieve its organizational objectives through demands of its own (increase in commission rate, etc.).

This decision will uphold Ace’s commitment to good service and quality to all of their clients and to all those they represent.