I. Market Situation Analysis:
Lancer galleries are in a very exclusive business. Although their number of competitors has increased over the past few years, the number of competitors is relatively few. This is an advantage. Disadvantages are far more. For one, replicas and fakes are becoming a problem in the market. This poses a threat to Lancer, as many people are only purchasing artifacts for gifts and decorative items, not caring about the historic value, and would rather pay a cheaper price for practical purposes. Second, obtaining artifacts from over seas has proven harder over the past several years because of political situations and other reasons that limit supply. This makes true artifacts harder to get, therefore more expensive. Lastly, because of the recession and economic issues, buying African and South American artifacts is not as common.
II. Key Problem
Lancer Galleries must decide whether it will be a smart decision, but ethically and financially, to take the deal that was offered to them by a mass merchandise department store. The contract presents the opportunity to add $4 million in additional sales annually, however they would have to triple the amount of replicas they sell. They are torn by the opportunity to make more money, but the potential to ultimately cheapen the value of their business by selling fakes.
III. Analysis of Options/Alternative Strategies
Lancer Galleries has two options. They can either take the deal proposed by the department store, or they can decline and continue to conduct business as they always have. If they accept the proposal they have the opportunity to increase sales by 4 million annually (depending on consumer acceptance). The company would buy product at 10% below the company’s existing prices and its initial purchase would not be any less than $750,000. However, in order to accomplish this, Lancer Galleries would have to triple the amount of replicas they sell in order to have enough merchandise to sell. By increasing the replica sales, Lancer would be redefining the business, as they have always prided themselves on finding the most pristine and legitimate artifacts available. Lancer faces the dilemma of more money, versus sacrificing business values.
I recommend that Lancer does not accept the contract that was proposed. Right now their one advantage is that they don’t have many competitors. This is because they only sell legitimate artifacts and people trust that when they buy from them, they are getting a solid product. While upfront it may seem that they would be making more money, I believe that overall they would be cheapening their business by tripling the amount of replicas sold.