Ace Brokerage Company

Group 6 1. Manoj Gupta (25NMP27) 2. K.K.Tiwari-(25NMP50) 3. Ram Awtar Anand (25NMP52) 4. S.K.Sharma-(25NMP53)

Context
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 Morreauxs request or refuse it.

Distribution Channel
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%

Food Processor & Manufacture

Food Brokers

National Super Market Chain

Local Chains

Local Cooperatives

Morreauxs 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 Companys request to develop institutional business. How can Ace keep their strong Relational Exchange relationship with Morreaux, while achieving their own business objectives and interests

Analysis
Situation Option-1:If they reject the proposal Pros Concentrate on the area of expertise that is retail grocery Save on expenses and avoid further problems that come with the new market Cons Morreaux may find new partner which may mean loss of market share for Ace 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 Increase in commission, profits and market share. Additional business Amount of time and money to start up new department Inexperience (management capabilities) may lead to failure

Recommendations
Ace Brokerage Company will accept the Morreaux Sugar Companys 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 Aces commitment to good service and quality to all of their clients and to all those they represent.