Problem Identification

Good evening everyone let me introduce the problem in this case.

In late 1977, executives of fisher-price toys consider to change the company's method of distribution in the Benelux market. The marketing manager-Europe presented three options: the first one was to continue with independent distributors like before, one in Belgium and one in Holland, the second possibility was to set up a company-owned sales company as soon as possible, which would require about a year to accomplish and only take effect in early 1979, the third one was a compromise between the two extremes. It was a "phased takeover", in which the distributors would be asked to switch over to a commission arrangement during 1978. Fisher price would take over the top 90 accounts in the two countries and service them directly in 1979; the company would start operating its own warehouse and office in 1980; and finally in 1981 it would establish its own sales force.

Next is the problem of fisher price in Benelux market. Both distributors were free to set their own selling prices, but as a practical matter had little latitude. Retail selling prices for fisher-price products were well established and discounting from these prices was rare. Neither distributor had spent anything on advertising for fisher price products, nor had fisher price itself advertised in the Benelux countries. Fisher price's major competitors all utilized independent distributors in the Benelux countries and in most other European markets.

If fisher price moved immediately to set up its own sales company, or if it proposed to shift to a commission arrangement and was rejected by the distributors, the company risked exposure to substantial legal liabilities. In Holland, the problem was not important, all that was required to notice distributors one year in advance. However in Belgium, the situation was different. The law there required a manufacturer

...