Precision Worldwide Inc. manufactures steel rings, which are used in certain machines. French firm Henri Poulenc competitor of Precision Worldwide Inc is introducing a plastic ring, which is a substitute for the steel retaining rings. Hans Thorborg, general manager of Precision Worldwide Inc. is worried because the plastic rings not only have a longer life than the steel rings but are also manufactured at a lower price. PWI has a large quantity of steel rings and substantial inventory of special steel. In a meeting, the general manager, the sales manager, the accountant and the development engineer discussed the possible problems and alternatives for this problem.

For PWI, manufacturing plastic rings was defiantly the best solution for the problem but they still wondered what they would do with the inventory they had. According to the sales manager, customers new about the new plastic rings and were asking if PWI was already selling them. The development engineer calculated that the plastic rings could be by mid-September. The sales manager thought that since the plastic rings could be produced at a really low cost, the inventory problem was irrelevant. He suggested that if the steel rings couldn’t be sold they should just throw them away. Another problem was that Henri Poulenc was selling the plastic rings at the same price that PWI was selling the steel rings. Not manufacturing the plastic rings would be like ignore a considerable profit margin.
In the meeting they concluded that the company was going to manufacture the plastic rings but they were only going to be sold on the markets where the competitors were selling as well. They would finish the steel inventory on the rest of the markets.
Patrick Corrigan, from the parent company agreed on manufacturing the plastic rings but that something needed to be done with the steel rings. Henk, the sales manager