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Petersen Pottery

In: Business and Management

Submitted By ivachamp
Words 1522
Pages 7
11/15/2011
Reichard Maschinen, GmbH

Executive Summary Reichard Maschinen, GmbH case is set in Western Europe in 1974, just after the Arab oil shocks of 1972 and 1973. National borders were still very important business barriers. But, the concept of open trade borders was beginning to grow. In June of 1974, Mr. Kurtz, managing director of the Grinding Machines Division of Reichard Maschinen was considering how he should handle a meeting that afternoon that would involve his sales manager, his controller and his product engineering manager. The meeting concerned the introduction by a Belgian competitor, Bruggeman Grinders of plastic rings to take the place of steel rings which were a standard component in many grinding machines, including many of the machines made and sold by GDM. The new plastic rings, which had only been introduced in April, not only appeared to have a much longer life than the steel rings, but also apparently were much less expensive to manufacture. Mr. Kurtz’s problem in responding to the new ring was complicated by the fact that he had 25,000 steel rings in inventory and 26 tons of special alloy steel purchased recently for the sole purpose of making more rings. He knew that his raw steel could not even be sold as scrap because of the special allows in it. He had been required to buy a full year’s supply in order to convince a steel mill to make the special product. Overall, he was holding about $93,000 worth of inventory related to steel rings.

Case Analysis
Issue of the case
Facing the introduction of plastics rings by one competitor, Bruggeman, Reichard Maschinen, GmbH (RMG) needs to decide 1) whether they will start to produce plastic rings and 2) when to start the production, if needed.
Incremental cost analysis For the short run, RM has the following three alternatives. We will propose to limit the time span

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