--*<'
Bostcn Electronics and Nueleonics corporatiom
Nrtcleonics Cor1rot'ittiott ,rt'An',"ì'ica i.s tlre'pripre c6ptrrìctor fì,. t6e
U.S. Air frtlt'cc's Creyh<ltrntl nri.ssile. The conlrpnny 6a.s relie6 Setrviiy
tltt sttlrcotrtrilctor.s in tlre rlevelopment ancl rntnufricture of the *rissile,
Itttrl itlrtlrrt fi5 Lxlt'(!()tlt ol'tltc srrlus tlollnr i..t {irr,
lllryc,ltlrsgtl t,6rrrgr6rtlrrts,
lrr tiru eirrly stitge.s ol'the rtri.ssile'.s .l"r*t,rf,nept, w6ep Nrrcleo*ics lr^rl
itrr Ait'Iltlrctl l'tlr-eitl'clì itttcl tlevelopnrent contrnct, the 1lorp1:irrry rlirl
tr
gt'eitt rleal ol'ctltitrtrctitìg olì it cosi- pf ,rr-n*",i-fa" bir.sis.'l-hese
cr>,trrrcts^
\\'(ìl'(' c«rttvtlt'tetl ttl llrice rerletenninttion as soorr ts .strppliers ktlerv
ctttltt.t4h itlrottt s1:ecilìcutiorr.s to qtrote rerrsonrrlrly reirli"^ticllrices. 'r
Norv rìrany strpPliers hirve lirrcl sq{iìcient experience to ìre rvillipg to
rltttlttt ()ll il [ì.terl"ptice llnsi.q, nnd the]nruter,ills rllllll1ger, I\,1r. Srvl*.
llr.)ttt'tle, l>uys it nttt'nber of'snrirll cor-nponerits rt fixecl prìt"u. I-I6wever,
lre lllel'els to ctltttitttte to lltry the nràre conrplex itepr.s o1 tr 5*sis tllrrt
l)ct'llrits priccs ttl Ite recletenlrined perioclic*lly lly either.pnrty. I{e
believes the.se itenrs nl'e .so slrecializÀcl ancl liis strppliers now lrave so
'- -++x.uel+-e+ttleFbl+cx] witli tlterrr tlint no conrpetitor could srrcce**fi,liy
Plotltrce thenr at lower cost. As fle.strlt, ii'supplier.s were rr,,,varclecl
[ìxetl-plice cotltt'rrets nfier conriretitive iriikìirìi, they ..o,,tA easilf
chiuge Prices high euotrgh to eliu 'ratrrer exor.hiì,i,-,t prnfit.rTliis i.s tnre evelì of sonre reratively si:lpie p,r,ir, É,r,1 *rn,r:1:Je,
lJostort Electlortics ttritkes a specitrl re.siitor ,rs".l in the rpis^sile's
illìce s1,,'stellt. "lìllet'iltrces ot1 tltis re,sistol'are extremely tiglrt, *ritl ,{iiiatrt ffrst
lltc corttlrrtrly lrittl n {ìriltrrsticnlly higli;r-ct'iì}) r'itte. At teast li)0 resistrlrs
\v(iIc lc'iectetl iirr cvery orìe itccepteil. 'l-lre colllpirrìy accepterl it.s fir.st
ot'tlet' lilr'2,(XX) resistot"r^ nt $6 e,rcli, with
1:r'ice rerleter-nrirrirtion" After it
crlttlPlete<l lrrrlf-o{'this orcler, tlre conrp,,,ly sulxnitte4 t6e fof fn*i,-,s;";;
I>reirkqloryu nnrl t.equel;te(l I new price;
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fulitrrrrlìrr:ttrring ovcrlrt:arl . ,.
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'tirtrrl rrrirrrrrt'rrr:frrr.irrg
trrt! rrrlrrrirrislrirtivc
'!ì;tirl ccst
s-rtlcs
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L.xprJltries
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Nrrcleonics' niilterials rlirnitger' wrts 1:trrticutrrrly shockeci lty Bos'
ton's enorlllor.rs overheacl chitrge. Boston's .sales matìttget' explainecl
thnt tlrese chirrges incluclecl the cost of sclap thrrt had beeri rtrn. A[tet'
strbstiurtinl negotiation, Ntrcleouic.s fìntll1,{lgreetl to pily i}oston $11.94
lor the seconcl Ìrrrtch of I,000 resistors provicìed thtt Eostorl weuld stick
to rr 1:r'ice o{'$6.00 lbr the lìrst brtch. l}oston a§reetl, .qince it l>elievetl it
hrirì lirrrrlrl ii u,ny lo redrrcu i[s sct'np sttilstrtntinlly,
' While lSostorl was cortpleting tl^ris oxler, Ntrcleonics got nn extetrsion of its lrrinre corrtrtrct frour the Air Force. lt plnceci atr or<ler rvith
Boston for arn trclclitional 4,000 resistors. The orcler wiìs irrieecl tt $6
rvith n recletemriniltion clruse. Calculrrting thrrt Bostor shoulcl be glining rtcklitional exper:ience ancì shoulcl be reclucing costs, Nucleonics'
nrrrteria]s illiìnager clecicled to invoke the recleterrninirtion clarrse nnci
rLìoperì price riegotiirtiolls on ihe seconcl ot'cler'.
In trccordiìtlce rvitl-r the provisior-r.s o{'t}re clituse, Bostoir subnrits the
fìrllorving rurit crtst lrre:tkrlown for tlre finnl Iot of I,000 pieces rnrcie orr
tlre irritirrl llrrrtirrctiort oltlcr:
il
lrtirtcriirl
s
Lnlror
Ìt'lrrrrrrlhctuì'ing ovcrlrerul . .,
'IÌrtitl rrrirrrrrfitctrrring cost '.
Srrles arrrl arln'ririistrttive exferr.ses
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$0.87
1.05
2,25
....
T0tirl eostr rrrr rr rr rrrrrrrrr rrrrrrrr rr rrrr
fi4.17
0,21
$4'38
Bostorr srrggests that since the seconcl orcler will be nranufactrrrecl in
Iots o{'2,000, it cirn tr{Iorr.l to recluce its price to $4.85 ancl still rntke n 10
percent 1:rofit on sales. It regrets that it cannot r-nake any lìrrther price
recluction becirtrse its ;,^trppliel's rìre increrrsing prices ancl so rrirrterirrls
costs will rise by 2 cents per resistor. In adclition, Boston recently
negotirrted a nerv trvo-year coritr:.rct witlr its trnion thnt crrllecl for lvage
irrcreirr^es of'30 cent§ per lrour. Iloston's cun'ent iìver'ilge wiìge is $5.30
per hotrr,
Boston Electronics and Nucleonics Corporation
Questions:
1.
How likely is that Nucleonics accepts Boston's offer of a $ 4.85
price?
2.
What price would be reasonable based on Boston's current costs,
its projected increases in cost, and the experience it has gained,
based on an BA% learning curve? (Provide and excel file with
them)*
3.
Did Boston Electronics use the best disclosure strategy in the
relation with Nucleonics?
4.
What relational strategy would it be best from Boston point of
view in order to strategically manage the relationship with
Nucleonics?
5.
What kind of purchase orientation did Nucleonics used with his
suppliers?
o for reference about the learning curve
o
.
.
see,
among any other possible sources,
http://www. d ire ctiv e s. d oe. q ov/p dfsld oe /d o e texUn ew or d / 4 3 0/q 4 30 1 -
1cllp2l .pdf
http://cost.isc.nasa.qovllearn.html
hftpt/www1 -isc.nasa.gov/bu2/learn.html