Office Supplies Case Study

Office Supplies Inc.

Shahla Vasquez, marketing manager for office Supplies Inc. must decide whether she should permit her largest customer to buy some of OSI's commonly used file folders under the Customer's brand rather than OSI's own FILEX brand. This is not the first time that Business Center has asked OSI to produce a file folder line for Business Center. In fact, Business Center not only continued to buy the file folders but also the rest of OSI's product lines. And total sales continued to grow as Business Center built new stores. Business Center accounts for about 30 percent of Shahla's business and FILEX brand file folders account for about 35 percent of this volume.

Shahla has a real concern about the future of the local stationers business and some are seriously discussing the formation of buying groups to obtain volume discounts from vendors and thus compete more effectively with Business Center's 150 retail stores, the large regional and the superstore chains, which are spreading very fast. They buy directly from manufacturers, such as OSI, bypassing wholesaler like Business Center. It is likely that the pressure from these chains is causing Business Center the desire to buy a file line with its own name.

None of Shahla's other accounts is nearly as effective in retailing as Business Center, which has developed a good reputation in every major city in the country. Business Center's profits have been the highest in the industry. Shahla is concerned that if Business Center brands its own file folders it will sell them at a discount and may even bring the whole market price level down.

Shahla is having really hard time deciding what to do about the existing branding policy. OSI has an excess capacity and could easily handle the Business Center business, and she fears that if she turns down this business, Business Center will just go elsewhere, and its own brand will cut into OSI's exisiting sales at Business Center stores....