Firm plans to expand current distribution network

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Question

A manufacturing firm plans to expand the current distribution network. The manager of the firm considers whether to extend a long-term contract with the current company who has done business with the firm in the past and whose distribution system reaches 60% of all potential customers. The second option is to sign a one-year contract with a new distribution company. The new company used to reach only 30% of customers, but they claim that they have invested heavily over the past year in distribution resources and now expect to be able to reach 80% of customers. The manager is not that sure about the new company's claim and give them about 50% of trust. If the new distributor still covers only 30% in year 1, however, the company can switch back to the familiar old distributor. The manager of the firm wants to develop two-scenario plans: 3-year and 10-year planning horizon. Which distributor should the manager choose for each plan? Show your analysis.

Reference no: EM133960124

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