Professional Documents
Culture Documents
Professor Long
2/4/2011
I. Introduction
Fe'nix del Sur is a company, which sells South American and African antiquities.
It is also a source for Southwestern Indian authentic jewelry and pottery. The company is
located in Phoenix, AR. Fe'nix del Sur originated as a trading post in the early 1900's. It
was the leader in authentic Southwestern jewelry and pottery yet now has expanded to
sell pre Colombian artifacts from South America and burial artifacts from Africa. Fe'nix
del Sur has established itself as one of the most respected sources of these artifacts.
In 2001 the company started selling replicas along with its authentic products.
The replicas are so good that only a true collector would know they were not authentic.
The company now has craftsmen in Central America, South America, Africa, and the
Southwest. To this date, replicas only account for a small portion of the company’s total
revenues. The company didn't want to initially expand into replicas but the firm’s clients
were demanding a larger product line. These items are usually purchased by gift buyers
The company’s gross sales are about $25 million and its profits have been steadily
increasing by 20% over the past decade. Attributed to the popularity of the companies
product line and expanded distribution of South American and African artifacts. The
Problems the company is facing are the rarity of the real artifacts and political
instability in certain countries. To the first point, there is a very limited supply of real rare
artifacts to be found and sold so it is hard to keep up with the demand. Second, political
unrest makes it hard to even get into a country to export the goods the buyers have found
and purchased. Some governments are restricting the export of certain artifacts due to
Another problem is that the competition for authentic artifacts has raised 10 fold
in recent years. A decade ago there were only 5 major competitors for the company, now
there are 11. This has forced the company to add three additional buyers in the past two
years. The company’s gross margin has slipped due to aggressive competitive bidding by
others.
The retail competition has become harder as well. Some of the company’s larger
and exclusive department stores have been sending out their own buyers to deal with
Fe'nix del Sur's own contacts in foreign countries. This is forcing the company out of
Smaller amateur competition is also eating away at the company’s profits. These
amateurs come into a city and dump inauthentic junk on the market at exorbitant prices,
Another problem is Internet sites, which sell authentic goods. If you Google buy
African artifacts, dozens of pages come up with ecommerce stores that sell both authentic
and replica artifacts. The problem is counterfeiting. 90% of what is coming into the US
The problem recently other than the Internet is that several mass merchant
department stores have started to sell similar merchandise. These stores sell a mix of
replicas and authentic items. The stores were selling the items cheaper than Fe'nix goods
were sold for which again eats away at the company’s profit margin.
A mass merchant store contacted the company in 2009 asking to sell a large
product line. The store said they would pay 10% below the companies existing prices
and the purchase would be for no less than $750,000. Purchases were expected to be 4
million annually however, to satisfy the contractual obligation, the company would have
to triple its replica production. Accepting the contract would have a severe impact on
how the company defined its business. The real question to be asked is: Do they want to
be an authentic antiquities supplier and reject the contract or be a cheap replica supplier
There are really two possible choices to this fundamental question. Either accept
or reject the proposed contract. Accepting the contract comes with some advantages. If
they accept the contract there is a possible $4 million dollars in additional revenue for the
company. They would also be broadening the company’s position into replica artifacts.
This would also cause the company to expand their reach into other department stores
Some disadvantages are the possibility of loosing current dealers that only deal in
authentic antiquities. The company could also loose customers that held the company at
a certain standard. If they started mass-producing replicas then picky customers could
Rejecting the contract would have its advantages and disadvantages as well.
Some advantages being keeping their relationships with current dealers preserved.
Another is keeping their current customer base happy. Finally they can keep their name
intact of being a company that deals in highly sought after authentic antiquities.
$4 million in sales. They will also not expand their reach to a new audience and expand
IV. Recommendations
While the idea of broadening the company’s customer base and increasing sales
by $4 million dollars sounds promising, the fact that the company has a gross margin of
$25 million should not be ignored. Also, the company’s business has been steadily
growing by 20% over the past decade. To totally transform how you do business when
you have a working business model seems silly when some simple adjustments could be
made like increasing the company’s presence on the web and re-branding the company to