Memaksa Steel, an Indonesian steel products manufacturer, has recently developed a new finishing process that reduces the wear time on steel by 60% for products that are subjected to intense abrasion during use. The marketing department believes this innovation should be applied to steel saw blades for use in Indonesia’s lumber mills. Saw blades manufactured using this new finishing process would sell for 35% more than the older blades and drastically increase the cutting time before needing replacement. Santi der Majoido, the CEO, must examine the channel structure and decide whether or not to launch the new product.
This case is best used as an introduction to distribution channels as it highlights their necessity in bridging the gap between production and use in an industrial setting. As such, it is also applicable for classes on new product introductions and industrial business-to-business marketing. This case introduces the concept of the intermediary, such as distributors and outfitters, and the functions they perform, as well as the financial model, for example, the implications of discounting off the final suggested price.
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