Confidential Letter - the Case of the Blazing Sofas

Résumé du document

I am the director of the Soft Cushion company which is specialized in the production of all kind of cushions. Our offices are located in Istanbul, and the company is owned by M. Salam who holds also many businesses in the textile sector in Turkey. The company was created two years ago and at this time, customers was exclusively Turkish retailers. Due to M. Salam and the success of our products line, we have begun to export overseas in Spain and Portugal. Today, the firm has a resounding success and we are negotiating agreements with German, French and English companies. Our products are medium quality and we offer one of the cheapest prices in the market. To prevent the mould apparition on the cushions, we introduce inside them pouches containing a biocide called dimethylfumarate. In the form of little balls, this process is very efficient, the chemical solution effectively kills the moulds during the transit phase and the price level of this product is very cheap. However, several hundred persons have been recently injured by the dimethylfumarate in England, Finland, France, Spain and Canada. Hurt customers have united themselves in class action to suit in court the responsible companies such Argos, Walmsley and Land of Leathern. The amount of the compensation claimed comes to £10 million, but the verdict has not yet been announced. Nevertheless, on 2009 March, the European Union commission has taken the initiative to ban the importation in Europe of products containing dimethylfumerate molecules used to avoid moulds.

Extraits

[...] For us, it seems to be the best alternative to choose. The manager team of Soft Cushion and me have so conclude that the best decision is to adapt ourselves to this legal development. We can namely not continue to use dimethylfumarate as we did it previously. However, this solution leads to a cost augmentation and I would like to have your feeling about this problematic. Finally, please remind that we have to take a decision as soon as possible because the law is already operative. [...]

[...] Obviously, the worst scenario will be the death of the Soft Cushion company. With the managers team, we have measured the risk of the potential solutions which could address this problematic. Here is the condensation of points that we have tackled along with our opinion for each one: Continue to export product containing dimethylfumarate, as we do it currently That seems to be inconceivable considering the new legal environment. The law is new, and the control level is going to be high. [...]

[...] Such augmentation shall lead to a distortion of the marketing mix. Use a substitution product less dangerous for the skin and eco- friendly, but 50% more expensive. The biocide account currently for of the sales price. (percentages given as example) From a legal outlook, this solution seems to be the most acceptable. By this way, the company activities become respectable regarding the European law, what ensure a more sustainable development. The price is certainly higher than the DMF price more) but actually, it represents only a one percent increase of the charge X .Furthermore, in addition to avoid justice problem, this solution is not harmful for the environment what sticks perfectly with the actual “green trend”. [...]

[...] Our products are medium quality and we offer one of the cheapest price of the market. To prevent the mould apparition on the cushions, we introduce inside them pouches containing a biocide called dimethylfumarate. Under the form of little balls, this process is very efficient: the chemical solution kill off effectively the moulds during the transit phase and the price level of this product is very cheap. However, several hundred persons have been recently injured by the dimethylfumarate in England, Finland, France, Spain and Canada[1][2]. [...]

[...] They complain and claim for a million compensation and the court should agree in the following months. Furthermore, the European Union commission has decided recently to ban the importation of product containing DMF, used as a biocide. The problem is that Soft Cushion uses the dimethyl fumarate as a biocide for the entire product sold in Turkey, but also European countries. This product has wide advantages for our business notably in term of effectiveness and cost, but it is very risky to continue incorporating DMF in our product. [...]