Ankush Gangopadhay | Poulomi Roy | Anmol Jitesh Motta | Shubham Chopra

Southwestern Ohio Steel

BBMK CASE ANALYSIS

PROBLEM STATEMENT
In what ways can Dan Wilson, Vice President of Southwestern Ohio steel solve the
dilemma of whether to sponsor MATWORKs event or risk spoiling the valued
relationship with them by declining the offer.
Introduction
Southwestern Ohio steel, founded in 1945was established primarily to supply steel
to the General Motors plant in Ohio. It bought sheet or coiled steel from local
producers and then transported, warehoused, processed and resold the matter to
local users. It was mainly involved in maintaining inventory, breaking bulk,
intermediate processing and rapid and accurate delivery were hallmarks of the
company and had led to consistent growth and recognition as one of the industry
leaders in technology and service.
The company is now faced with a sponsorship request from Matworks, one of the
oldest and most valued custmers. They now face a dilemma whether to accept or
deny the request thus made by analyzing the various considerations at play and
maintaining the stand of being customer oriented.
The situation
The steel service Centre business was considerably competitive and generally
involved local players as the high weight of steel made cost of shipping high which
acted as a prohibitive measure limiting competition in a geography.
Given the above, large customers with established requirements were sought out
amongst customers for consistency that eased accurate inventory forecasts. Higher
gross margins could be justified by establishing customer satisfaction due to
servicing of customer service required. Average profit margin was 3% of sales.
Considerations
Relationships had been an important part of selling in the steel industry and Wining
and dining the customer, gifts, exchange of tickets and other free-wheeling was
rather common (though now it was changing) had been part of the cost doing
business. Matworks, at once was the largest customer of SOSLP and bought a bulk
of its raw material exhaustively from SOSLP. However, they were now facing difficult
times and hence their demand had significantly reduced. $2 million to $672
thousand).
The following aspects should be considered:
Relationship with Client:
If SOSLP is known to aid their customers and help smoothen the ups and downs of
the market. Taking the long term view had always been a core value of the company
and sponsoring the Matworks event would be to continue on those lines of customer
relationships and expectation management.
Cost of sponsorship
SOSLP allocates 1/100 of 1% of its sales into advertising and promotions.

The sales is 19944 was $25,00,00,000. Therefore, the advertising budet will be
(1/100*1%*25,00,00,000) which comes to $25,000.
For sponsoring an event at the Annual Sales Meet, the company will have to incur a
minimum expense of $15000(Golf tournament). The revenue earned from Matworks,
sales in 1993 was $6,72,000. A profit margin 3% entails profitof $20,160 (3% of
$672000)
Recommendations:
Sponsoring the Golf tournament seems feasible as:Profit is 4 times the investment in Golf tournament
The advertising budget is 5 times the investment in the golf tournament.
It will uphold the image of a co-operative supplier who values their long standing
relationships.