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Case 7

CATCO Electronics Corporation is a multinational firm that produces medical computers and electronics. While it operates globally, CATCO can be considered a monopolist in its control over freight charges due to its large account size. Speedy Cargo is a small local cargo carrier that provides quality service to CATCO. However, Speedy Cargo argues it is not being adequately compensated by CATCO given its current rates. Maintaining the business relationship with Speedy Cargo benefits CATCO's just-in-time delivery system but results in added costs without incentive from the parent company. If rates are not increased, Speedy Cargo risks insolvency due to rising operating costs.

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1K views2 pages

Case 7

CATCO Electronics Corporation is a multinational firm that produces medical computers and electronics. While it operates globally, CATCO can be considered a monopolist in its control over freight charges due to its large account size. Speedy Cargo is a small local cargo carrier that provides quality service to CATCO. However, Speedy Cargo argues it is not being adequately compensated by CATCO given its current rates. Maintaining the business relationship with Speedy Cargo benefits CATCO's just-in-time delivery system but results in added costs without incentive from the parent company. If rates are not increased, Speedy Cargo risks insolvency due to rising operating costs.

Uploaded by

Wacky Larim
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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JASPER B.

MIRAL Managerial Economics For Cases 7, 5, and 2

Case 7: CATCO Electronics Corporation (USA)

1. CATCO: CATCO is a perfectly competitive firm for the fact that it is one of the multinational firms that provides medical computers and diverse mix of electronics products not just in Japan and USA but worldwide. In fact, they had the sales of two billion dollars all over the world. On contrary, CATCO could be considered as a monopolist because they can control the freight charge of their products because they knew that any cargo company cannot afford to lose such big account as them. Speedy Cargo: Although Speedy Cargo is just a local short haul carrier, they could be considered as a competitive firm in terms of providing quality services to their customers. Despite the fact that they do not have enough resources in providing their services, they always find means, any means, for them to be able to meet the requirements needed. Moreover, Speedy Cargo is not a monopolizer.

2. Yes, because, in spite of the good quality service the Speedy Cargo offered with CATCO, they were not compensated equally with the current rate they had. 3. If Speedy Cargo moves 91 containers in a month still the number of container in excess of 91 cannot cover its cost. 4. Additional operating costs for both Yoshi Kano and CATCO if they gonna change the budget figure, this is the fact. However, if this put into reality, Yoshi Kano could be able to comply with the JIT system which the parent company aims to implement, thus retaining Speedy Cargo is an advantage. While, on the part of CATCO Electronics, it is just an additional costs and parent company wont encourage. 5. With the existing rate, I supposed Speedy Cargo could not be able to survive or continue its operation. First point, the owner/operator drivers are asking for an increase, second point, with all the charges such as demurrage at the pier, trip permits and other, the Speedy Cargo cannot pay all these costs without asking for an increase from the CATCO.

6. If I were Yoshi Kano, I would approve the rate increase that the Speedy is asking for. However, I will make a deal with the Speedy Cargo to somewhat lowering a little bit the price as an increase. For instance, $110 instead of $125. Maybe this could be arranged with Speedy Cargo. Needless to say, with what the Speedy Cargo had done for the company I do believe that they deserve an increase. 7. If I were John Patrick, I wont gonna continue doing business with the CATCO. Though, the latter is a big account but the Speedy cannot put itself in to risky situation. Retaining a big account but risking the company is a big mistake.

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