. Questions Question 01: Critically compare the four situations mentioned in the
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Question 01: Critically compare the four situations mentioned in the case and discuss how Pack Tech and its partners in each of the four case situations trust or do not trust each other?
Question 02: Besides trust, are there any other aspects of the business relationship between the buyer and the seller that make their relationship stronger or weaker?
Question 03: What common themes can be identified in all four situations as reasons for either the existence or absence of trust between the parties?
Question 04.: Does trust exist in a customer-supplier relationship?
Question 05: What do you think Riyaz should do about the UAE ink supplier?
INTERNATIONAL JOURNAL OF CASE STUDIES IN MANAGEMENT Volume 10 Issue 4 December 2012 Pack Tech, Dubai: Does Trust Exist in Business Relationships? Case prepared by Mohammed LAEEQUDDIN and Professor Kareem ABDUL WAHEED It's late in the evening. At his Jebel Ali Free Zone office in Dubai, Riyaz, General Manager of Pack Tech, is seriously thinking about a recent conflict with one of his local suppliers, who has been providing his company with printing ink for the past six years. His point of concern is about building and maintaining business relationships with suppliers and customers, and specifically about whether there is something called trust in business relationships. Riyaz has to decide whether to maintain the business relationship with the local ink supplier or find an alternative supplier locally. He feels that the issue between Pack Tech and its local ink supplier is a matter of trust and betrayal, as he recollects previous similar conflicts which led to the breakdown of long collaborative relationships with two of his key customers from Iran and Sri Lanka and one supplier from Greece between 2007 and 2009 Pack Tech is a family-owned, medium-sized, flexible packaging material converting company based in Jebel Ali Free Zone, Dubai. The company was started in 1997 and has grown five fold over the last 10 years. Today, it exports 70% of its products to 20 countries and imports its raw material from five different countries. Riyaz has been working with Pack Tech for the past 10 years as General Manager. He is a very committed and hard-working person and the company owners have great confidence in him and fully support him in all his managerial decisions The company produces two types of products, namely, 38 micron aluminium foil lids and 35 micron polypropylene film labels. Thirty-eight micron aluminium foil lids are used for sealing polystyrene, polypropylene and other kinds of plastic containers for yoghurt, fruit juice and water (Figure 1). Thirty-five micron polypropylene film is used in wrap-around labels for carbonated beverages, water and fruit juice bottles (Figure 2). To produce lids, Pack Tech purchases 38 micron aluminium foil in 500 to 800 mm width and 600 mm diameter rolls. These rolls are coated with heat seal lacquers on one side and printed in six to eight colours as per customer design, and then cut into individual lids according to the size and shape of the container Similarly, 38 micron polypropylene films are purchased in 800 to 1,000 mm width and 600 mm diameter rolls and label designs are printed in multi-ups and slit into individual label rolls. The heat seal lacquer formulation and coating process involves technology, skill and the risk of 1Factual case that masks the identity of the company Mohammed Laeequddin is the General Manager at Al Wasl Water Purification L.L.C., Dubai, UAE. 3 Kareem Abdul Waheed is an Associate Professor in Marketing and Associate Dean, Internships and Projects at the Institute of Management Technology, Dubai, UAEExplanation / Answer
Q 1. In the first case presented Iranian agent Ali was doing business for PackTech in Iran market and there were no legal agreements made between them for the operation as the company was new to that market.Ali started producing good results in the few years of operation so there was a trust between Ali and the company.But as the import duty and other taxes increased Ali could not compete with the local suppliers of the pack who started producing a similar product and gave at a cheaper price. Ali started shifting his business from Packtech to other local suppliers for his survival in the market and without the knowledge of Packtech started his own business. This is a mere breach of trust what Packtech had on Ali.PackTech could have helped him in this situation but Ali broke the trust of business.
In the second case, there was a trust issue from company's side where it could not trust his partner Dillon in Srilankan market. Dhillon grew Packtech business in Srilanka and there was a proper agreement of payment between them in L/D and D/A basis.But Due to some delay in payment Packtech started stopping the supply till the payment receipt.Though Dhillon was a trusted partner and although he made a request and asked the company to trust, the company could not believe him due to the economic and political condition of the country.Here it shows the trust issue from company side.
The third case was a trust relationship and bonding between the two business entities.Greek supplier was charging more in foil supply as compared to other Asian suppliers due to some extra tax and the difference in euro value and dollar value.Packtech thought of taking supply from Asian suppliers as there was a difference of $400 per ton of metal and he also requested to decrease the price to the Greek supplier but as the greek supplier could not decrease the cost Packtech started taking supply from Asian suppliers.But the two companies did not break trusts and started a healthy personal relationship with a vision to have future business.
In the fourth case, there was no trust issue from both the side as Packtech thought of savings when the local paint supplier's employee made them an offer of less cost as compared to the supplier. The trust issue was between the employer and the employee as the employee took advantage of the company to have a contract with the consumer company and started its own business without knowledge of the employer.Packtech could not help the supplier as he had to make its business profitable by getting the supply with less cost.
Q2.Yes besides trust the business ethics makes the relationship stronger. If companies do their business in an ethical manner and following the legal guidelines and the contracts they make it help the business relationship stronger. As we can see from the Srilankan supplier case, though the two parties were having trust in each other Dhillon delayed some payments which made the relationship little weaker and it made Packtech think of stopping supplies which affected Dhillon's business too.Strong business ethics and follow of business rules is more important in business.
Q3.The common theme which we can identify in all the cases was to gain profit in the business in terms of a monetary requirement in either party.All the cases the trust issue came as there was a revenue involved in all the cases.In the first case Ali started growing its own business to have a market share and gain profit.In the second case, the delay of payment made the company to stop the supply and company also thought of financial crisis may happen in Sri Lanka which can affect their business.I third and fourth case company thought of saving some extra amount in its cost.
Q4.Yes, trust exists in customer-supplier relationship, in some cases when the supplier and customer both have been following the rules some unavoidable situation delays sometimes supply or payment which can only be handled by the trust between each other.This trust is required to build a stronger network in business.
Q5. Riyaz should continue his business with the existing supplier as they are doing business from the last some days and the supplier had no issue with quality and other supply requirements.Although the new party made a less price offer he doesn't have any experience in handling this kind of business.If he fails in his commitment it will take Packtech reputation down as well as it might lose some business.The existing company Packtech can trust as it is supplying goods in required time and in proper quality.
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