Explain why would it be interesting for a student to study this Case Analysis? F

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Explain why would it be interesting for a student to study this Case Analysis?

FERRO INDUSTRIES -EXPORTING CHALLENGE IN A SMALL FIRM

It was a sultry July afternoon in 20 10 in New Delhi, India, as Garima Shanna was sitting in her office. As head of exports at Ferro Industries (Ferro), Sharma was trying to foresee and ana lyze all the possible outcomes of an important decision she had made that day. Shanna's mind had been occupied ever since she had sent a message to Ferro client Sheikh Mohammad Al Yusuf in Saudi Arabia, conveying Ferro's decision to re lease machinery bought by the latter despite the fact that the issue of an export payment was pending between the two parties . Although she was aware of the significant risk associated with releasi11g products before settling payment for them, Sharma, along with Yatendra Sharma, her husband and Ferro's chief executive officer (CEO), still believed that the decision was the most prudent option u nder the circumstances: Yusuf was one of Ferro's oldest and most important foreign customers a11d the Shannas believed that he would keep his word and settle the issue ofoutstanding payment soon.

Yusuf had placed a large order for roll-forming machines from Ferro in March 2010, but he had been unwilling to pay for the consignment in advance. Ferro exported the machines from its New Delhi office. The machines were sent from tl1e Ferro factory to the shipping line on May 6, 20 10. The container took one month to reach the port of Riyadh, Saudi Arabia. Yusuf had agreed to pay before he collected the machines from Riyadh, but even after Yusuf received the bill of lading (BIL) from Ferro, the company still did not have tl1e desired payment. Consequently, the Sharrnas sent instructions to tl1eir carrier, World Shipping Company, not to release the machines tultil the promised amount was paid. The situation was complicated by the fact that Yusuf was actually a middleman for a third party in Saudi Arabia (tl1e real buyer of the machines) and was therefore dependant on this party for payment. Further, holding back the consignment meant increased demurrages (charges for delays of cargo ships) for Ferro. Tims, in order to minimize financial loss and to avoid offending and losing a significant, regular client, Garima Shanna bad decided to release the machines to Yusuf before recei ving payment -but now she worried that she shou ld not have done so.

BACKGROUND OF THE COMPANY

Ferro Industries entered the steel industry in 1995 as a small firm and developed imo a highly successful company in many aspects. The firm was headed by Yatendra Shanna, a mechanical engineer and business management graduate from Bangalore University and the Young Men's Christian Association (YMCA), De1J1i, respective ly. In order to realize his ambitious goals and optimally utilize l1is technical background, Shanna patiently formed and developed a team to deliver the products and services that he had selected for his company. He contributed his experience of over two decades in the metal processing industry as well as the exposure he had gained during his extensive travels. The finn 's manufacturing facility was located i n the Sahibabad ind ustrial area, which lay in the Nationa l Capital Region (NCR) of Delhi, India .

Ferro Industries was honoured with the Best Technology Award in 2009 from the National Small-Scale Industries Council. Since its inception, the company was established as a quality-driven organization, and was constantly striving to introduce i1movative products and technologies in order to provide high-quality services to its customers (see Exhibit I). The firm planned, designed and erected more than 100 plants worldwide, which utilized internationa l experience and the latest technology available . By the beginning of the year 20 10, the firm's international experience gathered over the last couple of years helped in the smooth functioning of tailor-made lines. These lines were tailor-made strictly on the specifications given by tl1e customers, which resulted in a high level of customer satisfaction. Soon after, all tl1e tailor-made lines started functioning smoothly, offering 100 per cent satisfaction to customers. A team of highly qualified and experienced professiona ls worked hard to adopt and update the existing technology at Ferro in order to keep pace with changing global trends.

Garima Sharma joined her husband 's company as head of exports in A pril 2005. She had worked with Norton Network in Delhi as head of human resources for I 0 years before joining Ferro. A few montl1s after Garima Shanna joined Ferro, she received an email enq ui ry from a Saudi Arabia-based finn called Metal Star. Sheikh Mohammad Al Yusuf had written on behalf of Metal Star, enquiring about the technical aspects of the machinery his company wanted to order. Since Garima was primarily responsible for administrative and public relations issues, she forwarded the enquiry to Yatendra Shanna, who was a mechanical engineer and a technical expert on the product concerned. He responded to Yusuf, who then expressed an interest in visiting Ferro Industries and inspecting the product. Yatendra was very excited because this was one of the first foreign enquiries received by the company after its expallSion. He shared the news with Garima and asked her to take on the responsibility of organizing the inspection and dealing with this client throughout his stay in India. Armed with a strong motivation to contribute to her husband 's firm, Garima made the difficult decision to release the shipment to Yusuf in 20 I0 without payment, as he was a regu lar client of the organization; but would Ferro have to pay for Garima's generosity in this instance?

SMALL AND MEDIUM ENTERPRISES IN INDIA

Economic reforms were introduced in India in 195 1.The subsequent industrial policy followed by both the Government of India and plam1ers eannarked a special role for small-scale and medium-scale enterprises (SMEs) in the Indian economy. Accordingly, due protection was granted to both small-scale and mediwn­ scale industries until 199 l, when the country liberalized its trade policy. Thus, certain products remained reserved exclusively for small-scale units for man y years, though many products were gradually dropped from this list of prod ucts due to changes in the industrial policies and climate.

After agriculture, the SME sector was the second-largest employer in India. I ndian small and medium firms manu factured a range of about 6,000 products, from simple crafts and consumer goods to highly sophisticated technology products like microprocessors, minicomputers, electronic components and electro-medical devices. The SME sector was therefore a major contributor towards increasing exports as well as satisfying domestic demand for several commodities .

There were nearly three mi llion SMEs in India, wl1ich accounted for almost SO per cent of the country's industrial output and 42 per cent of total exports. The SME sector, which employed about 42 million people in over 13 mi llion w1its throughout the cowntry, had been one of the country's biggest employment­ generating sectors and also helped significantly in the promotion of balanced regiona l development in India. SMEs in India accounted for SO per cent of total employment generated by the private sector and 30 to 40 per cent of value addition in the manufactu ring sector. The small-scale industry exported items worth Rs96,640 mi llion 1 in 1990/91 ; this figure increased to Rs l ,502,420 million in 2005/06, and had been increasing consistently since then (see Exhibit 2). Since the late 1980s, 90 per cent of the total value of exports from SMEs continued to be domi11ated! by j ust eight product groups: readymade garments, engineering goods, electronic and computer software, chemicals and allied products, basic chemicals, pharmaceutica ls and cosmetics, processed foods, fu1ished leather and leather products and plastic products.

The employment data for Indian SMEs showed a significant gender imbalance. The final resul ts of the third all-India census of small-scale industries (SSls), conducted du ring 200 1-2002, showed that the percentage of women employed i11 the SSI se.ctor was 13.3 1 per cent. This was evidence of the existence of a bias towards men regarding employment in India SSls.The participation of female workers in SMEs was almost negligible. The labour cost in I ndia was also comparatively higher than i n neighbouri ng cow1tries, such as China.2 Thus, the availability of labour was one of the challenges in front of SSls in India. Imbalance in the labour gender available to Indian SSls further increased the challenges and increased the labour cost because the female labour force was not available to them.

The Indian SME sector faced a competitive business environment o'vi ng to the following factors: The liberalized investment regime in Lndia in the 1990s encouraged foreign direct investment (FDI); The formation of the World Trade Organiization (WTO) in 1995 forced its member-countries (including India) to lift quantitative and non-quantitative restrictions on imports; and Economic reforms in India since 1991 brought major changes in economic policies. These revised policies relaxed or removed many government controls on production capacity, imported capital goods, intermediate inputs and technology. These reforms altered the economic environment of the country.

PRODUCTS OF FERRO INDUSTRIES

Ferro comprised a part of the SME sector and was committed to growth in the capital goods industry in international markets. Tl1e company was aggressively seeking an intemationa l market share by continuously adopting advanced technologies a11d designs in its manufacturing facilities. Ferro's primary prod uct was the ro ll-fonning machine, which was used by nwnerous industries across the country and beyond. Oilier products manufactured by the company i11cluded cut-to-length lines and slitting lines (see Exhibit J ) and industrial machinery like roll-forming lines for roofi ng sheets and cold roll-fonning l ines. Since Ferro catered to the requirements of customers from different cow11ries and different business backgrounds, the firm offered full customizatiom of its end products as per the requ irements of the customer. The company also had a well-equipped production unit and assembly shop and had access to sophisticated technology.

Ferro emphasized quality at every stage of manufacturing and every product had to undergo several quality tests from conception to final del ivery. In order to ensure this rigid adherence to quality, the company manufactured and assembled its own components. Although the firm followed standard designs and specificatio ns, it manufactured its own machi nes as per the reqttirements and orders placed by clients. This comprehensive quality-control system ensured that each customer received the best possible products as well as timely and reliable services, thereby ensuring the smooth flow of the production and marketing process (see Exhibits 3 and 4).

PROMOTIONAL STRATEGY OF THE FIRM

Ferro Industries promoted its machines by participating in exhibitions held all over India. The first four exhibitions they participa.ted in were held in Delhi and orga11ized by the !J1dia lntemational Trade Fai r (llTF) and National Small Industries Corporation (NSLC). Ferro ha.d won the Best Technology Award (twice) and the Upcomi ng Women Entrepreneurship Award at these events.

PRODUCT PRICING

Like most companies, Ferro entered into a sales contract with its overseas clients. Since the machinery req uired heavy investment, the company typica lly required I 0 per cent of a client's payment in advance, 35 per cent after dispatching the B/L and the remruining balance at the time of delivery. Pricing for the domestic market was approximately 1 5 per cent lower than for the international market. Negotiations pertaining to pricing depended on a variety of factors, and Ferro therefore usually adopted a flexible approach to pricing in keeping with the existing demand for its products a.t a. particu lar time. For instance, when the comparty was short of orders, it offered competitive prices to its clients ; prices were also lowered to competitive rates if a client was known to have visited China (and therefore potentially encountered lower prices).The firm increased the prices of its products only when it had a sttrfeit of orders and could afford to make demands on its customers.

CLIENT PROFILE

Ferro catered to some of India's top industrial and bttsiness families and corporations including the Jindals, Ta.tas, Lloyds and Bhushan Steels. In addition, the company exported its ma.cltines to various countries such as Saudi Arabia, lsrael, tl1e United Kingdom, United Arab Emirates, Mauritius, Egypt and Kazakhstan (see Exhibit 5).

GROWTH AND EXPORT ORIENTATION

Ferro's overall sales grew by 3 1 per cent from 2008/09 to 2009/10.Although the company had no export orders during its ftrst year of operation. Ferro managed to generate 45 per cent of its revenue from foreign operations during its second year. Exports continued to grow significantly so that by the fifth year of its operatio ns, 75 to 80 per cent of the company's revenue could be attributed to exports. Through just one of its clients, Metal Star, Ferro Industries transacted a total business of about RslO million by selling six machines. Correspondingly, the company's net profit had increased continuously over the preceding three years, registering an increase of around 36 per cent during 2008 and approximately 30 per cent during

2009 (see Exhibits 6, 7, 8 and 9).

DOMESTIC COMPETITORS

Ferro Industries was one of three leadi11g manufacturers of roll-forming macl1ines in I ndia. Its main domestic competitor was Divine Machines Pvt. Ltd. (Divine Machines), which had facilities located i n New Mumbai, Maharashtra and Rajkot, Rajasthrun. Divine Machines was the flagship company of the Divine Group and was established in 1998. The company specialized in manufacturing coil-processing lines, including cut-to-length lines, slittu1g lines and roll-forming lines, as well as barrel corrugators and auxiliary/tenninal equipment like uncoilers, recoilers, flatteners and accumulators in process lines. Divine Machines also specialized in manufacturing automation devices such as press-feed units, servo-roll feeders, folding lines and Fieldbus Message Specification (FMS). These products were exponed to co1u1tries such as Scotland, Mauritius, Turkey, Italy, Saudi Arabia, Abu Dhabi, Balirain, Sudan, Nigeria and Nepal, among others. In view of the vast range of its products , its adherence to quality standards of prod uction and its impressive clientele, Divine Machines had clearly succeeded i n acquiring a global reputation for performance , excellence and attainment of higher product efficiencies.3 As a fmancially strong company, Divine Machines had no difficulty in accessing qualified employees and the latest technology. Additionally, the company had buiUt a reputation of ensitring timely delivery of quality products in both international and domestic markets at costs that were notably lower than those of its competitors.

COMPETITORS FROM CHINA

Another company that posed a major challenge to Ferro Industries (a nd to I ndian SMEs in the steel industry i11 general) was Chinese SME Chinese Engineering because of the comparati ve lower cost advantage it offered to the international buyer. Thus, Ferro was facing the challenge of keeping its products competitively priced in relation to companies such as Chinese Engineering.

SMALL AND MEDIUM ENTERPRISES (SMES) IN CHINA

As in l11dia, small- and medium-sized enterprises (StvfEs) played a vital role in the growth of the Chinese economy. Most of these firms be longed to the private sector of the Chinese economy. China formulated a munber of general and specific polices and regulations to promote the growth of SMEs. In September 1999, a series of measitres were enacted with the objective of restructuri ng the SME sector in China . T11ese measures included tl1e promotion of firm groups and the exit of non-viable small firms, as well as establishing business development services to assist SMEs in information consulting, marketing, funding, credit guarantee, technical support and services. In 2006, there were 42 million SMEs in China; according to the 2007 report of the Nationa l Development and Reform Commission, the SME sector in China accounted for 75 per cent of employment in townships and 60 per cent of the country's gross domestic product (GDP).4

In China, SMEs had significant potential in terms of creating employment opponunities.This was because, unlike in India, SMEs in China had access to low labour costs, which had been a key driving force for many sectors in China. Chinese SMEs also had ea.sy access to a workforce of women.The government in China had been very careful in maximizing its advantage in terms of labour resources, and had actively developed labour-intensive industries and SMEs with considerable employment capacities.

Despite these advamages, Chinese SMEs were facing a major challenge in the form of an inadequate credit system.A large share of deposits and of the loan market was under the control of state-owned commercial banks. It was not possible for most Chinese SMEs to meet the high requirements of these banks in order to obtain Joans. Moreover, the minimum amount that banks lent was vastly exceeded by the demands of SMEs. There were also structural limitations involved in borrowing from urban and mral credit cooperatives,which prevented them from bridging this gap. There was neither a set credit-rating assessment system in China nor any incentive for Chinese SMEs to bui ld a credit reputation since it did not have a significant impact on future borrowings . Consequently, the quality of loans was negatively affected, which resulted in even poorer credit ratings for many SMEs. The World Bank survey on the investment climate i n China revea led that SMEs5 were facing important credit constraints and had very limited access to private finances as compared to other Asian countries included in the su rvey. In addition, the survey found that the use of fonnal finance declined i n relation to decreasing firm size. Although SMEs used less credit than large firms in all of the cotu11ries surveyed, the gap was wider in China when compared with other Asian countries -including India. Chinese manufacturers were able to keep the cost of machines relatively low because they enjoyed the advantage of many favourable environ mental factors and government support. Unlike in India, the unskilled workforce of women was also easily available to Chinese manu factu rers at lower wages . The regular availability of a power supply was another asset Chinese manufacturers were able to rely on, unlike their Indian counterparts, enabling the former to save on the consumption of fuel for generating power.

Despite the numerous challenges faced by Ferro [industries, including power cuts and the under-estimated contributions of women workers, the company succeeded in carving a niche for itself in the Indian market. Furthennore, Ferro was seeking to expand its area of operations by establishing a sister company, Ferro International, by mid-20 10.

EARLY EXPERIENCE AFTER EXPANSION

Ferro Industries began expanding operations in early 2005.Soon after, the company was given the exciti ng opponU11ity to fulfill a large order placed by the Steel Authority of India (SALL).Ferro Industries drafted a 1 50-page proposal i11 response to tl1e order, which was sent to SAIL officials at different hierarchical levels (as the stipulated equipment was meant for different departments of the organization).

In the first scheduled meeting witl1 SAIL, held in Chennai, Ferro's offer was favourably received. A subsequent meeting was held one month later, in which more infonnatiou was given by the Ferro staff to another group of SALL officials fw1ctioning at different levels. ll1e order was worth Rs40 million and Ferro stipulated tl1at the company needed au advance payment of at least 20 per cent in order to be able to process such a huge order.This proposition was unacceptable to SAIL, which insisted that it would be able to give an advance of just J O per cent -and that t his advance would only be given after 25 per cent of the order had been met and the work had been inspected by SALL officials. Ferro's financial condition was not strong enough to allow the company to process the order, even partially, without receiving any advance payment at all. Meanwhile, the two domestic competitors of Ferro Industries took advantage of the situation and joined forces to overthrow the latter's proposal. In the confusion that followed, SAIL cancelled its offer, and the order was left pending execution. Ferro's hopes of expanding operations by fulfilling a large order for a public-sector undertaking were consequently shattered because of the involvement of unscrupulous people i n the deal and a disagreement with the managemem of SAIL on the issue of advance payment.

THE FIRST VISIT OF MOHAMMAD AL YUSUF

Yusuf visited l11dia to inspect Ferro Ind ustries for the first time on July 22, 2005. Garima learned that Yusuf's company was a construction firm dealing in false ceilings and channel manufacturi11g, and that Yusuf had come to know about Ferro through the Internet. Garima, who had persona lly gone to receive Yusuf at the airport, was a little taken aback to come face to face with a tall gentleman dressed in an expensive suit and costly accessories of internatio nal brands. Already feeling somewhat daunted, Garima led Yusuf to her Hyundai Santro car, which was not i n good condition. It was very hot outside and the car's air conditio ner was not effective enough to neutralize the high temperature outside. Yusuf was then taken to the office of Ferro Industries, wl1ich had tinted roofing but little else in terms of displaying aesthetics or prosperity . Tiie Sheikh's expensive leather suitcase was lifted from the car and placed on the muddy flooring of the company office, which, tlllfortunately, seemed to cause some damage to it.

Garima and Yatendra had invested all their capital in bringing the latest teclmo logy to their finn in order to ensure that Ferro's products were technologicrully superior to those of both domestic and foreign competitors, especially those from China. In the process, they had failed to pay much attention to the furnishing of their office, which contained only a few tables, chairs and computer systems to meet the basic req uirements of oftice administration and business commllllication. Yatendra joined Garima and Yusuf and explained the technologica l aspects of the product to the latter. Yusuf seemed to admire their expertise in manufacturing cold roll-fonning lines, which very few companies could claim. The Sharmas tried their best to ensure that the Sheikh's decision would not be influenced by the appearance of the oftice and that he would instead concentrate on the technologicrul expertise of the company when making his decision . Promisi ngly, Yusuf expressed his appreciation for the commitment shown by Ferro Industries in offering tailor-made products to its customers as per their irndividual requirements.

Garima succeeded in learning a few facts about Yusuf in the course of their conversation. Although her interaction with him had been brief, she still managed to make a mental note of a few of his key traits, and likes and dislikes. Later that evening, Garima and Yatendra took Yusuf out for dinner. Garima ordered mutton for Yusuf and he was delighted to realize that Garima had understood his tastes during their short conversatio n. Yusuf also seemed fully convinced of the teclrnical competence of Ferro I ndustries and expressed his keetrness to execute the business deal. The busy day, full of rapid business developments, seemed to be coming to a satisfactory end.

During the remaining two days of Yusuf's visit, Garima took him for a tour of Delhi, showing him almost every historical monument i11the city and purchasing some gifts for his family. Yusuf had mentioned that he was looking for a special kind of fragrant wood fow1d in India called 'ooth .' Garima searched the whole of Delhi to procure the wood for him as part of her strategy to offer personalized treatment to her company's clients. Garima explained, "First [this personalized treatment] was out of the heart, and then it became a part of a strategic plan."

During her interactions with Yusuf, Garima discovered that he had already visited China and met a few roll-forming machine man ufacturers there. This piece of information was vital since Chinese machines, being priced lower than the corresponding Indian machines, offered serious competition to Ferro's products.

On July 25, 2005, Yusuf finally conveyed to Yatend ra Sharma that he had decided to give the order for one roll-forming machine to Ferro fJ1dustries. Yusuf wa nted to finalize the sale and delivery terms, includi11g the final cost of the machinery, before returning to Saudi Arabia. Yatendra and Garima were prepared to negotiate the cost of the machinery to secure this business order because they were hopeful of getting more business from Yusuf in future. Moreover, this would be one of the first overseas orders that Ferro completed after its expa11sion.

FOREIGN CLIENT RELATIONSHIP MANAGEMENT

The ability to offer customized treatment to clients came naturally to Garima ; however, she had not yet rea lized that this trait was a significant asset as it was a vital ingredient of customer management in the kind of business she was engaged in. Personalized treatment and continuous commw1ication were key factors for any organization dealing with foreign suppliers or clients. Recently, a prospective supplier from Ghana had visited Ferro Industries and arrangements had been made for her to visit the renowned historical sites of Delhi. When Garima discovered that this client was suffering from an orthopedic problem, she had taken her to a hospital persona lly. Garirna also tried to ensure that all of Ferro's foreign clients were taken to the best restaurants and that their needs were given great importance. fJ1addition, she kept in touch witlt these clients tltrough social networki ng websites.

EXPORT CONTRACT WITH MOHAMMAD AL YUSUF

At the beginning of 20 10, Yusuf placed another order with Ferro Industries, this time for many roll­ forming machines, which turned out to be one of the most challenging situations Ferro had faced. After promising a certain date of delivery, the company fowtd that it could not honour its commitment despite repeated reminders from Yusuf. Si11ce Ferro was carrying out an expansion program, Garima and Yatend ra had less capital to put into tl1e business, which affected the turnaround time for processing an order and led to delays in sltipments. The fact that it was a self-financed finn fartl1er aggravated the problem of delayed deliveries.

In the meautime, Yusuf kept in regular touch with Yatendra regarding the status of his order. Although Yatendra recognized the uncertainty associated with the delivery of the machines, he continued to assure Yusuf that the machines would reach him on time. Finally, after a long waiting period and persistent delay in tlte delivery of the machines, Yusuf decided to visit the site himself and assess tl1e progress on his order, in spi te of Yatendra's assurances.

On April 4, 20 l 0, Yusuf informed Yatendra that he would probably visit India in the near future to check the progress of his order. Yusuf arrived in Delhi on Apri l 24, 20 10 and visited the production facility of Ferro Industries the same day.Garima and Yatend!ra showed him that the machines were in the final stage of manufacturing. Yatend ra assured Yusuf that the machines would be ready within 10 days. During his previous visit to India, Garima had learnt that Yusuf was going tltrough some financial difficulties . He was trying to recover his money from a third party in Saudi Arabia in order to settle the payment with Ferro.

After being satisfied with the progress in the ma11tlfacturing of the prod uct and the treatment he received at Ferro, Yusuf returned to Riyadh with a promise from Yatendra that his order would be dispatched shortly. Yusuf's machines were ready in tl1e first week of May 20 I 0, and it was time for the machines to be dispatched to him.The decision was made to load the machines on the container, which was expected to reach Riyadh within one month from the date of departure. However, Yatendra was slightly worried about receivit1g payment for the machines once they were delivered to Yusuf, as he knew that the latter would be able to pay only after recovering funds from a third party. Garima advised Yatendra to first send the B/L to Yusuf and ask him to release 35 per cent of the payment , as had been agreed upon in the sales contract, and then to ship the container so that Yusuf would have more time to arrange the funds required to pay the remaining balance. Yatend ra asked the shipping compa ny to issue the B/L to Ferro Industries and to delay shipment of the container by 15 days. The shipping company agreed to do so on the condition that the consignment be deposited with them as physical proof that the product was ready and would eventually be shipped. Yatendra sent the machines to World Shipping Company on May 6, 20 I 0 and obtained the B/L.

A copy of the B/L was immediately sent to Suhas Kumar, Yusuf's manager, with a request for release of 35 per cent of the payment as had been agreed upon by the two parties. Previously, Ferro Industries bad always received prompt replies from Yusuf; however , this time, Yatend ra had not received any reply from Yusuf's manager after two days. Yatendra finally called the manager to confirm that he had received the B/L and to urge him to release the initial payment of 35 per cent. Kumar replied quite rudely to Yatend ra and denied receipt of the B/L. TI1is upset Yatendlra deeply and he began to lose hope of recovering his money from Yusuf. Garima was sitting next to Yatendra when he spoke to Kumar and she realized the gravity of the simation. After one month of silence from Yusuf's end, Garima decided that she had to intervene; she contacted Yusuf about her intentions to do so and he adamantly approved .

Usually, Garima did not interfere in a deal unless it had reached a dead end. Ln this case, since matters seemed to be getting out of control, she decided 1Q try and act as an arbitrator. Garima telephoned Yusuf and explained curtly, "We sent you the B/L yet you have not released the promised amount." Yusuf asked Kumar about the BIL and, a few days later, returned Garima's telephone call and confirmed the receipt of the B/L. He also apologized for the miscon11mu1ication on Kumar's part regarding the B/L. Garitna then req uested that Yusuf release the 35 per cent of the payment tliat was due upon receipt of the B/L. Yusuf, however, agreed to pay only 17 per cent, attributing his inability to pay the remaining amount to outstanding payments from a third party i n Saudi Arabia.

Garima and Yatend ra instructed World Sl1ipping Company not to release the machines until further notice. Consequently, the machines were not unloaded since the agreed payment bad not been received and Yusuf was forced to pay demurrages, which amounted to a significant sum of $100-150 per day. Yusuf was therefore still unable to obtain l1is machines and was instead being asked to pay additional charges to the port authorities for keeping his consignment in port. Deeply upset about tl1e situation, Yusuf told Garima about tl1e additional financial burden he was facing in terms of the daily demurrages and asked her to release the machines. He assured her tliat he would settle tl1e balance payment within a week. Yatendra, however, was not ready to accept the risk involved in this proposition , as Yusuf had not yet paid even the 35 per cent that he had promised to pay upon receipt of the B/L. When the stalemate continued, Yusuf sent the following message to Garirna: "l trusted your words; it is [now] your turn to honour my words."

Garima thought of a conflict resolution strategy, which she proposed to Yusuf; she told him, "Until the machines are released , we wi ll share tl1e demurrag·es." Garima also assured Yusuf that she would issue the necessary instructions to World Shipping Company to release the machines. On Ju ly 7, 20 10, Ferro contacted the shipping company by email and requested the release of the machines to Yusuf, even though Ferro had not received payment from him on time.

Garima looked around her beauti fully decorated office. She reminisced about all the challenges that Ferro had had to face i n fina l izing this major overseas deal with Yusuf. It reminded her of the struggle that Ferro Industries had gone through when it was in itially established. Garima also remembered how Ferro had to wait for a long time to obtain this order from Yusuf, which it desperately needed to survive in the market. Despite the tensions and problems that she and her husband had faced while concluding and executing the deal with Yusuf's company, Garima sti ll felt a deep sense of satisfaction at having handled the situation in a way that was satisfactory for both parties. She was confident that eventually matters would be resolved and that Yusuf's foll payment would be released to Ferro soon.

Explanation / Answer

After going through the given case study of Ferro Industries -Exporting Challenge in a small firm; in my opinion it will be interesting for a student to study this case analysis because this case analysis teaches following lessons:

Because of the above leanings a student might find this case analysis interesting.

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