Confidential Information

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Confidential Information
You represent Chips Ahoy, a manufacturer of semiconductors (also known as computer chips). One of the major chips which you manufacture is the "9090" which is used in a wide variety of personal computers including the "Future", which is made by Faster Computers. The 9090 chip is also made by several other semiconductor companies. The Future has been the surprise success story of the current sales season and is rapidly becoming one of the best selling computers in the country.
Due to an error by your former vice president of manufacturing, Chips Ahoy, which usually makes only enough chips to meet its current orders has 100,000 extra 9090s. The 9090 chips are filling up your warehouse space and are making it impossible for you to keep up with your manufacturing of other specialized chips that are now in heavy demand. The 9090s should begin to sell heavily again in six months, but you are desperate to have them out of your warehouse as soon as possible. You also do not want the computer industry to discover the error that was made.
You can easily manufacture up to 2,000 of the 9090 chips per week. By adding a second work shift, at somewhat higher cost, you could double this production to 4,000 chips per week.
The current market price for 9090 chips, which are usually sold in lots of 100, is in the $5.00 to $7.00 per chip range. Most firms that manufacture the chips have a cost of $3.50-4.00 per chip, but, because of the large quantity you made, your cost for these chips was only $3.00. The president of Chips Ahoy has said that you can sell the 9090 chips at any price, down to your cost of $3 per chip, because of the problems the chips are creating in the warehouse. In view of your problems, the faster you can get the chips out of the warehouse the better, but in any case you would like them all gone within 6 weeks if possible. You would prefer to have the chips picked up at your warehouse by the buyer, but, if necessary, you can have the chips packed and delivered at a cost of 5 cents per chip.
Your company has been approached by Faster Computers, the manufacturer of the Future computer, with an inquiry about the availability of 9090 chips. Neither you, nor Chips Ahoy, have ever dealt with this company before. A meeting has been scheduled between you and the representatives of Faster Computers to discuss their inquiry.



Confidential Information
You represent Faster Computers, the manufacturer of the "Future" computer, which has been the hit new product of the current computer sales season. The Future is based on the "9090" chip (a semi­conductor computer chip). You had hoped for a successful introduction of your new computer, but sales have been beyond your wildest dreams.
Because sales have been higher than you anticipated, you do not have enough chips to build all the computers that you can sell right now. If you could get more chips, you could sell more computers right now. You had planned to purchase the 9090 chips from any of several manufacturers. The general market price for the 9090 chips when bought in quantities of 100 or more is $5 to $7 per chip. There is, however, currently a severe shortage of chips, and, while the price has not risen, your usual suppliers cannot provide you with more than 1000 chips per month. American Semiconductor, from whom you have purchased in the past, tells you they can increase production to supply you with as many chips as you want, but that they cannot increase their production for at least six months.
You have an immediate need for 60,000 chips for current orders. You could, even purchase up to 100,000 chips which would allow you 40,000 for future computers. You would keep the remaining 40,000 in temporary storage until they are used (in about 4 months). You expect that you will continue to use the 9090 chip in the Future at this rate for at least two years.
You are aware that the cost of manufacturing the 9090 chip is usually about $3.50 to $4.00 per chip. Because of the immediate need for 9090 chips, the president of Faster Computers has agreed to pay up to $10 per chip. Of course your company would like to pay as little as possible for the chips. You would like to have the chips packed and shipped by the seller, but, if necessary, you can arrange to pick them up. You would like delivery to be as soon as possible, but you want 60,000 chips no later than two weeks from today.
You have approached Chips Ahoy, who manufactures the 9090 chip, to try to buy 9090 chips from them. You have never dealt with them before, but you know that they are one of the larger chip manufacturers in the country. A meeting has been arranged to discuss a possible deal.

Created by James B. Boskey; modified by John Barkai

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