Fe’nix del Sur, LLC, a leading artifact business company that sources and sells South American
and African artifacts, started as an operating post near Tucson, is considered to be well-
known since the early 1900's in the jewelry and pottery industry as one of the most respected
sources of artifacts for collectors that collect authentic artifacts and replicas and resell to artifact
collectors and gift buyers.
With annual gross sales at about $25 million, Fe’nix del Sur have grown steadily at a constant rate
of 20% per year over the last decade. One reason for their stable growth and success lies in South
American and African artifacts are gaining greater popularity and acceptance.
In 2001, Fe’nix started selling replicas, which account for only a small portion of total revenues,
along with its authentic products. The company has craftsmen in Central America, South America,
Africa, and the Southwest to provide the items. The replicas are so great that only a truly
knowledgeable collector would know whether they were authentic. Although Fe’nix initially was
reluctant to expand its product line into replicas and to increase their replica artifacts production to
increase sales, profits and market, the firm's clients forced the company to catch up with the larger
demanding product line.
On the other hand, as Fe’nix del Sur looks so great to grow their business, it is facing local
competition, its bargaining position and market share have eroded and the gross margin dropped
in recent years due to aggressive competitive.
The distribution channel of Fe’nix del Sur limited for usually Fe’nix company remains the sole
supplier to its buyers, distributing products through specialty dealers, including interior designers
and decorators, sponsored showings, and exclusive department stores. This limited supply chain as
well as political situation in Africa makes the artifacts difficult to get and the problems seems to
be more critical in recent years.
Increasing competition for authentic artifacts as well as increased demand for African and South
American artifacts, provides an opportunity to explore a new market and an opportunity to grow.
Fe’nix del Sur has been offered a contract that can add a full product line of authentic items with
an opportunity to broaden the firm’s position by increasing $4 million in additional sales over and
above their annual growth, in order to cope with the replicas. The tentative contract stated that it
would buy at 10 percent below Toucon’s existing prices, and that its initial purchase would be for
no less than $750,000. Fe’nix del Sur now have to make a decision whether they should accept the
II. Case Problems