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HudsonShoe Case Study

Whatis a kickback?

Thisrefers to payment of something that is of value to a recipient as areward or compensation due to provision of favorable treatment to athird party. It can take the form of money, credit, gifts or anythingof value and may be legal or illegal.

Whatwas the underlying problem here? What were the objectives of HudsonShoe? Policies?

Tobegin with, Hudson Shoe offered a kickback to their biggest customerin the amount of $1 per pair of shoe. This was legal in the sensethat the firm was compensating their largest customer. However, thecompany found itself in a dilemma when their largest client informedthem that an additional $1 per pair would be paid to the minister ofrevenue as well as $1 per set to the defense ministers who wereresponsible for approving the contracts. Amid competition from othershoe manufacturers who were willing to go to any lengths to get thecontracts, the organization found this contravening their objectivesand policies. Hudson Shoe’s shoes aims were, among others acommitment to loyal domestic customers. Hudson Shoe also maintained aclose relationship with its domestic buyers that involved acceptanceof returns at the end of the season, markdown allowances oradvertising money to retailers, in time deliveries as well asrelatively low prices.

Writepolicies that would have benefited Hudson Shoe.

Failureto meet the needs of the loyal domestic customers led to largestdomestic chain cancelling its contract with Hudson Shoe. However, thecompany could have benefited from sticking with its local loyalcustomers as its main business. On the other hand, the firm shouldhave remained with its pricing strategy other than raising theirrates by the amount of kickback it was offering to Lopez. This wouldhave ensured that the business maintains its policy with the domesticcustomers as well as reaping more from the additional sales.