Tel Aviv–based Diskit Khartsan Ltd. sold sprays, traps, and netting to combat Blatta lateralis, the Israeli flying cockroach. The insect, slightly over one inch (2.54 cm) long and capable of flying short distances, was noisy, unsightly, and posed a risk of food contamination. Every heat wave brought more infestations, and consumers across the Mediterranean armed themselves with Diskit's HLH™ brand products.
HLH products generated nearly two-thirds of Diskit's annual revenues. During periods of low demand, local retailers resisted devoting significant shelf space to the bulky products, which meant that during periods of high demand stockouts occurred frequently and Diskit lost sales. To address this problem, the company had implemented a trust receipts program that raised prices for retailers by 3 percent but allowed them to take Diskit products onto their balance sheets without payment until the products were sold.
After analyzing and discussing the case, students should be able to: • Understand the relationship between a firm's credit policy and its product market strategy • Explain the effect of growth on firms' strategy when product market strategy is capital-intensive • Understand how exogenous change in the market's structure affects firms' product market strategy and, consequently, its inventory and credit policie
