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The business needs to manage the relationship with the Tesco very carefully.
Kettleby Foods also knows that its rivals could quite easily approach Tesco and offer to produce a product at a lower margin thereby undercutting Kettleby Foods. In theory Tesco cold almost hold an open auction between the firms to get the best price...
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In theory Tesco cold almost hold an open auction between the firms to get the best price. In reality, this may not happen if the relationship and trust between Kettleby and Tesco is strong. It is important that Tesco have a reliable supplier; if Tesco drove prices too low and Kettleby went out of business as a result of having its margins squeezed, it would not be in Tesco's interest, even if they were big enough to secure alternative supplies...
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