Pack Tech, Dubai: Does trust exist in business relationships? Case Write-up By: Kshitij Sinha, Salil Garg, Kamran Khan, Tania Adhikari
About Pack Tech Pack Tech is a family-owned, medium-sized, flexible packaging material converting company based in Jebel Ali Free Zone, Dubai. The company was started in 1997 and has grown five fold over the last 10 years. Today, it exports 70% of its products to 20 countries and imports its raw material from five different countries. The company produces 2 types of products, namely, 38 micron aluminum foil lids & 35 micron polypropylene film labels. 38 micron aluminum foil lids are used for sealing polystyrene, polypropylene & other kinds of plastic containers for yoghurt, fruit juice & water. 35 micron In 2009, as a result of the strained relationship with Riyaz, Dhillon started to source material from Pack Tech’s competitor in Dubai to meet his customers’ demand & to purchase only small quantities of material from Pack Tech. Riyaz chose to limit business with Dhillon and to strictly follow up on payment collection. Gradually, Pack Tech lost Dhillon’s business to its competitor.
Greece Agent A foil rolling mill in Greece was the sole supplier of aluminum foil to Pack Tech and also provided full technical support in developing products and markets. By 2005, Pack Tech’s monthly consumption had grown to about 100 metric tons. During the 7-year period, a strong business relationship was established between the foil mill & Pack Tech managers and there was transparency between the companies. Pack Tech maintained a good relationship with the supplier, without any payment delays or issues. A very high level of mutual trust & transparency developed between the 2 companies. Starting in 2006, metal prices gradually increased by as much as 50% and the rolling mill’s energy cost went up by almost 100%. The same year also saw an increase in euro-dollar parity. Pack Tech had previously absorbed any price increases imposed by the foil mill. But by April 2007, Pack Tech’s average consumption had grown to 150 metric tons per month & it could not pass price increases on to its customers because its competitors were buying foil in dollars from India, China,
