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The case study is based on a ?real-life? problem situation that Sagem, a leading French communication company, is facing in Central America. At this point in time, Sagem is following its expansion strategy in Latin America and has won an invitation to tender for the replacement of 100,000 connections in Mexico. A US$13 million contract has been signed by Sagem for the sale of the 100,000 fixed mobile phones. While the production of the first 5,000 units had been launched in China, the Mexican client decided to make some modifications to the product. The Sagem management team had to cope with unexpected complications in terms of planning, delays, organisation and costs. The renegotiation of the contract is a key issue for Sagem to minimise the harmful impacts of the changes in the production process. More precisely, the management has to take into account the industrial feasibility, the costs, and taxation problems. In addition, this renegotiation has to be handled in accordance with the short and long term strategies of the company in that region. A teaching note supplement ?806-008-9? is available to accompany the teaching note.