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1. Describe the problem that Pacific Oil Company faced as it reopened negotiations
with Reliant Chemical Company in early 1985.
The main issue which Pacific faced when it initiated negotiations with
Reliant Chemical Company was about the supply and the demand conditions. False
assumptions were made about the undersupply of VCM in addition to this; it was
believed that costs would rise. Both Gaudin and Fontaine, the negotiators in the case,
had several issues to address. Among them, the most basic issues were about how to
bargain for the desired price. The increase in demand for the product will result in a
scenario in which the Pacific most likely will be in an ideal spot to seal the profit
margins in contact with Reliant Chemical Company. One of the main points
concerned the relationship between the companies. Both companies were in a positive
relationship concerning the supply and demand of VCM and this factor without a
doubt was extremely fruitful. In the light of the prevailing market conditions,
competitive pricing from formula pricing techniques, the business deal will be ideal
for both companies. However, unfortunately, turn of events altered the expected
course of negotiations. The supply of VCM that initially was thought to be less,
suddenly gained traction and as a result a number of chemical companies initiated the
installation of the appropriate systems with the intention to manufacture VCM with
the expectation that it will come into play within the coming 20 to 30 months with the
insurance that there will be no oversupply and the costs will go down. Reliant with the
sole purpose to ensure it took a stand that they will not be able to agree to a five-year

contract and after some deliberations, a three-year contract was settled. As a result of

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changes in formula prices, this contributed to the reduction of revenues for Pacific
through margin. Reliant additionally negotiated over the minimum possible quantity,
and this also resulted in a reduction of revenue of Pacific.
2. Evaluate the styles and effectiveness of Messrs. Fontaine, Gaudin, Hauptmann,
and Zinnser as negotiators in this case.
Messrss style of negotiation was based on hard realities. Messrs
undoubtedly did it by the facts mentioned in the given case. Fontaine, the marketing
managers style completely turned the deal for Reliant Chemical Company. He most
likely lacked any negotiation skills and agreed to the offer from Reliant Chemical
Company and as a result, the package was prepared that resulted in the loss of the
Pacific Company. The idea concerning the reduction of formula prices and later the
minimum buy were two heavy decisions for both Fontaine and Gaudin. No doubt, this
resulted in the reduction of the revenues. Both Hauptmann and Zinnser were
negotiators from the Reliant Chemical Company (Spangler et al., 2003). They raised
the issue of leakage of pipes and forced Pacific to modify their meters. This cost
Pacific $20,000. Hauptmanns style was very effective, and he always used higher
management with the sole purpose to win over the negotiators of Pacific Company.
Zinnser, on the other hand, was the head of the negotiation appointed from the Reliant
Company. He had severed the company in fending off the competition. Two last
clauses in the contract are very important. According to these clauses, Pacific was
responsible for protecting Reliant. It was agreed that Pacific would not make a deal
with any chemical company manufacturing VCM. Furthermore, in the case of a deal,

Reliant too will get the opportunity to present the products and get raw materials by

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the contract. These clauses resulted in no threat situation for Reliant. Another clause
that was specifically added to the contract made sure that the Reliant take the
maximum benefit from the contract. It is clear from the case that both Gaudin and
Fontaine possessed a defensive style and during the negotiations, they agreed to
almost all the clauses raised by Reliant and eventually lost the contract. It would be
right to say that both of them lacked knowledge and appropriate information
concerning VCM (Barry, Lewicki, & Sanders, 2006). In contrast, the negotiators from
Reliant were well informed and understood all the desired information about the
VCM. Their negotiation styles were aggressive and tactful. All the clauses directly or
indirectly favored the Reliant. The negotiators from Reliant forced the top
management to accept them, and this resulted in a contract that benefited Reliant at
the cost of Pacific Company loss. The process of the relationship was perfectly
addressed by Reliant, and they had some deliberations that eventually resulted in
delay and because of this delay Pacific Company lost the opportunity to cater the
needs of their potential market and turned desperate to accept the contract. Because of
all the mentioned factors, Pacific is now responsible for the fluctuation in the market.
Furthermore, Pacific is also dependant on the sales of Reliant to evaluate its financial
performance.
3. What should Frank Kelsey recommend to Jean Fontaine at the end of the case?
Why?
Frank Kelsey undoubtedly was against the option to grant them any
immunity against price and competition. Frank additionally advised not to

compromise on these clauses because they most likely will benefit from it and

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eventually it will result in loss of Pacific. Later the Reliant raised another point
concerning the minimum buying. They said that market is giving an indication that
the sales of WCM might drop. This vital decision led to another important clause that
stated the conditions of reselling. According to the clause, if the product bought from
Pacific Company annoy because of the low demands, Reliant can sell the product
back to Pacific. This clause was a financial disaster and most likely will negatively
influence the warehouses because of oversupply. Collectively, all the clauses resulted
in a contract that was not for Pacific Company. Kelsey specifically advised not to shift

the position from these specific points within the contract.

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Bibliography
Beyond Intractability (2003) Available at: http://www.beyondintractability.org
(Accessed: 14 January 2017).
Lewicki, R.J., Saunders, D.M. and Barry, B. (2014) Negotiation. 7th edn. Boston:
McGraw Hill Higher Education.
Spangler, B. (2009) Problem-solving mediation. Available at:
http://www.beyondintractability.org/essay/problem-solving-mediation

(Accessed: 14 January 2017).

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