Automotive Fabrics - Negotiation Case

Purchase Negotiation Case:

Common Information

This simulation involves negotiating the purchase of an automotive fabric. The following information is common to all groups participating in the negotiation:

n There are four potential manufacturers of textile products. These include the following:

n Athena Corp. - Annual sales of approx. $ 40 million dollars, located in Bowling Green, Kentucky..

n Cybaris Corp. - Annual sales of approx. $ 50 million dollars, located in Charlotte, NC.

n Medusa Corp. - Annual sales of approx. $ 20 million dollars, located in Columbus, OH.

n Orion Corp. - Annual sales of approx. $ 35 million dollars, located in Grand Rapids, MI.

n There are four potential purchasers of textile products. These companies are second tier automotive suppliers, who supply the major automotive companies located in Michigan, Ohio, and the Southeast. These companies have all purchased in small quantities from all of the suppliers, and include the following:

n King Corporation, located in Greenville, SC, has requirements for 150,000 yards of fabric for 2001. The products will be required in 2002 and 2003 according to current plans, and volumes are expected to increase.

n Queen Corporation, located in Knoxville, TN, requires 250,000 yards of the fabric for 2001, but volumes for 2002 and 2003 are uncertain.

n Duke Corporation, located in Cleveland, OH, requires 100,000 yards of the product, and production volumes required are expected to increase by 50% or more in 2002 and 2003.

n Duchess Corporation, located in Lansing, MI, requires 200,000 yards of the product, and volumes are expected to decrease somewhat in 2002 and 2003.

n Prices for similar fabrics are in the $12.00 to $15.50 price range per yard.

n All identified suppliers are able to produce to specifications provided by the purchasing company. However, quality performance related to the product can vary greatly.

n Individual cost structures of the firms providing the fabrics can vary significantly.

n Suppliers provide widely different levels of service and technical support.

n All suppliers have to satisfy the same quality and delivery terms, payment terms, and transportation (FOB seller's plant).

n Industry capacity utilization is about 75 percent.

n All purchasing companies have purchased relatively small amounts from all of the suppliers previously, never totaling more than $100,000 per purchase.

Assignment:

Students will work in small groups and participate in one face-to-face negotiation session. Group size will not exceed 3-4 people for either the buying or selling negotiating team. Each group will develop a brief written negotiating strategy prior to the negotiation which is to be handed in to the instructor, then conduct an actual negotiation session with an assigned buyer/supplier group from the class. (*Note that an agreement may not always occur with an assigned group). Eventually, each pair of groups will develop jointly a written contract that documents the outcome of the negotiation process. The instructor has an information packet for the buyer and the seller which provides additional information required to prepare for and conduct the negotiation. Buyers and sellers can share as little or as much of the information with each other as they desire during the actual negotiation.

Groups must prepare properly before conducting the negotiation. Each group's negotiation strategy should be developed prior to the negotiating session. All group members are to participate in the research planning as well as the actual negotiation. Remember, price is not the only variable subject to negotiation. Be creative when crafting your agreement.