Personal Selling

Faurecia is a French based automotive parts producer, headquartered in Paris, France.The company is comprised of many divisions that produce different parts, including seating systems, dashboards, and braking systems.The automotive exhaust system division was the most high profile within the company.This division had various operations around the world that supplied large automotive companies in France, Korea, China, South Africa, and the United States.

Automotive exhaust systems involve the use of tubing to guide exhaust gases away from the combustion engine in a car.Automotive exhaust systems are produced using primarily stainless steel, as this material resists corrosion and withstands the high temperatures associated with automotive exhausts.Faurecia purchases about 150,000 tonnes of stainless each year, which represents nearly 2% of the global market - a significant share for one single buyer.However, the stainless steel industry in the last ten years has seen many mergers and acquisitions.As a result, the number of global players had reduced from around thirty to fifteen.Most stainless producers were focused on directing their steel to Asia, especially the growing and recovering Chinese market.

The division's central purchasing department was located in Paris.Each regional operation within the division also had its own purchasing representatives, who were responsible for the day to day logistics and communication with the local stainless steel producers.The central purchasing department was responsible for taking the lead on annual negotiations in conjunction with local representatives.This was to ensure purchasing activities were consistent with overall corporate objectives.As well, the central purchasing department would act to acquire and divert stainless from a variety of global suppliers to its various operations around the world.

Intense competition among numerous parts suppliers, who were dealing with large automotive companies that were putting pressure on parts prices, resulted in Faurercia's executive team placing tremendous pressure on the purchasing department to more aggressively negotiate lower prices for materials.As a result, the purchasing team looked increasingly to more stainless suppliers around the world in order to diversify its sourcing, and hopefully obtain better prices.

In 2003 Europe prices were quoted around $1100-1200/tonne.In the United States, prices were being agreed at around $1200-1300/tonne for the same year.Prices were typically higher in the US due to different market conditions and the fact that transportation costs from overseas would naturally mark-up prices of imported stainless.The purchasing team had looked to Korea in 2004 as a new source of stainless steel.The main producer in Korea, POSCO, was viewed as the lowest cost and most efficient producer of good quality stainless in the world.POSCO focused on standard commodity grades of steel, shying away from more specialised products, and produced 1.0 million tonnes per year.Faurecia looked to Korea as a new source of lower priced stainless.Faurecia was targeting Korea as a source of stainless steel primarily for its Chinese operations, and POSCO appeared willing to enter into a new commercial relationship.POSCO was reported to be selling to some customers at a price of $950-1000/tonne.

In 2003 the company had entered into early discussion with POSCO, and by October of that year both companies had come to an understanding that Faurecia would purchase 1,000 tonnes per month in 2004 from POSCO, By January of 2004 POSCO's sales team was considering asking for higher prices over 2003.This was because of the rising costs of raw material to make stainless, especially chromium, nickel, and steel scrap, they could not conclude the deal at the prices agreed upon back in October.These raw materials had risen by 50% from October 2003 to January/February of 2004. Raw materials represented about half of the costs of producing their stainless steel.POSCO now had to consider its selling model and approach to Faurecia, and how it was going to present its sales request.

Task:

Using the strategic consultative/selling model, and acting as POSCO, discuss:

-What the personal selling philosophy of POSCO should be

-How should POSCO build up a long-term relationship with Faurecia

-Discuss POSCO's customer strategy

Then using the Presentation Plan Framework, discuss:

-Your approach to the presentation'

-The details you will present

-The flexibility you may show in negotiations