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Introduction
Pacific’s Background
Pacific Oil Company, previously known as the SweetWater Oil Company, started out in 1902 as a pioneering venture of an oil business in the north central Oklahoma, USA. It went through a series of expansion and acquisition first in 1920s and 1930s, Hutchinson did it and renamed it Pacific Oil Company. Apart from owning major coal beds in the US and oil holdings in North Africa and Middle East, they also have a large network of independent gasoline stations which gives them an edge over it’s competitors.
Pacific is also a leading manufacturer of industrial petrochemical raw materials, with some of these products being made by very few companies around the world, making the market a supplier’s market through which Pacific had gained considerably over the years. ...
Having a broad portfolio of activities, it was important for Pacific that all it’s employees had proper reporting relationship based on their daily action, rather than the nature of their actions. ... This type of matrix-like relationship among its employees made Pacific more dynamic, as decisions relating to a particular area of expertise could be addressed with little overhead from bureaucratic purposes. For any multinational company like Pacific, this was certainly one of the biggest operational efficiencies. ... Reliant already had developed a small polyvinyl chloride production facility at Abbeville, France, and Pacific constructed a pipeline from its petrochemical plant at Antwerp to Abbeville. ... This fared very well for Pacific as it provided them with the sufficient leverage to negotiate favorable agreements. ...
However, the market was poised to change significantly between the period of 1985 and 1990 with some of Pacific’s major competitors, installing new facilities and therefore putting an upward pressure on the supply of this product. ...
Reason for Renegotiation
Pacific, being a dynamic organization, keeps constant tap on its markets and reviews its existing policies and partnerships for any need for change. This keeps Pacific always prepared for the trends in the market for the next 3-5 years. ...
The end of the extension of the contract with Reliant was in line with the projected changes in the market, and this made Pacific’s position more unstable to the upcoming threats.
Consider all the above, and also Reliant being a major customer, Pacific felt that it was very important that they renegotiate the deal well before in time, so that they could ride through the negative forces that were to come into effect into the near future without any problems.
Theoretical Evidence
Negotiation
The Definition of Negotiation: Negotiation is process where two parties come together to receive some benefit from each other. ...
From the case Pacific Oil Company we can observe that two companies namely Pacific Oil and Reliant Corporation acted as two parties, who came together to reach to an agreement that mutually benefited them. From the Pacific Company’s point of view the exchange of resources in this negotiation was selling VCM to a permanent buyer even if the market is down where as the Reliant Corporation also ensured by the negotiation a permanent supplier for one of their core product.
Negotiation Described:
Cooperative process
There was evidence of cooperative processes between both the parties since they already have signed agreements twice in 1979 and 1982.
Agreement
When Pacific Oil Company’s Marketing Manager Fontaine and VCM’s manager Gaudin presented the renegotiations proposed to the Vice president of Europe for Reliant Corporation Haumptmann and purchasing manager Zinnser they agreed to the proposal. ...
Adversarial relationship
Pacific Oil Company is one of the largest and best-known worldwide producers of industrial petrochemicals. The product line of Vinyl chloride monomer (VCM) is one of major’s industrial chemical lines for the Oil Company. Therefore they are the sellers in the negotiation. ... VCM is a raw material that they have been purchasing from the Oil Company for about 11 years. ...
Conducted through Agents
Mainly the managers for both the parties dealt several meetings of the negotiation process hence they acted as agents. None of the CEO or high level authority directly worked on the negotiation project. ...
Fear and Negotiation: Negation processes usually are lengthy, stressful and monotonous because many conflicting issues need to be settled here. ...
Therefore, the conclusion must be that we should negotiate although negotiation involves conflict. ...
Time Phases of Negotiation: There are five time phases in negotiation process, they are as follows:
Relationship Development: Relationship should be developed before starting to negotiate. ...
Pre-negotiation: In the pre negotiation process, the issues should be made ready to be discussed in the meeting and also information should be collected on the other party’s executive’s who would be present during the negotiation. ... So they thought of first approaching the Reliant Corporation with the new five yeasr proposal and then inform the superior authority about the situation of the negotiation. In the pre negotiation periods they however did not expect any major complications and thought the Reliant negotiators would ask minor usual predictable questions, which later on proved to be wrong.
Negotiation Event: This is the ultimate event for which all the team members from both the parties waited so long. ...
Post Settlement: Since in the case there is no proper conclusion of whether they have had the deal or not, the negotiation process did not reach up to this stage of the time phase. ... Within the time period the Reliant Corporations was impressed with the Pacific Oil Company for supplying good quality product. The Pacific Oil Company also acknowledges that dealing with Reliant was very profitable. ... The Pacific executives maintained it during the gap they had between the renewals.
Types of Negotiation: Pacific Oil Company –Reliant corporation negotiation was pure joint problem solving focusing more on the cooperation than on the conflict and self interest. The managers of both the companies seem eager to solve problem regarding conflicting issues for instances while negotiation Zinnser mentioned to Fontaine that the future market may not be good and there are other two companies coming in 24-30 months making the market even more complicated. ... The other natures of the negotiation also support that the negotiation is a joint problem-solving sort.
Variables in Negotiation Style
Variables in Negotiation Style The Negotiation Between Pacific
Oil Company- Reliant Corporation
Nature of Issue .Multiple issues involved
Relationship of Parties Interdependent
Type of Parties Both acted in some way givers & takers
Time Available Long
Balance of power Dynamic/even
Nature of Issue: Multiple issues were dealt in the negotiation. ...
Relationship of Parties: The relationship between the parties were interdependent as Reliant had to depend on pacific for the supply of quality VCM as well as the Oil company had to depend on Reliant for the timely purchase of VCM in order to earn revenue. ...
Time Available: The negotiation process was quite long continued for more than a year time. ...
Balance of power: In the negotiation process, both the parties had more or less equal power. However in some situations we see that the manager of Reliant was in a better position to dictate than the managers of Pacific Oil Company.
The Dual Concern Model: The negotiation between Pacific Oil Company and Reliant fell under the category of joint problem solving. However it seems in some state that the managers of the Oil Company were more interested in ending the deal at the cost of the company’s interest. ... So the conclusion is though the negotiation is a joint problem solving one, it lies some where in between yielding and problem solving in the duel concern model.
Concern for
Reliant’s
Needs
Concern for Pacific’s Needs
= The position of the Pacific Oil- Reliant negotiation in the duel concern model
Culture
Cultural Differences:
Cultural difference usually is great barrier in the negotiation process.
Approximate Word count = 6454
Approximate Pages = 25.8
(250 words per page double spaced)
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