Reference no: EM132964337

Automotive Fabrics - Negotiation Case Study 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:

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

• Athena Corp. - Annual sales of approx. $ 40 million dollars, located in Bowling Green, Kentucky..
• Cybaris Corp. - Annual sales of approx. $ 50 million dollars, located in Charlotte, NC.
• Medusa Corp. - Annual sales of approx. $ 20 million dollars, located in Columbus, OH.
• Orion Corp. - Annual sales of approx. $ 35 million dollars, located in Grand Rapids, MI.

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:

• 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.
• Queen Corporation, located in Knoxville, TN, requires 250,000 yards of the fabric for 2001, but volumes for 2002 and 2003 are uncertain.
• 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.
• Duchess Corporation, located in Lansing, MI, requires 200,000 yards of the product, and volumes are expected to decrease somewhat in 2002 and 2003.
• Prices for similar fabrics are in the $12.00 to $15.50 price range per yard.
• All identified suppliers are able to produce to specifications provided by the purchasing company. However, quality performance related to the product can vary greatly.
• Individual cost structures of the firms providing the fabrics can vary significantly.
• Suppliers provide widely different levels of service and technical support.
• All suppliers have to satisfy the same quality and delivery terms, payment terms, and transportation (FOB seller's plant).
• Industry capacity utilization is about 75 percent.
• All purchasing companies have purchased relatively small amounts from all of the suppliers previously, never totaling more than $100,000 per purchase.

Questions:

1. If you represents a buyer, consider the different suppliers - which one would you select? What type of contract would you use? If you represents a manufacturer, consider the different purchasers - which one would you select? What type of contract would you use?

2. What are the risks and rewards to consider in this case? How can you balance these risks and rewards?

3. How will you prepare and negotiate a contract?

4. Based on the information within the case, which elements would you include within the draft contract? Why?