Reference no: EM133393070

SCENARIO

British Dairies Limited (BDL) is one of the leading manufacturers and suppliers of complete milk plants. At present, BDL is negotiating to sell a milk plant to Saudi Arabia. Earlier, 10 years ago, it has sold a small plant to Kuwait. That is the only experience BDL has had in that part of the world.

Two other competitors; Danish Dairies A/S from Denmark and Global Dairies Ltd from the USA, are also negotiating to get the project. These two firms always compete with BDL in international projects.

BDL came into contact with the Saudis at an exhibition in München. The buying firm, Jeddah Food Industries Ltd. (JFI) is a private concern owned by a powerful group related to the royal family.

The group owns several other industries and also a bank. The background of the project is an explicit ambition of the Saudi authorities to become self-sufficient in basic food industries. At present, around 70% of country's needs for dairy products are imported from Europe (specifically the Netherlands, Denmark and Switzerland). There are two dominating industrial groups in Saudi and JFI is one of these. The other group is already running a milk plant in Riyadh which they bought from the Danish firm.

The project group from BDL has visited Saudi Arabia a number of times and discussed the offer for the project with the buyer. In these meetings, people from both sides met and discussed technical specifications and other terms for the project. BDL has been invited to visit Saudi Arabia for final negotiations. Most of the technical details and some other terms have been agreed upon and all parties are quite optimistic about an agreement.

NEGOTIATION TEAMS BDL

Peter Plan, Vice President responsible for the Milk Plant division. Earlier, he was working as Marketing Manager and has enough experience of international projects of this type. He was also involved in negotiations for the project in Kuwait, as a team member.

Sam Skeptic, is an engineer and has prepared all the technical specifications several times together with the buyer's representative, Alex, the buyer's consultant.

Nicky Control, is a relatively young MBA from LBS who has been working with BDL for the last three years. This project is the largest so far and the first one with an international dimension. Nicky is very ambitious and has been working intensively with the offer.

James Thesaurus, is an interpreter from a communication consulting firm from London. He has extensive experience of working with Arab countries and has been helping different British and Irish firms in Saudi Arabia (His wife is from Egypt).

JEDDA FOOD INDUSTRIES LTD

Sheikh Rahim, is the President and owner of JFI. He is also the leader of the negotiation team. He is around 50 and has studied law at Oxford. He owns several industries and is very rich and influential. He controls most of his industries himself and is therefore, a very busy person.

Mohammed Mustafa, is an engineer and is expected to be the first Managing Director of the proposed Milk plant. He is 45 years old and has been studying in Europe and the USA. He has a solid background in technical side of the food industry.

Alex Moneypenny, (a relative of Mrs Moneypenny, secretary to James Bond's Boss, M), is Vice President of Sahara Consulting Group in Jeddah, a British Saudi consulting firm, which specializes in projects between Saudis and western firms. Moneypenny was responsible for the project feasibility study, carried out for JFI.

Faisal Mahmood, is Secretary of State for the Department of Industries. He takes part in the negotiations for all big projects between Saudi's and western firms and is responsible for questions on taxes, custom duties, residence permits and other government rules and regulations.

THE PRESENT SITUATION

This is BDL's first project in Saudi Arabia, and there are good chances that if they get this project it will be possible to get more projects in Saudi. At its head office in Manchester, BDL has recently invested in new machinery and equipment and its capacity has thus been enhanced. BDL offered the project at a price of € 350 million with the following terms of payment and guarantee period of 12 months.

20% at contract signing
30% when installations start
30% after first prove run
20% 3 months after the first prove run

Danish Dairies A/S has earlier delivered a project to Saudi to another party in Riyadh which is functioning very well. Alex Moneypenny has disclosed to Sam Skeptic, (perhaps with the consent of Sheikh Rahim) that the price offered by the Danish firm, for the same project, is much lower. However, he also said that BDL's technical solution is perhaps considered a bit better.

BDL does not know much about the American offer. However, they know that Moneypenny has all the information on them. There is a rumour that the Americans have very good contacts with some local important people, so called "Middlemen" and that they are working on Sheikh Rahim and the government representative Faisal Mahmood.

Task:

As Mohommed Mustafa of JEDDA FOOD INDUSTRIES LTD, how would you negotiate with BDL? What are the questions and points you will highlight at the face-to-face negotiation table?