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United food company

United food company is specialized in the production and packaging of large


range of food products. As a result of increased demand on the company’s
products, the company decided to make considerable expansion in production
.lines and consequently, an investment budget was set 2 years ago

A team of technical people specified the quality specs for required expansion and
proposed a number of well-known suppliers to the purchasing manager Mr.
Ahmed who is in charge of negotiation with supplier regarding commercial
aspects. As a result of the dramatic increase in prices (costs) during the past 2
years, the finance manager –Ms., Malak asked Mr. Ahmed to employ all means in
.order to accommodate such expansion within the approved investment budget

Therefore, Mr. Ahmed invited vendors to submit their proposals in an open


bidding. Unfortunately the lowest bid exceeded the investment budget by 5%; in
addition, all bidders stipulated an increase in price by 3% after 3 month from
.singing the contract till the end of the contract

On his part, Mr. Ahmed decided to negotiate with the lowest pricing bidder;
therefore, he conducted a preliminary survey of the supplier’s technical
.capabilities which were proven to be outstanding

As a result of that Mr. Ahmed called Mr. Latif, the marketing manager in the
vendor’s company to negotiate the deal. Mr. latif, was not as good in negotiation
.as in technical aspects

After almost an hour of negotiation Mr. latif agreed to reduce the total cost of his
bid from LE800.000 to fixed LE600.000 without any changes in specs, or lead
time or delivery time, and immediately, a contract was singed, a purchase order
.was placed, and a check of advanced payment were made

After 2 weeks Mr. Maher the production manager of the united food company
called Mr. Latif to discuss some technical issues, after many calls, Mr. latif finally
answered saying, “the company did not approve the contract, and he claimed
that fixed price is applicable only for deals that do not exceed LE200.000”. The
production manager informed Mr. Ahmed of what happened, who on turn called
Mr. Sayed, Mr. Latif’s boss who repeated what was said by Mr. Latif, and added
that in addition, “we would not approve a losing deal like this”.

Questions:

1- Who is responsible for the unethical practices? And why? And who behaved
in an irresponsible manner?
2- If you were Mr. Latif whose deal was rejected from top management what
would be your reaction?
3- If you were Mr. Ahmed, would you renegotiate with Mr. Latif in order to
get a solution out of this dilemma? Assuming that – under any
circumstances- this supplier still the best bidder.
4- Assume that you have decided to renegotiate with latif, and you have set
your negotiating range between LE650000 to LE700000 and an increase in
price of 2% after 3 months from singing the contract. What are the various
options available to taper off concessions? And what is the best option?
5- How can the following negotiation techniques be applied in this case.
a- The red herring.
b- Good guys bad guys.
c- The deliberate mistakes.
d- Interests overweigh principals or positions.
e- Tapering off concessions.
f- Acting as a reluctant buyer and the other party may be acting the same
g- Others ….. Mention

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