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30 Jun
2020

Region Negotiation plan

Category:ACADEMICIAN

SOLUTION AT Australian Expert Writers

Negotiation Plan Example.doc.docGeni Cabre (geni@straudico.com)1/2Department – Region Negotiation planexample written by Geni Cabre April 11th 2003My nameCONFIDENTIALTo: My boss via other bossMATERIALOTHER PARTY NEGOTIATION PLANNING GUIDEOTHER PARTY supplies MAIN MATERIAL to Xxxxxx and has just started to produce the XL MATERIAL. The current MATERIAL forPRODUCT A and PRODUCT B is composed of 2 layers, which should be replaced by 2 MATERIAL layers as of July’03. Severaladditional cost savings projects, all related to the new OTHER PARTY MATERIAL, can be achieved in FY 03/04 totalling globalannualised potential savings of 3.8 Million €. Other cost saving projects have been proposed by OTHER PARTY but have also beenrejected by MY COMPANY as would not providing the properties required by the material. Over the past 10 years, OTHER PARTYhas proved to be a good material quality supplier.
UNDERLYING MOTIVATORS
OUR MOTIVATORS
THEIR MOTIVATORS
! Assure supply for MATERIALS in REGION 1 and REGION 2! Minimise cost by price reduction (all plants) and freightcost (NA)! Avoid upcharges for remaining OTHER PARTY suppliedmaterials if NA volume moves away from MATERIAL.! Minimise long term commitments as MATERIAL technologyis planned to be phased out by ~ CY2005! As timing until technology change is too short, most costsaving projects may require too much resources for a shortlife cycle (eg. replacement of RAW MATERIAL).! Due to the 2 Million$ penalty paid in cash to OTHER PARTYin CYs 2000 and 2001, and the business we have giventhem in over 5 years, we believe that OTHER PARTY wouldhave depreciated its lines by Dec’03.! Maintain a good commercial relationship with the OTHERPARTY Group
! Keep the business as MY COMPANY is OTHER PARTY’smain customer! Get a long term commitment to ensure business continuity! Get business to fill up capacity in Italian plant by increasing# of shifts! Start up the FACTORY line (REGION) and move MYCOMPANY FOR THIS REGION volumes there to free upcapacity in COUNTRY X for other customers! Provide savings in material via technological changes onlyand not on OTHER PARTY’s operating costs! Maintain a good relationship with MY COMPANY acrossBUSINESS UNITS
COMMON GROUNDS / SHARED GOALS
! Identify business opportunities with which MY COMPANY can minimise the MATERIAL costs! None of the parties is willing to walk-away as (a) MY COMPANY needs the MATERIAL until ~2005 and timing is too short toqualify an alternative, (b) OTHER PARTY needs volume to ensure business continuity until it has found enough volume fromother customers.
NEGOTIABLE ITEMS
NEGOTIATING RANGES
NEGOTIABLE ITEMS
OPTIMISTIC
REALISTIC
BOTTOM-LINE
Main material pricing as of January 2004” More costumers, split the fixed costs” Start up of FACTORY” MY COMPANY has paid 5.6 Million $ cashand contracted volume for over 5 years.Shouldn’t investments have been repaid?
6% price decrease dueto non-technologicalchanges vs. currentpricing for correspondingsilo
2% price decrease dueto non-technologicalchanges vs. currentpricing for correspondingsilo
Current pricing forcorresponding silo
Length of the new agreement” How much is this 1-year contract worth toyou?” We have to show the technical team that itis worth keeping materials rather thanchanging technology
1 year
1 year (with option ofextension)
1.5 years (with option ofextension)
Additional BUSINESS UNIT business
Additional business =>extra reduction in pricing
Linking to R&D forpotential upstreamcollaboration
No additional interest inOTHER PARTY from MYCOMPANY
MAIN MATERIAL pricing
0.10 €/m² pricereduction (Amount ofFeedstock ABC inMATERIAL must bereduced by TECHNICALDEPARTMENT)
~ 0.08 €/m² pricereduction (newFeedstock ABC is tooexpensive, must reducescrap from 10% to 8%,optimised use ofMATERIAL line)
0.05 €/m² pricereduction (alreadyachieved with last quote)
Increasing volume / silo
>3% price reduction (asin current contract)
3% price reduction (as incurrent contract)
3% price reduction (as incurrent contract)
Negotiation Plan Example.doc.docGeni Cabre (geni@straudico.com)2/2
Last month benefit” Better efficiency of the line & fixed costs
3% price reduction
None
None
OTHER MATERIAL – Price adjustment” Seems quite high if take out Raw Mat’s” Would like to understand what is drivingthis cost” Part of the success of this new product inthe market is its pricing” The technical team is already working onalternative materials / technologies to drivecosts down
0.16 €/m² (~ ConvertingCosts as products A&B +additional 6% pricereduction)
0.10 €/m² (~ ConvertingCosts as products A&B)
Current pricing forcorresponding silo
VALUE-ADDED OPTIONS
VALUE-ADDED OPTIONS
BENEFITS / OBSTACLES
! MAIN MATERIAL business volume! OTHER MATERIALS volume! Length of the contract! Agreement to source REGIONAL volumes from FACTORY=> freeing up capacity in COUNTRY X for other customers! Linking to R&D for upstream projects
! OTHER PARTY is proposing technical changes only (“Ball inMY COMPANY camp”)! Most proposed ideas are not viable due to short life ofMATERIAL! OTHER PARTY’s non-feedstock costs are not competitive! “If starting up FACTORY, operators will need to get onboarded, FACTORY volume would not be enough to fill upcapacity”! “Having more customers does not necessarily meantsavings by splitting up fixed costs as more volume meansmore shifts => more operators and training”
ASSUMPTIONS / QUESTIONS
! Would OTHER PARTY be able to start up FACTORY by January 2004? By when should we expect the confirmation?! We would like to understand the drives of the cost!
1. OPEN THE DISCUSSION / 2. EXPLORE MOTIVATORS
1. Show OTHER PARTY that our Objective is his objective” we want to get the best deal to show internally that it is not worth moving to other technologies / suppliers2. Watch-out is OTHER PARTY not proposing a competitive deal and end up the meeting with many follow-ups to do. Change inbuyer will not help.3. High pressure from market to reduce pricing: consumers find the PRODUCTS too expensive, REGION 1 is considering stopping itfully this year, REGION 1 is working to find a cheaper replacement.4. Major items to be discussed:” Proposals provided during last meeting – follow up with R&D” CY 2004 business opportunities” MATERIAL savings” Length of new agreement” Price of MATERIALs“
MY NAMECc: IMPORTANT PEOPLE TO COPY
Region Negotiation plan appeared first on My Assignment Online.

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