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De Havilland Inc Case

Essay by   •  January 25, 2014  •  Essay  •  803 Words (4 Pages)  •  1,644 Views

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This report is designed to identify and explain the BATNA's, Parties,Interest, Value, Barriers, and Power inherent in the negotiation process between De Havilland Inc Request For Quotation(RFQ) for flap shrouds and equipment bay doors for it dash 8 aircraft from Marton Enterprises Inc, it new supplier.

The parts costs that constituted 60-65% of de Havilland's total manufacturing costs was the immediate problem that De Havilland sought to solve; this prompted them to request a 25% across-the-board reduction in the price of parts, as well as demand a long term fixed rate contract for parts supplied by its vendors.

Another issue was the uncertainty surrounding the ability of Marton Enterprises to follow through their quoted price during contract execution, and whether the quoted low price was designed to win contract. If the contrary is the case, the company stand to incur more cost in the long run..

BATNAs:

One possible BATNA for de Havilland is to request Marton to further lower their costs, or switch to another vendor or explore the possibility of incorporating other product mixes and /or product lines into Marton's offer enabling de Havilland to achieve more cost savings or economy of scale. For instance if Martos Enterprise submit a quote of $100000 for only flap shrouds, de Havilland can propose that they throw in equipment bay doors in that quotes as well. Marton Enterprises possible BATNA could be incorporating other product lines to their offer and negotiating better transportation, supply, support services and quality performance terms with de Havilland. For example Marton can offer to provide free training and technical assistant to de Havilland for a one year period after product supply.

PARTIES:

The parties involved in this bid evaluation from de Havilland Inc includes not only the immediate experts in Material, Finance, and Engineering and Quality Assurance but also the top management in the corporation who signs-off on the final deal. Although, the team analysis of Marton Enterprise skills and capabilities will play a vital role in the award of the contract. However, their primary interest is to make sure that Marton Enterprises is sufficiently stable to be relied upon in both the short term but also for long term business relationships. Their review and verification procedures will include Marton's financial statements, audits, visits and inspections. These processes are undertaking to ensure that Martin Enterprises has the ability, capacity and capability to execute the contract.

VALUE:

When doubts about capacity to accomplish the term and condition of contracts are removed, this would engender the potential value creation for both parties in that the buyer will be confident to receive quality and reliable work while the supplier will win the good will of a business client, thereby creating a long term mutually beneficial relationship.

BARRIERS:

A significant barrier to success is the possibility that Marton could have proposed low price just to win contract, and then submits changes that could result in higher cost after contract award

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