Pacific Oil Company - Strengths and Weaknesses of Fontaine's and Gaudin's Negotiating Strategy

Pacific Oil Company: Case 2

The Pacific Oil Company established its first major contract in 1979 with the Reliant Corporation. The Reliant Corporation was one of Pacific's largest and most valued customers. The Pacific Oil Company went into renegotiations with Reliant Corporation with a goal of extending the current contract for five years before the current contract expired. Jean Fontaine, Marketing Vice President for Europe along with Paul Gaudin, the vinyl chloride monomer (VCM) marketing manager was members of the Pacific Oil Company team. The team representing the Reliant Corporation was Frederick Hauptmann, the senior purchasing manager and Egon Zinnser, the regional vice president for European operation. During the talks, several issues were presented to the Pacific Oil Company in which they were not prepared to address. The case study gave examples of different negotiating strategies and tactics as well as examples of failure when Pacific failed to adjust their strategy in response to Reliant's issues. The analysis of the strengths and weaknesses of both parties are addressed in this paper as well as an analysis of what Pacific Oil Company should do at the end of the case.

Strengths and Weaknesses of Fontaine's and Gaudin's Negotiating Strategy

Strengths. Fontaine's and Gaudin's overall strength was the relationship that was already established with Reliant Chemical Oil Company. They framed their strategy around emphasizing the need for a lasting relationship with Reliant Chemical and by communicating the ways that Pacific had gone out of its way in the past to ensure delivery and service; this is representative of a collaborative strategy. They set the negotiating climate and built rapport during the first negotiation session. There was evidence of good bargaining such as when they agreed to a one cent per pound revision as opposed to Reliant's proposal of a two cent revision on the formula price of VCM. Additionally, Fontaine and Gaudin emphasized the benefits to the supplier for doing business with Pacific Oil Company.

Weaknesses. Fontaine's and Gaudin's advanced planning was not sufficient enough to successfully renegotiate with Reliant Chemical. They approached the negotiations as a somewhat casual encounter without much forethought. Although they knew there would be some give and take, they went into the negotiations thinking that the main issue would be pricing, therefore no other goals were established to the negotiation. Additionally, they made an assumption that the contract would be signed quickly and that the result would be a successful agreement. They did not consult with Reliant Chemical about an agenda or possible issues nor did they brainstorm for possible issues that Reliant could possibly have presented to the negotiation. Lewicki, Saunders, and Barry (2010) wrote that knowing the answers to what issues will be presented to the negotiation and knowing what issues are important to you helps you stand firm on which issues you can afford to concede (p. 37). There were no second-best options or "best alternative to a negotiated agreement" (BATNA) established before and during the meetings in the event an agreement on a proposal was not reached. This may have undermined their opportunity to walk away from the negotiations. Moreover, they did not try to figure out Reliant's BATNA nor did they collect and analyze data about the negotiating style of Reliant's key negotiator, Hauptmann. The negotiations sessions turned out to be more reactive than proactive. Specifically, Fontaine's and Gaudin's lack of planning resulted in them responding to demands and ineffectively attempting to persuade Hauptmann and Zinnser. They should have placed themselves in Hauptmann's and Zinnser's shoes and imagined what they really wanted to achieve. On the other hand, Fontaine and Gaudin could have contacted Reliant Chemical to ask what issues they expected to discuss (Lewicki, et al., p. 37); this would have given them leverage. If that approach had been implemented, it would have been beneficial in helping Fontaine to understand the values, needs, and issues from Reliant's perspective. Because Fontaine and Gaudin did not anticipate possible issues