Pacific Oil Company

Introduction

Pacific Oil Company

In 1979, Pacific Oil Company established the first major contract with Reliant Chemical Corporation, one of the major industrial chemical lines, vinyl chloride monomer (VCM). Pacific Oil Company and Reliant Chemical Corporation were currently in a five-year contract that expired in December 1982. Pacific Oil Company knew there was a worldwide shortage of VCM and demand was continuing to rise; as a result, they wanted to obtain a favorable renegotiation of their existing contract.

In February 1982, three years into the current contract, negotiations began. Jean Fontaine, Pacific Oil Company marketing vice president and Paul Gaudin, VCM marketing manager would head the negotiations. After several meetings, the contract was extended from January 1983 to December 1987; both parties signed October 1982.

Jean and Paul agreed the Reliant Chemical Company account had been profitable and beneficial and believed Reliant Chemical Company was satisfied; however, in December 1984, Jean and Paul reviewed their existing chemical contract and the data showed a change in supply-demand; there was a demand for VCM and the demand was continuing to rise. With this information, they feared their long term relationship with Reliant Chemical Company may be in jeopardy. At that point, it was in their best interest to contact Reliant Chemical Company to obtain a contract extension as their current contract would expire in two years. After contacting Reliant Chemical Corporation, re-negotiations began with senior purchasing manager, Frederich Hauptmann, and regional vice president, Egon Zinnser.

Describe the problem Pacific Oil Company faced as it re-opened negotiations with Reliant Chemical Company?

Jane and Paul entered in re-negotiations several years before they should have and lacked experience in negotiating. They failed to perform any research prior to starting the negotiation process and lacked a negotiation plan. Instead, they went in with the collaborative strategy as they believed their only concern would be pricing; the relationship and the outcome were most important to them.

Identify the strengths and weaknesses of Fontaine and Gaudin's negotiating strategy in their deliberations with Reliant Chemical Company.

Strengths:

Pacific Oil Company main strength was the established relationship with Reliant Chemical Company. There focus was to emphasize on the continued lasting relationship to gain Reliant Chemical Company's trust. Although competitive strategy was the intent, poor planning, lack of a negotiation strategy and not setting deadlines caused their strategy to fail. During the negotiation process, good bargaining tactics were demonstrated by