Pacific Oil Company, like many major oil companies, produces fuel and diesel oil, gasoline, and a variety of industrial chemicals. One of its major industrial chemical lines is Vinyl Chloride Monomer—VCM—primarily used for the manufacture of polyvinyl chloride plastics. Pacific Oil had a number of VCM customers in its European market, one of whom was Reliant Corporation, which manufactured plastic pipe and pipefittings for residential and industrial plumbing. Pacific had negotiated a sales agreement with Reliant that had been renewed. During the term of the contract and because of changing market conditions, Pacific decided to try to get the contract extended beyond its current expiration date.
Pacific Oil Company had established a four-year agreement with Reliant Chemical to sell VCM. In October, this agreement was successfully renegotiated to extend to December. However, by December, Pacific was deeply concerned about the status of the contract, for the following reasons:
The market for VCM had been in a significant "shortage" situation for years. However, a number of new chemical plants were being built, and between the added capacity to produce VCM and a drop in demand, it was clear that the market would be oversupplied in a few years.
1. A few large customers that bought huge amounts of VCM dominated the market. It was therefore important to keep contracts with these customers, because if a company lost one, it would be almost impossible to make up the business with new customers.
2. Corporate headquarters of Pacific Oil was talking about setting up a new company division to produce its own line of PVC products. If Pacific entered the PVC market, it would buy its own VCM chemical stock and not have to be as dependent on external sales.
As a result, Fontaine and Gaudin decided to try to get an extension of their contract with Reliant past the expiration date, while at the same time trying to determine whether Pacific was going to get into the PVC business on its own. The case describes the deliberations between Fontaine and Gaudin and Reliant’s two major negotiators, Zinnser and Hauptmann.
You are to write a nine – ten (8-9) page report that answers the following: Describe the problem that Pacific Oil Company faced as it reopened negotiations with Reliant Chemical Company.
1. Identify the strengths and weaknesses of Fontaine and Gaudin’s negotiating strategy in their deliberations with Reliant Chemical Company.
2. Identify the strengths and weaknesses of Hauptman and Zinnser’s negotiating strategy.
3. What action should Fontaine take at the end of the case?
4. The format of the report is to be as follows:
Typed, double spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format.
• Use headers for each of the criteria, followed by your response.
• In addition to the 8-9 pages required, a title page is to be included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date.
• Written assignments must have a title page, abstract, section headers, introduction, conclusion, and reference page.
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