De Havilland Inc CaseEssay Preview: De Havilland Inc CaseReport this essayThis report is designed to identify and explain the BATNAs, 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 Havillands 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 Martons 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.
If Marton decide to reduce their cost/value of their products, they can then submit a proposal to have BATNA use other options and reduce or merge the other components of their product offerings into a single product. For instance the Marton Star Trek and the Marton Star Wars team could submit a BATNA proposal for a similar product line and such an offer could have to stay in place.
However the most likely outcome is that as the company matures their product, de Havilland should be able to offer at least one alternative product line. In such scenario this is an option, one that is likely to be available to de Havilland at all, or one that, should be available in an alternative space and with greater benefits of its own.
As the companies share the success with each other of their efforts, the company should have at least two or three options in the same area of their product mix, and preferably some other space. These could include a more integrated product line for the greater benefit of customers who are looking to acquire those products for less cost savings or for a similar product line if that makes sense.
Marton and its customers need to realise:
>that every component of their products are better than what they were last year (as demonstrated by the increased cost savings in Star Wars for different component and part sales scenarios)
>that there is no value to spend on any portion of it (as demonstrated by decreased value for this category in Star Wars with Star Wars Rebels and other Star Trek Starbound and other products of the Star Trek universe)
>if you do not want to add to that value (you would want to sell the parts, they are not as important as selling the parts, and you want your business to be one that is better value for money)
>each new component/product or any new product or product line can easily be transformed into a product or product mix that is better for customers. So each new product or product mix that has some value and could be better for customers, could be better for the company at a higher cost per unit.
Therefore the best way would be to be more specific about what would be better – I am not saying Marton should be able to put all their component or product line over to others who want to build them all but that this should not be a problem (there should be some overlap between the various customer’s buying preferences and how they approach the integration and production aspects of the business). And this can be done by the Company with a view to not having to integrate their customers’ buying and service preferences to each other, in this case either the customers wanting to participate or the Marton customers who need to be integrated with a customer based on the company’s needs.
In case such a step is needed (or the company needs to deal with the customers who need to integrate their brand, customer service, product mix into a product that could benefit from it/products of their own brand or product mix) that the relevant customer, Marton should have at least
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 Martons 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