Pacific Oil & Reliant: A Contract Renewal Negotiation - Paper Sample

Introduction

Reliant and Pacific Oil Company have engaged in business for numerous years. The initial negotiation to renew the contract between the two companies occurred in a very basic manner with Fontaine and Gaudin as the lead negotiators. As a result of the negotiation, the contract was extended to five more years (Lewicki, 2014). However, during the original contract, the supply was low while the demand was relatively high, indicating how stable it was. This meant that negotiating the contract would be simple. Surprisingly, after signing the contract, the demand and supply situation in the market shifted. The future projections suggested an increase in the supply-demand, resulting in fewer clients for the Pacific. The brewing scene in the market prompted Fontaine to reconsider re-signing and maintaining all the present major clients; thus, he proceeded with the negotiation between Reliant and Pacific (Karrass, 2017). This paper will examine the strengths and weaknesses of Fontaine’s and Gaudin’s negotiation strategy, the strengths, and weaknesses of Hauptman's and Zinnser’s negotiation strategy, and then suggest an action that should have been taken by Fontaine at the end of the case.

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

Weaknesses

The negotiation strategy between Gaudin and Fontaine has various weaknesses. For instance, there was no prior preparation for the negotiation. Consequently, critical aspects of a negotiation like the interests, best alternatives, and target points were not properly presented during the negotiation. According to Lewicki (2014), negotiators with effective alternatives to any form of contract often have the upper hand throughout the negotiation and meet most of their objectives and expectations. It is crucial to comprehend that Gaudin and Fontaine had no set goals while engaging in the negotiation. As such, all the parties could determine the best alternatives to the negotiation.

Furthermore, Gaudin and Fontaine being too transparent during the entire negotiation resulted in weakness. According to Stankosky & Baldanza (2018), if a party appears more vulnerable than the counterpart, then the possible adverse consequences of making “information concessions” should properly be considered. In this case, the negotiators revealed virtually everything to Reliant, rendering any negation power that they previously held irrelevant since Reliant could use the unexpected information as leverage during the negotiation. Also, Pacific Oil let Reliant know how desperate they wanted the contract signed, a move that prompted Reliant to take advantage of Pacific Oil. Acts of desperation during a contract often create a conducive environment for the other party to press for their interests more, leading to the party with the upper hand setting high demands (Logrolling, 2018).

Strengths

The only strength in Fontaine and Gaudin's negotiation strategy was the ability to comprehend from their perspective that the contract with Reliant was a key factor to the success of their business. Consequently, they decided to adopt an accommodative strategy. For ages, the accommodative strategy has been applied in a scenario where the negotiator considers the relationship's outcome more essential than the substantive outcome (Karrass, 2017). In so doing, the negotiator lets the other party benefit more with the sole intention of maintaining the existing good relationship between the negotiators. In most cases, the strategy is used when the main objective is to strengthen an existing relationship or build a new meaningful relationship; hence the negotiators purposefully sacrifice the outcome to please the intended party.

Strengths and Weaknesses of Hauptman's And Zinnser's Negotiating Strategy

The negotiation strategy applied by Hauptman and Zinner had various strengths and notably, no weaknesses. Hauptman conducted thorough planning before engaging in the negotiation. The preparation enabled him to establish a coefficient that would considerably regulate the contract’s price per year, leading to Pacific Oil agreeing to the contract. After successfully negotiating the pricing, he went a step further to introduce multiple substantive interests. As Helmold et al., 2020 note, substantive interests are associated with central issues within the negotiation. Some of the issues include financial and economic issues, which highly affect the rates and prices. It is critical to comprehend that the interests may be instrumental, intrinsic, or both; we may insist on a given interest since it is intrinsically satisfying or because it aids us in realizing our long-term goals. Because Hauptman did extensive research on his negotiations, he had informational power, and all his presentations were supported with data and facts. Since the supply in the market was growing, Hauptman and Zinner had a great chance to exploit and achieve leverage and the best alternative during the negotiation (Karrass, 2017).

The Action That Should Be Taken by Fontaine At the End of The Case

Fontaine should avoid letting Reliant obtain the contractual rights or reselling the product if they fail to apply the minimum amount. Moreover, the nature of the contract would not allow Reliant to hold on to its position in the contract, while Pacific Oil remains competitive. Fontaine can also take advantage of the flaws he committed by conceding to every suggestion by Reliant without making trade-offs in the process. According to Lewicki (2014), negotiators should never concede without securing a trade-off of equal value. Fontaine has made Reliant believe he would concede to anything, hence firmly insisting on the contractual rights would leave Reliant with no option but to accept. According to Kizi & Ugli (2019), a negotiator should be aware of his priorities and the other party's priorities. If a party values an interest over the other, then the other party should prioritize more pressing issues. Had Fontaine performed extensive research on Reliant’s priorities and his priorities, he would have stood a better chance to refute the contractual rights for the resale of the products.

Conclusion

Pacific Oil Company illustrated numerous weaknesses during the negotiation, but the nature of their relationship with Reliant was a great determinant of their success. They expressed the value of their friendship from the initial stage of the negotiation, and Reliant took advantage of the glitch. The case elaborated on how revealing too much information during a negotiation leads to the opposition acquiring more power to compromise the negotiation. Moreover, making a lot of concessions during the negotiation poses a severe threat to negotiation interests.

References

Helmold, M., Dathe, T., Hummel, F., Terry, B., & Pieper, J. (2020). Successful International Negotiations. Springer International Publishing.

Karrass. (2017, December 04). 10 Powerful Concession Strategies Of Successful Negotiators. Retrieved April 20, 2018, from https://www.situationalcommunication.com/10-crucial-concession-strategies-of-successfuleffective-winwin-negotiators/

Lewicki, R. (2014). Negotiation, 7th Edition. [Chegg]. Retrieved from https://ereader.chegg.com/#/books/0077499417/

Lewicki, R. (2014). Negotiation: Readings, Exercises, and Cases, 7th Edition. [Chegg]. Retrieved from https://ereader.chegg.com/#/books/1259192024/

Negotiations and Logrolling: Discover Opportunities to Generate Mutual Gains. (2018, February 01). Retrieved April 20, 2018, from https://www.pon.harvard.edu/daily/mediation/mediation-breaking-a-partial-impasse-in-negotiations/

Stankosky, M., & Baldanza, C. R. (2018). 13—Secret of Successful Negotiations: Expand the Pie from the Outset, in 21 for 21. Emerald Publishing Limited. https://www.emerald.com/insight/content/doi/10.1108/9781787437876/full/html