The Pacific Oil Company (Essay Sample)

The Pacific Oil Company
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The Pacific Oil Company
Problems Pacific Oil Company Faced As It Reopened Negotiations with Reliant Chemical Company in Early 1985
One of the main problems the Pacific Oil Company faced on reopening negotiations with Reliant Chemical Company is increased competition. Several companies that produced similar products as those of Pacific Oil Company had announced plans for the construction of vinyl chloride monomer (VCM) manufacturing facilities, which were expected to be functional within the next 20 to 30 months. With many of its major competitors developing their VCM manufacturing facilities, it follows unconditionally that their cost of production reduces. A reduced cost of production often has a significant impact on the buyout prices of the products. Hence, Pacific Oil Company, which was still dependent on Reliant Chemical Company to supply it with VCM, was subject to massive competition from the rivaling companies that will be producing their raw materials. This eventually puts Pacific Oil Company in an awkward position in setting prices of products for which customers are willing to pay while at the same time maintaining its competitive advantage in the market.
With several other companies planning to establish VCM manufacturing facilities, it is obvious that the supply of these products is likely to increase. As a principle of demand and supply suggests, increase in supply of products and services without a proportional increase in demand, brings an imbalance in the market. Therefore, an increase in the supply of VCM in the market with no increased in demands at the same measure will certainly trigger a drop in the value of the product. With the Pacific Oil Company aware of this principle, it has to ensure that the Reliant Chemical Company reduces the prices of the VCM products by significant percentage in order to meet the changes in the future market. However, Reliant Chemical Company will not easily accept to reduce the value of its products on reasons that are not yet a reality in the market. Due to that, it becomes a challenge for Pacific Oil Company to negotiate the terms of a new contract that guarantees better returns with Reality Chemical Company.
The Pacific Oil Company is equally likely to find problems in maintaining its current customers, as well as attracting more customers to its operations. It is undisputed in a situation where the market turns from high demands to excess supply; customers are bound to move from one company to the other in search for better offers. Excess supply leads to increased surplus levels, which consequently decreases the purchase price to clear off excess stocks. Nevertheless, all business ventures aim at making profit. Thus, the Pacific Company ought to devise strategies with which to cope with the market situation, which is prospected to have excess supply of the VCM. It can achieve this by increasing its production while at the same time maintaining its customers. This is a huge challenge, which the management of Pacific Oil Company mandatorily has to consider before signing a new long-term contract with Reliant Chemical Company.
Styles and Effectiveness of Different Participants in the Renewal of the Contract between Pacific Oil Company and Reliant Chemical Company
Jean Fontaine is the marketing Vice President of Pacific Oil Company in Europe. He is the main ambassador of the company’s operations across Europe. Alongside advertising the operations of Pacific Oil Company, Fontaine ensures that only deals that are productive and beneficial for the company go through. Like any other marketing agent, Fontaine is responsible to bring business partners with the best offers and quality to the company (Fifield, 2012). As for the case study on Pacific Oil Company, Fontaine’s approach of consulting other stakeholders of the company before deciding if the company should or should not sign a new contract, is commendable. However, he does not consider the future situation of the company and the long-term eligibility of the contract. This subjects the Pacific Oil Company to the risk of getting losses if it signs a contract whose terms would not be profitable to the company for long.
Paul Guardin is the VCM manager for Reliant Chemical Company. His primary responsibility is to ensure adequate market of VCM at all times. Due to his roles, he is the main link between the Pacific Oil Company and the Reliant Chemical Company. He has established himself as an effective marketer as he consistently holds meetings with Fontaine to ensure the contract between their companies yields. Moreover, he puts the interests of his company first and is never willing to negotiate any terms that would not be profitable to the company. He also works as a team, as he often consults other stakeholders of the company, more so, Zinnser before making any critical decisions on matters affecting the company.
Frederich Hauptmann is the senior purchasing manager of Reliant Chemical Company. He is responsible to supervise and authorize all purchases in relation to the products produced by Reliant Chemical Company (Guth, 2007). In this case, Hauptmann is very effective, as he refuses to justify any long-term (5) contracts between Reliant Chemical Company and Pacific Oil Company. He cites such reasons as rapid fluctuations in demand, pricing structure, and increased competition of Reliant’s product lines as possible factors that may affect the long-term profitability the contract. He does this to avoid any chances of exposing his company into massive foreseeable and preventable economic risk.
Egon Zinnser is the regional Vice President of Reliant Chemical Company’s European Operations, and the immediate supervisor of Hauptmann. In this case, Zinnser negotiates the adjustments of the VCM process from 2% per pound to 1% per pound reduction. This increases the income of Reliant Company. As Garrett (2005) documents, effective contract negotiators must ma...