Free Essay

Pacific Oil Case Study

In: Other Topics

Submitted By szokepumukli
Words 1256
Pages 6
Pacific Oil Company is a Sweetwater Oil company of Oklahoma City, Oklahoma. It was founded in 1902. One of the major chemical lines of Pacific's is the production of vinyl chloride monomer (VCM).
“VCM is subjected to the process of polymerization, in which smaller molecules of vinyl chloride are chemically bonded together to form larger molecular chains and networks.” Pacific Oil's first major contract with the Reliant Corporation was in 1979. The contract between Pacific Oil and Reliant was a standard one for the industry and due to expire in December of 1982. The contract was negotiated by the purchasing managers in Europe then it was reported to the vice presidents in the states.
In February 1982, Jean Fontaine marketing vice president of Pacific Oil Europe, discussed the Reliant account with his VCM marketing manager, Paul Gaudin. Fontaine and Gaudin agreed that the Reliant account had been extremely profitable and beneficial for Pacific and Relaint also, overall the quality and the service of the agreement was satisfied. The latest projections proved that there was a worldwide shortage of VCM and that demand was continuing to rise. If the situation would remain the same for years then Pacific believed that it could justify a high favorable formula price for VCM. Fontaine and Gaudin decided to renegotiate the current agreement, so the strategy would be to ask Reliant for their five-year demand projections on VCM and polyvinyl chloride products.
In their negotiations the strategy would be: keep the successful long-term relationship ensure that all of the projections would have a guaranteed supplier point out the extra effort from Pacific to ensure delivery and services use past and future relationships to appear high formula price point out the ways that Pacific competitors could not offer the same kind of service
The result of this negotiation was a very favorable contract for Pacific Oil, signed by both parties on October 24, 1982 till December 1987.
In December 1984 the yearly review showed that: the basic supply-demand situation on VCM was changing Relaint was aware of the situation, so as a result Fontaine and Gaudin wanted to anticipate the change in the supply-demand situation as an opportunity to pursue a more favorable price re-signing all major customers because of the high demand serious talk about Pacific entering the PVC business or not
As a result of the evaluation a new contract had been proposed in December 1984.
Two strategies:
“First, they would approach Reliant with the intent of reopening negotiation on the current VCM contract. They would propose to renegotiate the current agreement, with an interest toward extending the contract five years from the point of agreement on contract terms.”
“Second, they would contact those people at corporate headquarters in New York who were evaluating Pacific's alternatives for new product development, and inform them of the nature of the situation.”
Gaudin contacted Frederich Hauptman, the senior purchasing manager for Reliant Chemicals in Europe. As a result of the meeting, Hauptman cabled Gaudin that Relaint was willing to begin to renegotiate the current agreement.
March 10
Egon Zinnser, the regional vice president of Relaint's European operations, Hauptman, Gaudin, and Fontaine sat down to review the current VCM contract. They felt that Pacific's basic formula price on VCM is fair, but might not remain competitive in the long-term future. The net result of the meeting would be to reduce the effective price of VCM by approximately 2 cents per pound. This would be a net reduction $4 million per year. The proposal went back to Paris for further discussion. By of May 15, they had agreed on a revision of the formula price that would adjust the price downward by alsmot one cent per pound.
May 27
Hauptman contacted Gaudin to talk about the remaining issues in the contract. Gaudin hoped that Reliant would be willing to agree to extend the contract five years from the point of singing. Reliant had serious reservations about committing the company to a five-year contract extension. Reliant wanted to make a commitment for only a two-year contract renewal. After several phone discussions on
August , 17, Gaudin and Hauptman agreed to a three-year contract renewal. Remaining contract issues will be discussed in September.
September 10
Remaining important issues before signing the contract was the minimum quantity requirements should be raised to 10 percent each year. Hauptman's minimums were too low. No meetings were held until late October. In November the agreement consisted of 205 million pounds of minimum quantity purchases in the first year, 210 million in the second year, and 220 million in the third year.
October 24
Pacific had decided not to develop its own product lines for either PVC or fabricated products.
December 14
A year had passed in deliberations, but still few technical issues remained, such as delivery pipeline being metered. Pacific was in charge of maintaining the pipeline. Reliant was concerned about the condition of the pipeline. No agreement had been made.
January Meetings
Gaudin stated that the investigation of the pipeline had discovered no evidence of significant discharge. Hauptman stated that their own spot monitoring showed it was considerably more and that Reliant would feel more comfortable if the new metering system could be installed. Gaudin agreed that Pacific would remeter the pipeline.
January 23
Zinnser had few small issues of contract language which was going to be arranged on February 3. Pacific Oil had an obligation to write two additional clauses into the contract that would protect Reliant in the event of further slippage in the VCM market. The first was a “favored nations” clause, stipulating that if Pacific negotiated with another purchaser a more favorable price for VCM than Reliant was receiving now, Pacific would guaranteeing that Reliant would receive the same price as well.
The second was a “meet competition” clause, guaranteeing that Pacific willingly meet any lower price on VCM offered by a competitor, in order to maintain the Reliant relationship. Hauptman argued with both of the obligations.
March 11
Frank Kelsey, strategic planning manager of Pacific Oil Comanpy, met with Gaudin and Fontaine in Paris to review what happened in the Reliant contract negotiations over the past year. Since Reliant and Pacific had already settled on minimum quantity amounts, Reliant wanted the contractual right to resell the product if it could not use the minimum amount. Kelsey did not agree with this obligation, but Fontaine debated the point, saying he really thought Reliant might default on the whole contract if they did not get resale rights.

The negotiation could have involved professional negotiatiors, such as “The HackerStar Negotiation” case study. Pacific Oil failed to see the other parties point of view and Reliant also failed to view the situation from the other party's perspective. The hackerStar Negotiation was a very good example because the professional negotiatiors made the other parties understand different poistions and views. The whole negotiation took almost a year to finalize the language in the contract. Both companies were looking at their own good and they did not pay enough attention that the companies were very satisfied with each others work. It will affect their future relationship. All the meetings should have been held in person not over the phone. The outcome will be more effective if the parties can see each others reaction. Phone discussions are not the best ways of solving a problem. Too much time is given to the parties, and cannot see any reaction as it would be in person.

Similar Documents

Premium Essay

Pacific Oil Case Study

...Critical Thinking – PACIFIC OIL CASE STUDY Brian Crummy MGT 470-1: Conflict Management and Negotiation August 31, 2014 The Pacific Oil Company, known for touching off the “black gold” rush began working with the Reliant Corporation in 1979. The first contract between the two was for the purchase of vinyl chloride monomer. As the end of the contract drew close in 1982, the companies worked together to broaden the contract from 1983 to 1987. In 1984 Jean Fontaine, the marketing vice president in Europe for Pacific Oil, and Paul Gaudin began to re-examine the company’s chemical contracts. Upon examination of the Reliant contract, they realized the demand for VCM was rising, and that a new contract could be re-negotiated for a better price. Gaudin contacted Frederich Hauptmann, the senior purchasing manager for Reliant in Europe. From this point, negotiations began. When they first found out about the increased demand for VCM, Fontaine and Gaudin decided to use the two company’s long history together as a leverage point. This point ended up hurting them because Hauptmann asked for a little more concession wise each time the parties met based off the history the two companies had together. Each time, Fontaine and Gaudin agreed to provide these while thinking the negotiation would end with a contract extension like the previous deal with the company. Because of inadequate planning, Fontaine and Gaudin did little to use the power they had over Reliant to secure a......

Words: 486 - Pages: 2

Free Essay

Proc 5840 Pacific Oil Case Study

...Case Study #2: Pacific Oil Company PROC 5840: Pacific Oil Case Study 30 Sep 2013 Abstract This paper assesses a negotiation between Pacific Oil Company, a seller of vinyl chloride monomer (VCM), and Reliant Chemical Company, a buyer of VCM. Each negotiation team’s strengths and weaknesses will be assessed. The Pacific Oil strengths included their negotiation team and the strength of the VCM market. Their weaknesses included poor organizational control, managerial decision making, and their failure to recognize the changing interests of Reliant Chemical and selection of a negotiation strategy. Reliant Chemical strengths were assessed as a strong organizational relationship and management decision making. It recognized, resolved and or reconciled the changing interests of Pacific Oil, derived the best approach for the negotiation, determined the relationship with the other negotiator(s), and selected the appropriate strategy and tactics. Reliant Chemical had one assessed weakness, which was its possible vulnerability to effective counter tactics. The paper concluded by providing a recommendation to close the negotiation with Reliant Chemical on more favorable terms to Pacific Oil. Introduction The Pacific Oil Company negotiation filled with examples of how people (Corporations, Management and Negotiator(s)) should prepare, interact and react during a......

Words: 5908 - Pages: 24

Premium Essay

Oil Companies

...Running Head: PACIFIC OIL PACIFIC OIL CSU GLOBAL AMANDA BAUMAN The case study analyzing negotiations between Pacific Oil Company and Reliant Chemical Company it shows how the role of power can dictate the outcome of negotiations. Pacific Oil did not prepare properly for the negotiations they were entering with Reliant Chemical Company. By assuming Reliant was comfortable with their current contract Pacific failed to properly prepare for any unknowns that arose during the negotiations. Pacific oil was in need of a supplier for VCM in order to produce PVC, navigating a VCM market surplus, and how to navigate the start ups of various businesses. By not entering negotiations with a specific strategy or goals in mind Pacific allowed their selves to lose negotiation power with Reliant Chemical Company. When Pacific Oil Company and Reliant Chemical Company reopened negotiations, assumptions were made that delayed and cost Pacific Oil some negotiation power. As Pacific Oil prepared for the negotiations they failed to do the proper research and homework needed to create successful business plans. Pacific Oil did not understand Reliant’s need, or think ahead to what they might need when reconsidering their contract. By assuming Reliant was just as comfortable as they were with the existing contract conditions, Pacific lost time to gather the necessary information in order to fully understand Reliant Chemical Company. By not having a well thought out and understood......

Words: 1202 - Pages: 5

Premium Essay

Studing

...Pacific Oil and Reliant: a good example of negotiating without the 7 step process Managing Conflict in Negotiations The Pacific Oil Company went into negotiations with Reliant Manufacturing, and its goal was to sign a more long-term agreement. Pacific assumed that the new contract would be signed with no major hurdles or objectives, and that the dominant point of negotiation would be price. Jean Fontaine, who is the marketing vice president for Pacific Oil, went into a negotiation process with Reliant. Jean started the process several years before Reliant Manufacturing’s contract was up, hoping to beat her competition to the lower price offers and leave with a contract extension of 5 years. Unfortunately, Jean did not properly research her client’s needs or adequately project what the outcome might be. Because of this, Pacific Oil Company was not prepared to address the concerns and requests that Reliant brought up during the negotiation. Though both parties wanted to move quickly toward signing a contract, Pacific Oil Company elongated this process because it did not have a thorough negotiation strategy that included a contingency plan or best alternatives. Pacific oil also neglected to draw out its best alternatives or bottom line in advance. Staying on the Same Page in Business Negotiations Pacific believed that other elements of the contract might be discussed, but that no dramatic changes would be expected. Because of Pacific’s lack of strategic planning, they......

Words: 2712 - Pages: 11

Premium Essay

Havard Negotiation

...Concourse | Negotiations https://webster.campusconcourse.com/view_syllabus?course_id=12777 W EBSTER UNIVERSITY • JOINT BASE ANACOSTIA-BOLLING • GEORGE HERBERT W ALKER SCHOOL OF BUSINESS & TECHNOLOGY • MANAGEMENT NEGOTIATIONS PROC-5840 3 Credits 01/07/2013 to 03/09/2013 Section 34 S1 2013 Modified 12/05/2012 MEETING TIMES Saturdays - 8:00am-12:00pm CONTACT INFORMATION Monica Y. Watts, MBA Email: monicawatts98@webster.edu Phone: 202-344-2938 Fax: 202-344-1254 Preferred contact method: Email DESCRIPTION The course involves scope, strategies, and objectives related to negotiated acquisitions. The preparation, conduct, and documentation of the negotiation process are included. Requisites None OBJECTIVES The following is a list of the basic learning outcomes for the course: Identify the strategies, tactics, and skills needed to successfully negotiate an agreement/contract in industry or the federal government. Compare and contrast negotiation process in industry and the federal government. Acquire a working knowledge of the negotiation process that includes planning, closure and documentation. Perform a series of negotiation exercises that will allow the student to apply hands-on negotiation strategies, techniques, and tactics used in industry and the federal government to ensure successful negotiation outcomes (win-win). OUTCOMES The following is a list of the learning outcomes for the course: Graduates will know and explain the important......

Words: 3109 - Pages: 13

Premium Essay

Pacific Oil

...The Pacific Oil Company “Look, you asked for my advice, and I gave it to you,” Frank Kelsey said. “If I were you, I wouldn’t make any more concessions! I really don’t think you ought to agree to their last demand! But you’re the one who has to live with the contract, not me!” Static on the transatlantic telephone connection obscured Jean Fontaine’s reply. Kelsey asked him to repeat what he had said. “OK, OK, calm down, Jean. I can see your point of view. I appreciate the pressures you’re under. But I sure don’t like the looks of it from this end. Keep in touch—I’ll talk to you early next week. In the meantime, I will see what others at the office think about this turn of events.” Frank Kelsey hung up the phone. He sat pensively, staring out at the rain pounding on the window. “Poor Fontaine,” he muttered to himself. “He’s so anxious to please the customer, he’d feel compelled to give them the whole pie without getting his fair share of the dessert!” Kelsey cleaned and lit his pipe as he mentally reviewed the history of the negotiations. “My word,” he thought to himself, “we are getting completely taken in with this Reliant deal! And I can’t make Fontaine see it!” Background Pacific Oil Company was founded in 1902 as the Sweetwater Oil Company of Oklahoma City, Oklahoma. The founder of Sweetwater Oil, E.M. Hutchinson, pioneered a major oil strike in north central Oklahoma that touched off the Oklahoma “black gold” rush Source: Case prepared by Roy J.......

Words: 13412 - Pages: 54

Premium Essay

Oceanic Damage: What Have We Done to Our Planet?

...eliminate many species of sea creatures and destroy the water they inhabit and we need for our survival as well. Countries around the world have been heavily positively praised while some have been lauded negatively, for instance, the United States. A crying shame how most countries on Earth seem in continuing spiraling towards ecological harm in an abundance of forms, regarding ocean garbage, coral reefs and oil spills over a twenty-five year period have caused our oceans’ ecology suffering to escalate. Incidents regarding a floating garbage patch in the Pacific, even cruise ships repeating sewage and garbage dumping are atrocious. The problem is, most people do not pay attention and take situations such as these as non-existent. Evidence documented over decades suggest our oceans’ trouble will continue unless change happens sooner rather than later. Change in how we respond to problems should not take years for resolution, because some of the damage may be minute and builds up over time, while some comes in big bunches that there is not time to waste in resolving. In some of these cases, years elapsed before any significant progress had been made, resulting in more damage than first observed. The problems have similarities and differences, while causes are mostly humans deciding to abuse the ecosystem, and solutions do not come easy. However, we must come together in order to create solutions for fixing oceans and other waterways more quickly than ever to save them, such as......

Words: 4802 - Pages: 20

Premium Essay

Capital Mortgage Insurance Corporation (a)

...Lewicki−Barry−Saunders: Negotiation: Readings, Exercises, and Cases, Fifth Edition Cases 1. Capital Mortgage Insurance Corporation (A) © The McGraw−Hill Companies, 2007 Case 1 Capital Mortgage Insurance Corporation (A) Frank Randall hung up the telephone, leaned across his desk, and fixed a cold stare at Jim Dolan. OK, Jim. They’ve agreed to a meeting. We’ve got three days to resolve this thing. The question is, what approach should we take? How do we get them to accept our offer? Randall, president of Capital Mortgage Insurance Corporation (CMI), had called Dolan, his senior vice president and treasurer, into his office to help him plan their strategy for completing the acquisition of Corporate Transfer Services (CTS). The two men had begun informal discussions with the principal stockholders of the small employee relocation services company some four months earlier. Now, in late May 1979, they were developing the terms of a formal purchase offer and plotting their strategy for the final negotiations. The acquisition, if consummated, would be the first in CMI’s history. Furthermore, it represented a significant departure from the company’s present business. Randall and Dolan knew that the acquisition could have major implications, both for themselves and for the company they had revitalized over the past several years. Jim Dolan ignored Frank Randall’s intense look and gazed out the eighth-floor window overlooking Philadelphia’s......

Words: 31627 - Pages: 127

Premium Essay

Overseas Listing and State-Owned-Enterprise Governance in China

...governance via oversea listing. The ultimate function of corporate governance in SOEs thus relies heavily on public governance. Key words: state-owned-enterprises, oversea listing, corporate China governance, 2 Table of contents I. Introduction ....................................................................................................................4 II. The Governance problems of Chinese SOEs and the limitations of traditional governance problems .........................................................................................................8 A. The Governance problems of Chinese SOEs ...........................................................8 B. The limitation of Traditional Governance institutions in the case of Chinese SOEs...

Words: 30398 - Pages: 122

Premium Essay

Pm Issues

...MARKET TRENDS IN THE ASIA PACIFIC LNG INDUSTRY CONTENTS SUMMARY …………………………………………………………………........... 3 1. INTRODUCTION .………………………………………………………………... 4 2. TRENDS IN ASIA PACIFIC LNG TRADE ………………………………………. 4 3.1 LNG Consumption & Demand – Importing Countries …………………... 4 3.2 LNG Reserves, Production & Supply ……………………………………. 5 3.3.1 Type of Contracts ………………………………………………… 5 3.3.2 Exporting Countries ……………………………………………… 6 3. FUTURE OUTLOOK ……………………………………………………….. 7 4.3 Demand & Import Infrastructure ……………………………………….. 7 4.4 Supply & Production Infrastructure ………………………………..…… 9 4. CONCLUSIONS …………………………………………………………… 9 REFERENCES …………………………………………………………………………… 10 SUMMARY The demand for LNG has grown globally in the recent times and it has grown even more rapidly in the Asia Pacific region where many countries rely solely on imports for all of their gas needs. Gas now accounts for more than a quarter of world’s primary energy consumption. With an increasing emphasis on the environmental issues and the need for cleaner energy, the LNG market is expected to expand at even higher rate in the coming years. This increased demand will put a lot of pressure on the suppliers to explore new fields for development and to enhance their existing production capabilities so as to retain their market share. The purpose of this short essay is to assess the LNG market trends......

Words: 2489 - Pages: 10

Premium Essay

Maritime Terrorism in Southeast Asia

...ISAS Insights No. 8 – Date: 25 October 2005 Institute of South Asian Studies Hon Sui Sen Memorial Library Building 1 Hon Sui Sen Drive (117588) Tel: 68746179 Fax: 67767505 Email: isaspt@nus.edu.sg Wesbite: www.isas.nus.edu.sg ECONOMIC IMPACT OF TERRORISM ON THE SOUTHEAST ASIAN REGION 1 S. Narayan 2 Introduction The most important sea-lane of communication (SLOC) in the Southeast Asian region is the Straits of Malacca, the main passage between the Indian Ocean and the South China Sea. It is 600 miles long and 300 miles wide on its western side. The length of the Singapore Straits, which connects Malacca with the South China Sea, is 75 miles, with an overall width of less than 12 miles. The Malacca and Singapore Straits provides the artery through which a significant proportion of global trade is conducted. Some 50,000 ship movements carrying as much as one quarter of the world’s commerce and half the world’s oil pass through these Straits each year. The second SLOC is the wider and deeper Lombok. It is less congested than the Straits of Malacca, is quite often used as an alternative passage and is considered a safer route. The third SLOC is the 50-mile long Straits of Sunda, another alternative to Malacca. Because the currents are strong and the depth of the water is limited, deep draft ships do not use these straits. The largest SLOC is the South China Sea. It stretches 1,800 nautical miles from Sumatra to Taiwan and is home to four principal island groups......

Words: 3464 - Pages: 14

Premium Essay

Trans Pacific Partnership Agreement

...ABSTRACT Trans- Pacific Partnership Agreement (TPPA) is now sound familiar to Malaysia, this is because that countries is one out of the twelve countries that involve in that agreement. The goals of the Trans-Pacific Partnership (TPP), a much-delayed but significant trade agreement between 12 countries in Asia-Pacific and the Americas pushed by the US are increasingly becoming clearer after ongoing talks reveal some of the intentions Washington is pursuing with this pact. The highlighted of the agreement is to increase in import growth is projected to outpace increase in export growth, as the reductions in import tariffs and non-tariff measures (NTM) are larger for Malaysia relative to the other TPPA countries. According to The New York Times, economists are sharply split over the positive and negative effects of TPP, and both "opponents and supporters of the trade accord have quickly seized upon whichever analysis buttressed their own views. ECIPE has said in 2014 that TPP "will be the first ‘competing’ economic integration that is large enough to have a considerable negative impact on Europe. In the long-term, the negative effects will come from dynamic impact, e.g. on investment, productivity and competitiveness". Pascal Lamy called the TPP ‘the last of big old-style trade agreements’. It has said to be a negative impact on the oil and gas sector whose share of GDP is 12 per cent. PETRONAS stands to benefit very little from TPPA as 74 per cent of its exports are to......

Words: 7586 - Pages: 31

Premium Essay

The Problem Of Ocean Pollution

...see that this "dilution" policy has helped place a once flourishing ocean ecosystem on the brink of collapse" (“Marine Pollution”). Degradation has accelerated dramatically in the past three centuries as industrial discharge has increased. Ocean currents corral trillions of decomposing plastic items and other trash into gigantic, swirling garbage patches. In the North Pacific, known as the Pacific Trash Vortex, it is estimated to be the size of Texas and there are about 400 dead zones around the world (“Marine...

Words: 1589 - Pages: 7

Premium Essay

; Lerw

...The Long- Term Effects of oil on ecosystems: A comparison of the Exxon Valdez and the BP oil spill The Exxon Valdez was a single hull, 987-foot super tanker built by the National Steel and Shipbuilding Company, out of San Diego, California. The Exxon Corporation commissioned this ship into service on December 11, 1986. After the March of 1989 collision with Bligh Reef, the vessel was towed to the shipyard in San Diego and repaired in June of 1989, more than 1,600 tons of steel needed replacing, and the cost of this repair was over $30 million dollars. The Valdez is back in use owned and operated by the Hong Kong Bloom Shipping LTD., renamed the Dong Fang Ocean, and registered out of Panama. At 12:04 A.M. on March 24, 1989, the Exxon Valdez struck Bligh Reef, Captain Joseph Hazelwood was below decks and intoxicated, the vessel was under the control of the third mate, Gregory Cousins. It was later found that in addition to the intoxicated captain, the third mate, Gregory Cousins, did not have the proper endorsement on his coast guard license to operate a ship in the pristine waters of Prince William Sound, and on top of this Exxon failed to repair the damaged radar that could have prevented the accidental grounding of the ship. At the time of impact, the Valdez was carrying 55 million gallons of crude oil and 11 million gallons of crude was spilt into one of the most delicate, and bountiful marine ecosystems on earth, Prince William Sound. This number of 11......

Words: 3918 - Pages: 16

Free Essay

Coconutoil

...Organic Virgin Coconut Oil - A Healthy Oil The Coconut Oil Story Virgin Coconut Oil: An introduction For about 3960 years of the of the past 4000 years of the documented historical use of the fruits of the coconut palm as a food and a pharmaceutical, the news has all been good. It was seen as a sustainable resource from which the harvested materials influenced every aspect of the lives of tropical communities, but most importantly its fruit, the coconut flesh, water, milk and oil. The use of coconut oil around the world in tropical regions is prolific: South and Central America, Africa, the Indian subcontinent, Micro-, Mele- and Poly-nesia and most of Asia. The uses are so respected that they were documented by Ayurvedic medicine in Sanskrit from 1500BC in all areas relating to the mind, body and spirit. Early European explorers including Captain Cook wrote affectionately about the beauty of communities across the Pacific using coconut oil as an integral part of their daily lives. During WWII the water of the young green coconut was successfully used as a substitute for a saline drip saving the lives of many allied soldiers. After the war, in England coconut oil was sold as "margarine" and in the USA as "coconut butter". However, this all changed in 1954. In the social environment of the USA in which coronary heart disease (CHD) was becoming the primary cause of mortality in the adult population, the young researcher David Kritchevsky published two academic papers. The......

Words: 3568 - Pages: 15