United Food Company Case Study
Autor: reham_a_sadek • April 7, 2016 • Case Study • 537 Words (3 Pages) • 1,373 Views
United company
United food company is specialized in the production and packaging of a large range of food products. As a result of increased demand on the company’s products, the company decided to make considerable expansion in production lines and consequently, an investment budget was set 2 years ago.
A team of technical people specified the quality specs for required expansion and proposed a number of well-known suppliers to the purchasing manager Mr. Ahmed who is in charge of negotiation with supplier regarding commercial aspects. As a result of the dramatic increase in prices (costs) during the past 2 years, the finance manager –Ms., Malak ordered Mr. Ahmed to employ all means in order to accommodate such expansion within the approved investment budget.
Therefore, Mr. Ahmed invited vendors to submit their proposals in an open bidding. Unfortunately the lowest bid exceeded the investment budget by 5%; in addition, all bidders stipulated an increase in price by 3% after 3 month from singing the contract and covered the remaining period of the contract.
On his part, Mr. Ahmed decided to negotiate with the lowest pricing bidder; therefore, he conducted a preliminary survey on the supplier’s commercial and technical capabilities which were proven to be outstanding.
As a result of that Mr. Ahmed called Mr. Latif, the marketing manager in the vendor’s company to negotiate the deal. Mr. latif, in contrary to his commercial capability, he was proven to be technically excellent.
After almost an hour of negotiation Mr. latif agreed to reduce the total cost of his bid from 800.000 $ to fixed 600.000 $ without any changes in specs, or lead time or delivery time, and consequently, a contract was singed and a purchase order was issued and a check of advanced payment were handed over to Mr. latif.
After 2 weeks Mr. Maher the production manager of the united food company called Mr. Latif to discuss some technical issues, after many calls, Mr. latif finally answered saying, “the company did not approve the contract, and he claimed that fixed price is applicable only for deals that do not exceed 200.000 $”. The production manager informed Mr. Ahmed of what happened, who on turn called Mr. Sayed, Mr. Latif’s boss who repeated what was said by Mr. Latif in addition, he stressed that “we could not agree on a losing deal like this”.
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