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ONE ACRE ACCOUNT: CASE STUDY The scene can be Bungoma, Kenya, Moises Postigo is a purchaser interested in purchasing fertilizer on a large scale for his not-for-profit organization the main one Acre Pay for (OAF). OAF’s mission is always to provide fertilizer to farmers “who have nothing on a credit like system and once the farmers produce their very own crops a portion of their supplus would be returned to OAF. Eventually the farmers might no longer desire a “free palm out and you will be able to support themselves and the families without putting additional strain for the government as well as the economy.
When 1st looking at Kenya, Postigo acquired five different suppliers that met selected criteria he previously for working. He narrowed down the suppliers by calling them and asking all of them for a RFQ. He then, along with his knowledge of the marketplace and his merchandise as well as coming to the stand prepared, discussed the fertilizer to an acceptable price that may be offered to maqui berry farmers enrolled in the OAF program. 1 . Fertilizer is a product ” so why did Contraventana spend a great deal time having a relationship? Should not he have just set up a great auction?
Contraventana did his homework and understood that developing and building human relationships is a very important dimension inside the Kenyan culture. “Kenyan culture’s emphasis on interactions and hierarchy stems from the importance of relatives. Kenya is a place where you need to get to be aware of people¦in a living room with twenty-five people, you have to shake everybody’s hand (Negotiating, pg 3). Postigo realized that most of his potential suppliers we found in Kenya. This individual also knew that if perhaps he might make a deal with a vendor in Kenya then a transportation costs would be much lower, thus creating a little more wiggle room pertaining to his BATNA.
Postigo appreciated the importance of creating relationships by a different, even more strategic goal. OAF’s immediate plan designed rapid expansion with regards to the little family facilities, which required rapid development in their asked quantity of DAP. Postigo acknowledged that in building a romance he was genuinely opening up their opportunities for the future. If he could guarantee larger set orders in the future, then he may be able to use that influence to talk the supplier in to lowering the present price.
Portillo knew that establishing his desire for a strong relationship would pay off in multiple ways, both equally satisfying the cultural circumstances while likewise putting a proper plan in to place to recognize cost savings later on. 2 . What was Postigo’s BATNA to getting to a negotiated contract with Dehvi Medji and Sons? Throughout the negotiations intended for fertilizer, Contraventana was worried about three major issues: delivery date, selling price, and the capability for growth into the future. Keeping these things in mind, it seems that the very best alternative to a negotiated contract would have range from current market rates of fertilizer in the region.
If having been not able to come to an contract with the suppliers and negotiate an improved contract for OAF, then Postigo would simply buy the fertilizer at frequent market prices. According to the study, in Nakuru, where the ease of installation of fertilizer and the cost of transportation were taken into consideration, a 50kg bag could be acquired for four, 000 Ksh (Negotiating, pg 6). This kind of cost of 5, 000 Ksh would have been the BATNA for Postigo’s negotiations, Yet , the BATNA could also had been found in another one of the vendors which were being looked into.
If the other vendors got offered him a reliable selling price then that value might have been seen as Postigo’s BATNA. several. Should Portillo have put in the time and money in order to meet face-to-face using five potential vendors with regards to telling them about A single Acre Finance, rather than mailing them a great e-mail? Working for a not-for-profit organization, Postigo understood that he needed to save money wherever possible. Meeting with the vendors personally might have a new larger influence on empathy through the entire negotiation. He may have been ready use that to his advantage, but also in the end, the power would not have got outweighed the price.
Postigo called five sellers, four that came back with bids. The first scenario where the cost outweighed the benefit: had he traveled to the fifth supplier, it would have been completely a complete stupidity and money. Secondly, when Postigo informed the potential suppliers of their anticipated delivery particular date, a second vendor dropped out of the running, saying that they may not be able to associated with delivery date. By sacrificing the face-to-face meetings, Portillo saved a lot of time and money although still appealing to 3 potential vendors, sooner or later leading to a deal breaker that, by his viewpoint, was extremely successful.. Followup question: Did Postigo shell out particular awareness of the other party’s needs in the telephone calls with Dehiv Medji? Contraventana did a good job of paying attention to Dehiv Medji’s demands throughout the talks. They spoke about the affect the Kenyan government might have on each, understanding the federal government subsidies could cripple both parties. He brought up Medji’s opportunity to grow and wanted to be involved in their development, “he asked about growth prospects¦indicated that the two organizations may possibly grow together (Negotiating, pg 7).
Postigo negotiated in a fair and cooperative manner, providing versatility on delivery dates and transportation costs. “One in the biggest is attractive of Dehvi Medji to OAF was its readiness to fix an amount in November for a January delivery (Negotiating, pg 7). Postigo was very aware about the various other party’s requirements and served accordingly. He felt appreciative to make the discussion a win-win scenario and once all was said and done, this individual did exactly that. 4. What do you think about Pastigo’s sharing information with Dehvi Medji regarding OAF’s technique for the future?
Was this an excellent to do? Is this a good way to build a relationship? In the situation that Pastigo was in a discussion regarding the long term desired goals of the not for profit OAF was a valid opening technique.
Simply by opening with a amount info, especially with an area supplier, OAF as a business can leveraging the fact that they can be trying to increase the amount of fertilizer used by a lot of farmers which can be good for the fertilizer suppliers. This was likewise an efficient means to build the partnership the OAF was hoping to have using their future provider, by displaying that they were open and upfront with both the strategies and desired goals of OAF any conceivable relationship could from more easily. All in all when you are open right from the start Pastigo place himself in a good position to conduct the talks.. If Dehvi Medji’s value had been very good but not the best, would you still have recommended that Postigo make an effort to negotiate with Dehvi Medji? As we have mentioned before, Postigo was concerned with 3 major concerns: delivery date, price, as well as the ability intended for growth ahead6171. Taking into consideration many of these issues, it could be seen that Dehvi Medji met the other skills for a very good supplier in this they can meet the right delivery routine in January and they were a small company that had the cabability to grow alongside OAF going into the future.
Value was only one of the concerns that Contraventana was taking a look at. The case research goes on to claim that “in earlier fertilizer transactions between OAF and Dehvi Medji, the corporation had resolved for 10 % off their initial offer (negotiating, pg 7). This means that that although the initial bid that Dehvi Medji developed might have not really been the best, their organization was proven to have vibrate room through the negotiations procedure and could probably still be convinced to lower their cost to become the best price.
Although Dehvi Medji might possibly not have had the very best initial value coming out of the original requests pertaining to proposals (RFPs), their preliminary price could possibly be negotiated plus they met the other requirements, delivery routine and capacity for growth in the future, that OAF was looking at. Our recommendation to Postigo will be to still enter the negotiation phase with Dehvi Medji, regardless of the initial cost bid, in order to further opportunity out the requirements of the supplier and possibly discover all of the rewards that they have to give.. OAF’s creator, Andrew Youn, is a MBA. Given the value of low-priced, good-quality fertilizer to his company’s ability to achieve the goals, will need to Youn be thinking alternatives to buying from a number of Kenyan wholesale suppliers? What might individuals alternatives become? The importance of low-priced, good-quality fertilizer was obviously a major component to the success of the companies but it is definitely doubtful it turned out the only target of the designed for profit.
The aim of the OAF is to ensure that the local tiny plot farmers become more self-sufficient and by picking local bulk suppliers over a international supplier can easily build the fertilizer sector in Kenya allowing local farmers to have better access even if the OAF was to keep the country. It is quite likely that Mr. Youn did consider other options during the start-up process but in the end decided community suppliers might be a better choice. An option that they may regarded as would be by using a foreign flower nurseries and mass ship the fertilizer to Kenya and after that ship it to the facilities to break down and spread out to the taking part farmers.
This choice may include saved them enough money on the basic product to offset the rise in shipping and managing cost to have the fertilizer in to Kenya. This may not have recently been a viable option in this starting round of negotiation due to the limited volume of fertilizer the OAF was getting at the time. several. Postigo educated the case freelance writers that the Kenyan government performed implement it is program of getting fertilizer in bulk to disperse at reduced prices to farmers, but that this program did not really affect OAF farmers because they could hardly afford to journey to government depots and would not have the funds to buy or transport the fertilizer.
However , this action by the Kenyan authorities might have secondary effects intended for OAF’s transactions with fertilizer suppliers in the future. What do you believe those secondary effects could be? There are a variety of secondary implications for the OAF when negotiating foreseeable future fertilizer order form regional suppliers because of the government backed supply. One particular obvious problem in the risk which the a current or future supplier may not be capable of staying competitive inside the fertilizer marketplace in Kenya and will walk out business, making the OAF to search anywhere else for their supply of fertilizer.
Another less gloomy prospect is by using the government subsidizing fertilizer in Kenya the OAF may have an improved bargaining placement with the local wholesalers, enabling the OAF to purchase more fertilizer together with the same expenditure helping this software to grow faster. This kind of choice by the Kenyan government may also allow the OAF to negotiate together with the government to receive the discounted price and focus instead for the transport of the fertilizer through the government depots to the maqui berry farmers who need this most. 8. In what way do Postigo make use of his awareness of hierarchy in Kenyan lifestyle during his negotiations with Dehvi Medji?
During the second round of negotiations which were exclusively while using Dehvi Medji firm the awareness of the hieratical traditions of Kenya was used to assist set a price from which Contraventana could begin the rounded of discussions. This was noticed in the sentence on page several of the case analyze where Pestigo from seeking previous discussions knew that Dehvi Medji sold for about ten percent less than their beginning offer. It was an supposition made due to the fact that Postigo was working with decedent of the former managers who have made this 15 present lower price a way of business.
There is also the simple fact the prior to the negotiators started discussing cost Pestigo first discussed the increase in the cost of fertilizer and the effects it was having of the OAF, the probably hood of government intervention, and ultimately the growth prospective customers of the OAF and Dehvi Medji. Only in fact of this opening information was shared had been the transactions for selling price and travel brought into the negotiation. Both of these considerations manufactured by Pestigo showed he was willing to enter discussions with Jiten Patel and allowed both of them to come to a great agreeable solution. 9.
What do you see because the strengths and weaknesses of Postigo’s negotiating strategy for fertilizer in 3 years ago? Postigo got many abilities and failings in his look at of his first huge acquisition of fertilizer for the OAF. His main strengths were the reality that he was knowledgeable about his product as well as the suppliers he was dealing with and also the fact he was prepared entering the settlement process. His main weak spot included the very fact that he had not created a relationship with his Kenyan suppliers understanding far in advance that that is certainly an essential treatment in Kenyan business traditions.
He as well failed to have realistic objectives when asking a smaller company like Delvi Medji and Sons to potentially source such a big customer base. The simple fact that Portillo did not make a relationship would have resulted in Dehvi Medji and Sons’ Jiten patel(the supplier) agreeing with Postigo just to avoid confrontation knowing much in advance they can not be able to fulfill his requires. Postigo’s understanding of the wholesale prices along with his marketplace and predicted forecast did allow him nevertheless , to accurately predict OAF’s growth and was led heavily to his success of getting the fertilizer underneath the market price of 3, 263 Ksh/50kg bag.
He was able to job the suppliers down through both selling price competition but more importantly by providing a “win-win situation for both him and the distributor. His main incentive was by doing business with OAF the supplier would expand with the OAF as it extended its market to 30, 000 farmers. He in return expected a supplier to lessen their costs helping the OAF. Even though Contraventana had some weaknesses in the overall settlement strategy by simply not meeting face-to-face, In the end, Postigo successfully worked well to an acceptable solution exactly where both parties taken advantage of in 2007.
