Pacific Oil Company Negotiation StrategyEssay Preview: Pacific Oil Company Negotiation StrategyReport this essayOverviewPacific 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 of the early 1900s. It developed extensive oil holdings in North Africa and the Middle East, as well as significant coal beds in the western United States.
AnalysisIn 1979, Pacific Oil established the first major contract with the Reliant Corporation for the purchase of vinyl chloride monomer. The Reliant Corporation was a major industrial manufacturer of wood and petrochemical products for the construction industry. Reliant was expanding its manufacturing operations in the production of plastic pipe and pipe fittings, particularly in Europe. The 1979 contract between Pacific Oil and Reliant was a fairly standard one for the industry and due to expire in December of 1982. In February 1982, negotiations began to extend the four-year contract beyond the December 31, 1982, expiration date.
Fontaine and Gaudin agreed that the Reliant account had been a very profitable and beneficial one for Pacific and believed that Reliant had, overall, been satisfied with the quality and service under the agreement as well (Lewicki, Saunders, & Barry, 2010). They clearly wanted to work hard to obtain a favorable renegotiation of the existing agreement. Fontaine and Gaudin decided that they would approach Reliant with an offer to renegotiate the current agreement. Their basic strategy would be to ask Reliant for their five-year demand projections on VCM and polyvinyl chloride products. They had a change in the supply-demand situation that would require them to come up with a different strategy on how to keep their current customers and this would mean they have to compete with competitive market prices. Hauptmann replied that Reliant had serious reservations about committing the company to a five-year contract extension (Lewicki, Saunders, & Barry, 2010).
BATNAThe biggest mistake with the Pacific is that they did not even bother to explore and develop any kind of BATNA for their own situation. They did not contemplate any other possibilities and also did not make any effort in exploring other options and establishing at least some sort of alternative for this negotiation. Consequently, the market was tough for them as it was, but they mentally, and then in reality, limited themselves to only one option – keeping Reliant at any cost as their customer. Even though the case is not telling us what was the ultimate outcome of all those maneuvers, the final point described in the case was a very poor prospect for the Pacific when they did not have any control over the negotiation and were at complete mercy of Reliant, which as a company is the worst position
The Pacific is not alone in its failure to develop a real plan to deal with a significant power cut from the company. As evidenced by the decision in the Court of Claims, a major power cut is occurring from the Power Exchange of San Miguel to the Power Exchange of L.A. by the company’s executives, including its Executive Chairman, Jeff Hoch & Carl J. Williams. The Pacific’s leadership refused to cooperate (on a non-negotiable business case and in the case of the Energy Sector, a non-negotiable case).
The Power Exchange can only provide a good service through its own financial strength, which is the ability to support the large and relatively small customers it provides, all while remaining a reliable and reliable platform for power distribution of both residential and commercial energy. However, the CEO of the Power Exchange was not responsible for the actual management and operations of the Power Exchange, as such. However, while the management and operations of the Power Exchange have been extremely well done over the years, the CEO of the Power Exchange also went to great lengths to ensure the continuity and the effectiveness of its activities. He took care that his role in this business was managed and performed as he was required to. However, his own actions and actions were detrimental.
As stated previously we do not currently know if the Power Exchange or its employees would have acted as an asset to Reliant after the Power Exchange closed, or if those would have acted as liability under the circumstances of the Case. We hope the company will do just as safely with its customers as they did with its investors for Reliant. It appears that these are the facts that we believe may have been in the best interest of the Power Exchange.
In addition to these actions and others they have gone to great lengths to further their own ambitions. They have even tried to convince the California government to stop the construction and sale of a new power plant due to concerns of possible energy market impacts. This has been met by a variety of media stories and many articles that have taken the reader to multiple outlets.
In December of 2012 the California Department of Public Utilities released a report stating that it is “still investigating” the problems caused by the Wind and Water power plants constructed as an investment project. The “Investigative Report” says that problems with the project will hinder its construction. In other words, it claims that the power plant “does not represent a risk to power supply and distribution customers who are not expected to spend hundreds of millions over the long term.”
California’s Public Utilities Commission (CPUC) stated in a public comment that “The cost of building a Power Exchange in California is at best $900 million per year for a 6 MW power plant as a ‘consultative’ project designed to evaluate costs, market potential and potential benefits to the utility.”
Although “no direct investment was made into the building of the Power Exchange, the Commission indicated that in its estimate of the cost of construction, “the cost of construction was $900 million per year during the first 18 months.”
The CPUC did not provide further information at the time on what its “consultative” and “proposal” might look like and no actual work