ONE ACRE FUND: CASE STUDY
The scene is Bungoma, Kenya; Moises Postigo is a buyer interested in purchasing fertilizer on a large scale for his not-for-profit organization the One Acre Fund (OAF). OAF’s mission is to provide fertilizer to farmers “who have nothing” on a credit like system and when the farmers produce their crops a percentage of their supplus would be returned to OAF. Eventually the farmers would no longer need a “free hand out” and will be able to support themselves and their families without putting further strain on the government and the economy. When first looking at Kenya, Postigo had five different suppliers that all met certain criteria he had for doing business. He narrowed down the suppliers by contacting them and asking them for a RFQ. He then, with his knowledge of the market and his product as well as coming to the table prepared, negotiated the fertilizer to an acceptable price that could be offered to farmers enrolled in the OAF program. 1. Fertilizer is a commodity – why did Postigo spend so much time developing a relationship? Shouldn’t he have just set up an auction? Postigo did his homework and understood that developing and building relationships is a very important dimension in the Kenyan culture. “Kenyan culture’s emphasis on relationships and hierarchy stems from the importance of family. Kenya is a place where you need to get to know people…in a room with twenty-five people, you need to shake everyone’s hand” (Negotiating, pg 3). Postigo realized that most of his potential suppliers we located in Kenya. He also knew that if he could make a deal with a vendor in Kenya then the transportation costs would be much lower, thus creating a little more wiggle room for his BATNA. Postigo grasped the importance of building relationships from a different, more strategic purpose. OAF’s short-term plan incorporated rapid growth with regards to the small family farms, which required rapid growth in their requested quantity of DAP. Postigo recognized that in building a relationship he was really opening up their opportunities for the future. If he could guarantee larger batch orders in the future, then he might be able to use that leverage to talk the supplier into lowering the current price. Postigo knew that establishing his desire for a strong relationship would pay off in multiple ways, both satisfying the cultural status quo while also putting a strategic plan into place to realize cost savings in the future.
2. What was Postigo’s BATNA to reaching a negotiated agreement with Dehvi Medji and Sons? During the negotiations for fertilizer, Postigo was concerned with three major issues: delivery date, price, and the ability for growth into the future. Keeping these things in mind, it seems that the best alternative to a negotiated agreement would have come from the current market prices of fertilizer in the area. If he was not able to come to an agreement with any of the suppliers and negotiate a better contract for OAF, then Postigo would simply buy the fertilizer at regular market prices. According to the research, in Nakuru, where both the cost of fertilizer and the cost of transportation were taken into consideration, a 50kg bag could be purchased for 4,000 Ksh (Negotiating, pg 6). This cost of 4,000 Ksh would have been the BATNA for Postigo’s negotiations; However, the BATNA could also have been found in one of the other vendors that were being looked into. If these other vendors had offered him a reliable price then that value could have been seen as Postigo’s BATNA. 3. Should Postigo have spent the time and money to meet face-to-face with all five potential vendors for the purpose of telling them about One Acre Fund, rather than sending them an e-mail?
Working for a not-for-profit organization, Postigo understood that he needed to save money wherever possible. Meeting with the vendors in person might have had a larger effect on empathy throughout the...
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