Critique the proposal that Van Leer has prepared for Total. If Total declines the offer, should Van Leer hold firm on the price or counter with a reduction in the pric?e
First of all, the proposal has identified everything that TOTAL was seeking to obtain. These were (1) the best prices at each location based on the overall purchasing volume for the group, (2) all quoted prices would be firm for one year, with a multi-year proposal including the escalation on cost of raw materials starting at the second year, (3) an annual rebate based on purchasing levels, and (4) suppliers were asked to include information on their quality assurance and drum collecting facilities. Secondly, every element of the proposal was clear, concise and straight to the point. However, to increase its effectiveness, the proposal may need to assess more on the TOTAL’s needs, demonstrating to TOTAL that Van Leer has a clear understanding of their situation. On the other hand, the proposal has succeeded in identifying the problem- that being the high cost of the proposed unit process in France and outside of France. Thus, by offering rebates and establishing a cumulative discount policy on all purchasing in Europe, the problem of high unit costs will be improved. Moreover, by providing information of their Quality Assurance programs and Drum Recovery and reconditioning program, their quality of services can be collaborated by both TOTAL and Van Leer. Assuming that TOTAL also has their own sets of Quality of Service policies, both parties will be able to negotiate with one another and exchange their policies to an agreement and implement on it. The proposal however, does not show the method on how the negotiation will be conducted. This is crucial in guaranteeing atomicity property in the process given that both parties are honest throughout. --
If TOTAL declines Van Leer’s offer, it would best if Van Leer holds firm on its price they quoted instead of countering it with a reduction in...
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