Pacific Oil Case
Conflict Management and Negotiation
Paul Gaudin and Jean Fontaine negotiated a favorable contract for Pacific Oil Company in 1982 with Reliant Chemical Company. Gaudin and Fontaine prepared well for this negotiation, but they assumed it that negotiations would be quick and easy. Gaudin and Fontaine believed that even with the current and future market condition, a positive outcome could be obtained by offering the best service possible and having an established positive relationship. However, their aspiration to gain a favorable “re-negotiated” contract was hamstrung by competition; market expansion for vinyl chloride monomer “VCM”, and a different style of negotiation by Reliant.
The first problem with the renegotiation of this contract was the projected demand for VCM creating a “buyers market”, according to the textbook, “the demand was high, but the supply was to increase exponentially” (Lewicki, Saunders, and Barry 2010) Reliant was already locked into a five year contract with Pacific Oil, but there would be stiff competition at the expiration of the that contract. Knowledge of this market situation put Reliant in a position of leverage and trapped Pacific Oil into a desperate sign at all costs scenario. Gaudin and Fontaine assumed that even with a fluctuation with price; Reliant would sign a new because of their established relationship Pacific Oil. Gaudin and Fontaine’s assumption opened themselves up to more concessions by not attaching conditions to the price adjustment. They could have countered with a reduction of the formula price on the condition of contract length.
Another problem that Pacific Oil Company faced was their own internal research and development of expanding the use of vinyl chloride monomers. Not that coming up with other ways of marketing and using a product is bad, but the timing was an issue, because if Pacific Oil were to go ahead with their internal plans. The demand and price for VCM could be affected, and maybe putting off plans to start negotiations till this information was solid could have been beneficial. Also, Fontaine and Gaudin had this internal knowledge that if Pacific Oil were to start their own line of products, there could be a conflict of interest (Lewicki et al., 2010). Since, it took the company so long to determine if this was a possibility, Gaudin and Fontaine and negotiate blindly. Had they known prior to the start of the negotiation, there could have been more certainty to their negotiation.
The last problem that Pacific Oil faced was a change in the negotiating team for Reliant. Frederich Hauptmann and Egon Zinsler were new to the company not part of previous negotiations. Therefore, they had a different style and perspective on how to carry out the negotiations. They were very assertive by demanding a price cut during the beginning of the negotiations. Then they were conservative throughout negotiation by keeping their demands “close...