The Pacific Oil Case: Conflict Management and Negotiation

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 ...

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...d be in peril because Reliant could essentially control the prices of the product. Then sell it to potential Pacific clients, thus eliminating any future revenue streams. If Reliant insists that this is a deal breaker, then stopping or stalling the negotiations may be the only resort, because Pacific Oil needs to regain control the negotiation. This may allow another competitor to come in and make their pitch, but Pacific Oil cannot afford any more concessions nor can they afford to allow Reliant to take away potential customers or control their formula costs.

References

TRACY, B. (2013). The Six Styles of Negotiating. Mworld, 12(3), 21.

Craver, C. B. (2003). Negotiation Styles. Dispute Resolution Journal, 58(1), 48.

Lewicki, R., Saunders, D.M., Barry B., (2010) Negotiation: Readings, Exercises, and Cases. 6th Ed. McGraw-Hill Irwin. New York, NY