What other factors should Marvin and his team consider?
Marvin was the Cheif Executive Officer for his company. All decision making part had been taken care by him with respect to the hirarchy of the management. Company was getting good profit margin under his control whether that may be long term projects or short term projects. Irrespective of the project size comfortably company runs their operations successfully.
Bidding decisions are highly important in the organization, as most business decisions are depend on the competitive tendering system for their work. Previous research discussion of competitive bidding strategy has almost focused on the use of mathematical models.Through competitive bidding Marvin’s company was highly successful in winning the contracts and rated in a top position. And maximum of company profits came throuth the winning of projects an various areas. Maximum all the clients manage to give them a long term and fixed price projects. They can used to forecast their profit margins successfully.
But later Marvin established a policy where only 5 percent of sales would be used for responding to request fr proposal(RFP), this was preferred to as a Bid-and-Proposal(B&P) budget. In this policy cost for bidding the contract is expensive and client also knew that hear company has to spent huge amount of money, that could be eventually affect the business. Therefore Marvin saw some risk factor and started thinking whether to bid or not on the job.
Key factors that Marvin has to consider before taking any decisions:
* It is a long term and fixed project.
* Company will get returns even in recession period.
* Possibly they may get lower returns.
* Release the companies cost structure in order to satisfy the client.
* Clients must force to accept lower profits as the size of the project is big and long term.
In the past his company would bid all the jobs because that were good suited to their business requirements and profit margins also excellent. But moving forward to bid on this job was difficult for Marvin because his client was requesting to disclose the companies confidential data which is highly risky and unsafe for his organisation. If Marvin did not give that confidential data to the client the relationship between his client and organisation may get affected and it would be considered as non-responsive.
Should they bid on the job?
Well, they should bid at work. He is one of the trustful client and project size is also upto next ten years. This is one of the big contract than any other contract than Marvin’s company had ever got and it could also provide an excellent cash flows for the business in next ten years. To sustain in the competitive market business organisations always look forward to adopt new technologies and changes. Risk factors are also increasing in all business area because unable to predict the business market.
When clients are knocking the door with great profitable deals, company should accept it. For every aspects there are some advantages and disadvantages, if company can overcome that difficulties it will be great step towards success for every business. It may be a lower profit margins initially but going forward profits and earnings per share will be larger.