Unformatted Attachment Preview
Communication & Negotiation Skills
SBS/ABS – MBA
Assignment – 2021
STUDENT ID
UNIT TITLE:
NAME (in Full):
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GENERAL INSTRUCTIONS
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All assignments are to be submitted on 4th February 2021 on www.atmsstudentportal.com with the
login credentials shared earlier.
Assignment if submitted to any staff or kept in cc while submitting the soft copy will NOT be
considered for marking.
If assignment is not submitted on date, will follow with penalty of 10% deduction of marks for
every day.
Any Assignment submission extension request must come to Azra Fatima
(Head: Examination | Academic) - afatima@atmsedu.org 5 days before the date of
submission
with a valid reason and supported documentary evidence.
Similarity between students work is strictly not accepted, any student found with similar work will
be graded Zero and fail for the course. However, Plagiarism is an academic offence and will not be
tolerated.
Any reevaluation request should come in one week of grade release. Any late request will not be
obliged. (Form and other details shall be shared based on request)
Any rescheduling request should come and fulfilled within two months after the actual date of the
assessment. Any late request will not be obliged.
Assignment once submitted to exam board is final for marking.
Executive summary, Introduction, Conclusion and References is excluded from the word limit.
Total 90 marks. 10 Marks for Class Participation. Final marks will be
converted to 90 marks.
GUIDELINES FOR ASSIGNMENT
a)
If assignment is Question & Answer based then.
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• Introduction is needed for each question.
• Question has to be answered based on the mark allotted for each question with references if
b)
any idea or information is taken from other source.
If assignment is case based then,
• Executive summary
• Table of content
• Introduction
• Body of assignment (questions related to case need to be answered)
• Conclusion / Recommendation if any
• References (in-text + citation) to be used.
Total Marks
/ 90
PLAGIARISM
Plagiarism is a form of cheating, by representing someone else's work as your own or using someone
else's work (another student or author) without acknowledging it with a reference. This is a serious
breach of the Academic Regulations and will be dealt with accordingly. Students found to have
plagiarized can be excluded from the program.
Plagiarism occurs whenever you do any of the following things without acknowledging the original
source:
✓ Copy information from any source (including the study guide, books, newspapers, the internet)
✓ Use another person's concepts or ideas
✓ Summarize or paraphrase another person's work.
How do I avoid plagiarism?
To ensure you are not plagiarizing, you must acknowledge with a reference whenever you:
✓ use another person's ideas, opinions or theory
✓ include any statistics, graphs or images that have been compiled or created by another person or
✓
organization
Paraphrase another's written or spoken word.
What are the penalties?
The penalties for plagiarism are:
✓ Deduction of marks,
✓ A mark of zero for the assignment or the unit, or
✓ Exclusion from the program.
Plagiarism is dealt with on a case-by-case basis and the penalties will reflect the seriousness of the
breach.
Please note claiming that you were not aware of need to reference is no excuse.
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Part A
Negotiation and Its Complexities: A Case Study of Public Sector Negotiation with Vendors
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Author:
S. Riasudeen
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Cyril R. Fernandez
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Publisher: SAGE Publications Pvt. Ltd
Publication year:2017
Online pub date: January 02, 2018
• Discipline: Supply Chain Management, Negotiation, Public & Nonprofit Management
• Length:2,542 words
• DOI:http://dx.doi.org.liverpool.idm.oclc.org/10.1177/0972820117712328
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Abstract
This case is about the negotiation process carried out by the chief procurement officer
(CPO) of a leading public sector unit in India. When the company receives an order,
the order is materialized by using electric equipment in large quantity. Due to changes
in the business situation, the company realizes that it may not be possible to purchase
the equipment that they require at the same price as before.
The company has two vendors from whom they buy this equipment. Both the vendors
have similar manufacturing policies and same raw material suppliers. Additionally,
both the vendors have gone through some management level changes. The CPO who
is responsible for the purchase of the electric equipment has to conclude the deal with
the vendors and obtain the best possible price which is closest to the amount they had
previously paid the vendors.
Aabid, the Chief Procurement Officer (CPO) of NMD Limited, a leading Public Sector
Undertaking (PSU), in Navi Mumbai, was confused. NMD Limited, which had recently
received an order for Electro Static Precipitator, was in requirement of a transformer which
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formed the central component of the order. The Chief Executive Officer (CEO) had insisted
that the transformer be procured. Aabid had earlier purchased the transformer from one of
NMD’s two vendors, Syskateck Industries and Tyco Technocorp, at a ‘dream price’. Aabid
was unsure of being able to procure it again at the same price. He was expecting the price to
have gone up by a minimum of 40 per cent. However, Aabid observed that the management
at both Syskateck and Tyco had undergone changes in the recent past and therefore saw an
opportunity to seal the procurement of the transformer at the lowest possible price. He invited
suggestions from his team members to minimize the procurement price of the transformer.
Profile of NMD Limited
NMD Limited was an integrated power plant equipment manufacturer and one of the largest
engineering and manufacturing companies of its kind in India, engaged in designing,
engineering, manufacturing, constructing, testing, commissioning and servicing of a wide
range of products and services. NMD catered to the core sectors of the economy, namely the
power transmission industry, the transportation sector (railways), renewable energy, the oil &
gas industry, and the defense sector, with over 180 product offerings to meet the needs of
these sectors. The establishment of NMD Limited in 1964 brought about an upsurge in
India’s heavy electrical equipment industry. Consistent performance in a highly competitive
environment enabled NMD Limited to attain the coveted Maharatna status in 2013. Only
companies with an investment ceiling ranging from ₹10,000 million to ₹50,000 million were
awarded this prize.
The high-quality standards and reliability of NMD’s products and systems were an outcome
of its strict adherence to international standards, through acquiring and adapting some of the
best technologies from leading OEM companies in the world, coupled with indigenous
technologies developed in their in-house R&D centres. Most of the manufacturing units and
other entities of NMD had obtained accreditation from Quality Management Systems
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(ISO9001:2008), Environmental Management Systems (ISO14001:2004) and Occupational
Health & Safety Management Systems (OHSAS18001:2007).
Case Background
NMD had bagged an order for 250 electro static precipitators by quoting aggressively, as the
engineering sector was down in the dumps. The transformer, being the heart of the recently
obtained order, formed a good percentage of the total value. NMD had procured a similar
component in the previous year from one of its two suppliers. NMD had an in-house
manufacturing capability for the above discussed component. Information about its
manufacturing option and procurement policy is shared below.
Manufacturing Option
In one of the divisions of NMD, spare capacity to manufacture the transformer was available.
Sourcing the component from within would have led to capacity utilization at NMD. This
was considered to be essential by the corporate management since the company was passing
through a lean phase with a dearth of orders especially in the division where the transformer
could be manufactured and assembled.
Although the technology available within the company was slightly outdated, it could still
manufacture marketable products. While the item was made up of two discrete components
that were hard-wired externally, there were suppliers in the market who could supply an
integrated version (with the two components merged into one product). The high internal cost
of manufacture, combined with its old design, led to a towering price of ₹1.04 million per
piece.
Procurement Policy
The procurement policies of NMD were limited as it happened to be a PSU. The company
had a written document indicating unified purchasing policy which was followed across
various divisions of the company. This procurement policy had its own advantages and
disadvantages, both of which have been mentioned below.
The major disadvantages were:
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Procurement of materials could be through tender system only.
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Orders could be placed only with the bidder who was ranked the lowest (L1)
in the tender.
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Negotiations, if any, could only be an exception.
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Negotiations could be conducted only with the L1 supplier.
The third and fourth limitations were as per the guidelines issued by the Central Vigilance
Commission (CVC) of India to which all PSUs were subjected.
The major advantages of this policy were:
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Each division of the company had a well-organized database of suppliers
(with records of the supplier performance measured and recorded for each
order executed).
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Purchase enquiries could be limited to the suppliers in the approved material
directory of the division.
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Provision was also available for the company to resort to buying through
Reverse Auction (RA), which was considered to be a transparent mechanism
for conducting negotiations (electronically), with all the participants in a
tender enquiry.
Vendor Details
The company’s vendor base essentially had only two strong contenders, Syskatech Industries
and Tyco Technocorp. Both these firms had their products built on the same design
philosophy.
Supplier of Vendors
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One key and major ingredient of the equipment was a special type of oil, which was supplied
by only one supplier in the world located in the USA. Therefore, the price element of the
equipment with respect to this major item which they had to import was at par since the US
based supplier had uniform worldwide pricing for all its customers. The other major raw
materials that went into the equipment were copper windings and sheet metal steel. While the
price of the copper fluctuated highly, the price of steel had been stable over the past one year.
Thus, the overall price of the inputs remained constant for both firms (Syskatech and Tyco
Technocorp).
Manufacturing Process of Vendors
The manufacturing processes adopted by both parties (Syskatech and Tyco Technocorp) were
similar and therefore the costing structure for both remained quite similar. The annual
(financial) turnover of both these competitors (Syskatech and Tyco Technocorp) was also
comparable. However, both the parties competed fiercely in the market to secure the
available orders for themselves.
Past Procurement
In the year 2013–2014, NMD resorted to buying about ₹392 million worth of transformers.
The procurement was made through the RA process. There was stiff competition in the RA.
The RA yielded NMD a saving of about ₹31.63 million. The average unit price obtained then
was ₹400 thousand. This was what Aabid termed as the ‘dream-price’. The RA produced
about 30 ‘hits’ with both suppliers vying with each other for taking the order.
The market condition was such that both contenders were starving for orders and an order of
₹392 million would form a major portion of their order book. Syskatech, one of the
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contending firms, had a turnover of ₹531 million in the last year, of which ₹392 million was
from the single order that they had bagged from NMD.
Although Aabid was very happy at the price he got during the previous year, he was
apprehensive about the quoted price, feeling that Syskatech might end up making a loss in
executing the order and therefore he personally and carefully monitored the progress of the
supplies which stretched throughout the year. The supplies were slow, but nevertheless it did
not affect the operations at NMD. To some extent, in the course of the year, Aabid found the
supplies were received on a start-stop-start manner, as Syskatech made a ‘lot’ of supply and
waited for the release of payment by NMD before taking up the manufacture of the
subsequent lot. Syskatech was unable to mobilize the necessary working capital for
maintaining an uninterrupted flow of supply to NMD. At one point, Aabid had to intervene
by talking to a funding agency to extend monetary support (credit) to Syskatech based on the
strength of the order placed. The contracted payment term between NMD and Syskatech was
45 days of credit from the date of receipt of the goods.
Current Situation
While preparing the quote for the new orders, the Chief Marketing Manager (CMM) of
NMD, Mr. Chowdary, had a discussion with Aabid as to what price the marketing department
should factor in for the transformer. It was Chowdary who shared the data of internal costs of
in-house manufacture with Aabid. Chowdary also informed Aabid that, in consideration of
the high cost of in-house manufacturing, he had taken a special dispensation from the
Divisional CEO to outsource the manufacture of the transformer by buying the item through
the purchasing department.
As Aabid felt that the previous price was a one-time ‘dream’ price, he informed Chowdary
that the next price would be about +40.5 per cent on the previous price, which Aabid noted,
would still have been about 50 per cent lower than the in-house manufacturing price.
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Chowdary did not agree with Aabid about the raise in the price and insisted that he could
only take the current price in his estimates. Since Aabid and Chowdary were not in
agreement, Aabid privately approached the CEO. To his dismay, the CEO also insisted that
NMD had to acquire the orders somehow. The CEO took sides with Chowdary and overruled
Aabid’s objections. However, the CEO conceded to the fact that Chowdary would not take
into consideration the previous price in his estimates but would escalate it by 20 per cent.
Aabid was unhappy, but he could not do anything in the face of the insistence of the CEO
who went to the extent of saying that Chowdary should be a part of the team and that he was
paid to contain the material costs which alone could increase the competitiveness of the
company in the market and also led to the profitability of NMD. Knowing it to be a difficult
task, as a matter of caution, Aabid had a separate discussion with the Engineering Manager to
contain the cost. The Engineering Manager assured Aabid that he would concentrate on
reducing the material content (steel) while making the detailed design, so that the anticipated
price increase of the transformer could be off-set with lesser steel material input for the
overall system.
With this verbal assurance from the Engineering Manager, Aabid shared his thoughts with his
team and instructed them to keep the price increase to a minimum. He also assured his team
that he would be a part of every step of the purchasing process.
In the team meeting Aabid recalled that the Chief Operating Officer (COO) of Syskatech had
been replaced. The COO was eased out of the company on account of the loss-making order
that he had booked with NMD during the previous year. At that point in time, the order book
of Syskatech was very lean and the action was taken by the COO with the intention to
augment the top-line. However, the management was not pleased with the loss booked by the
COO of Syskatech and therefore had asked the COO to leave.
Aabid had a gut-feeling that Syskatech would have booked a loss of around 15 per cent
during the previous order and shared the same with his team. During discussions, Aabid had a
hunch that the management at Tyco Technocorp would also have undergone changes, since
both the suppliers were aggressively competing in the market.
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Supplier Current Status
Aabid shared his hunch with Mr Roberto, the Senior Buyer at NMD. Roberto revealed that
Tyco Technocorp did not only replace its COO but also the Regional Representative (RR) of
its firm. Roberto informed that the replacement had been affected two years back at the top
and six months back at the region level as a fall-out of a loss-making order booked by the
COO in a government contract. With such management changes at Syskatech and Tyco,
NMD’s buying team felt that the current COOs would be cautious and circumspect in quoting
their prices for the fresh requirement of the company.
Options With CPO
Aabid invited ideas from his team members for the best approach that should be adopted for
the present purchase so that the company could get the material at the optimum price.
He said that the options available were:
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Insist with Syskatech to take a repeat order at the same rate, terms, and
conditions.
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Proceed with tendering and the adoption of the RA process.
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Go ahead with tendering on paper-mode bidding with the first lowest price
taking the order and follow it up with face-to-face negotiations, if required.
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Place an order with Tyco Technocorp on nomination basis subject to their
acceptance to supply the material at the current price levels.
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In this scenario, Aabid wanted the team to adopt the buying process which would allow NMD
to get the best price.
Referring to the above case study, Answer the following questions: (Total word count for all
questions is 2000 words as minimum)
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What is the main problem/ challenge that NMD Limited was facing? What were the
NMD Limited’s expectations about the price change from the suppliers?
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While relying on your analysis of the CPO’s embraced strategies regarding their
procurement approach with suppliers, what type (s) of negotiations (Distributive or
integrative bargaining) NMD is likely to focus on? Justify your answer. What tactics
can Aabid exercise to achieve distributive bargaining? What tactics can Aabid
exercise to achieve integrative bargaining?
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Assume now that both suppliers had a meeting with Aabid before the tender to
negotiate the price informally. Suppose that Syskatech followed integrative
bargaining while the other supplier followed the distributive bargaining. What tactics
would each of these suppliers follow to achieve their goals?
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What are the factors that affect a successful negotiation?
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Part B: (Total words count for all questions is 1000 words as minimum).
Propose and discuss strategies to change an organizational culture from a hierarchy to family
culture that focus on leadership, staff, HR and policies and communication styles.
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