Question

Mack Trucks, which is part of a newly consolidated operation comprising the truck making units of Volvo, Renault, and Mack, is facing intense pricing pressure from customers and competitors. The ability to meet its financial targets has presented a major challenge for the company. With limited ability to raise truck prices and declining demand, the alternatives facing Mack were to manage material costs better or absorb price increases through lower profit margins and profitability. Even before Volvo assumed ownership of Mack Trucks and Renault, Mack and Renault sought to leverage the commonality between them on a global basis. Mack Trucks had concluded that procurement offered excellent opportunities for global synergy across Europe and North America. Mack Trucks, working jointly with Renault, had implemented a global sourcing process designed to leverage the volumes available through the combined truck units. Volvo Truck is now part of that process. A central part of this process features negotiation to help the three combined companies carry out their vision of global procurement.
2.1 You have been hired by Mack Trucks to observe the negotiation and provide them with feedback as to what can be done better. Your explanation to Mack Trucks should effectively highlight the tactical issues that are faced in negotiation. (15)

Answer 1

All the three companies here must agree to tripartite agreement where all enjoy the benefits of single vendor and thus economies of scale can be leveraged thus lowering costs and entering into long term contract which will be win win situation for all stakeholders and thus global procurement strategy will be implemented. Incase of failure, the agreement must mention alternative suppliers woth bank guarantees and payment terms well in advance.

All parties thus must comply to globally accessible standard of production to cater to customers and thus drive profits by lowering costs amd firm supply levels throughout without market disruption.