Electrical Equipment Ltd (eel) case study

Business-to-BusinessEEL - Case Study

INSTITUTE OF MANAGEMENT DEVELOPMENT AND RESEARCH

GROUP - VII

Elements of Case1

Voltas & EEL Meeting Participants –

Suresh Kumar - Regional Marketing Manager - Eastern Region (RMM-E) of EEL.Pradeep Dasgupta - Sales Engineer , EEL - Kolkata.Murli Bhasin - General Manager ( Materials ) of Voltas Ltd

Products Specification –

Flame-proof motor - Maker - EEL, Cost - Rs. 50,000, Specifications - 40HP, 1400rpm, Centrifugal Pump - Maker - Voltas Ltd.

The Meeting Scenario

Voltas acquired order for 10 pump sets from Eastern Coalfields at a competitive price.

Competitors - Siemens, ABB and Kirloskar. EEL - already sent quotation for supply of 10 flame-proof motors. Volume

Discount - 20% on basic price & maximum Discretionary Discount can be offered - 12%.

Voltas demands for weekly delivery of 2-3 pumps from 4th week, completion in 8 weeks. Failure to do so will attract penalties (EEL disagrees)

EEL offers for delivery in 6th to 8th week and will be sent in one or two full truck load, to keep logistics costs low and avoid damages and delays. EEL also offers 12-18 months warranty, free after sales service for the same period & free installation.

Voltas accepts this arrangement immediately. Now Voltas demands more 15% discount to existing 20% basic discount. With

commitment to finalize the order right away. EEL were only willing to give 12% discount to which Voltas replied that they

will inform their decision within 3-4 days.

2

Organizational Buying Behavior

(Concept Applied) Buying orientation has a narrow & short term focus and buyers follow practices like lowest price involving hard negotiations with short-listed or qualified suppliers. Buyers typically argue that there are no differences between various suppliers’ offers in terms of product quality, technical services or product features as it is a commodity & price is the only thing negotiable.

Voltas used “I WIN - YOU LOSE” negotiation style to achieve Cost Leadership.

Voltas straight away took control and directed the entire negotiation over their stiff competition to get this contract as well as their working on thin profits margins.

While Voltas is reputed company and important client for EEL, hence there are many demands from Voltas.

3

Purchase/Procurement Process4

(Concept Applied) Organizational Purchasing is complex and time consuming.

There might be individual, team, top management or even other departments involved in this process.

Negotiations

Negotiation is a process that tries to maximize the benefit to both buyer and seller

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Negotiations (2)

Voltas Limited BudgetVoltas (Mr Murli Bhasin) must have been approved budget by buying center/team that matched the amount of 20%+15% discount – Hence possibilities are they either have to get approval from buying center, decision making units or finance department. Price WarsAll the organization use this Cost Leadership approach to get the best deal at lowest maximum cost. The other competitors are also evaluated for their offered price and then negotiated for the lowest possible price with other offered services.

Even though Voltas conveyed they will require 3-4 days to evaluate and take a decision, they are more willing to deal with EEL for below reasons –EEL has long standing relation with Voltas, they understand of needs/requirements of Voltas and processes to complete the orders.Voltas will opt for regular supplier i/o other competitors for reasons of quality, reliability of delivery dates, and most important is urgency which may arise in future.

6

Suggestions

EEL should have opted for more proactive - negotiation strategy.

EEL gave too much including freight charges and other benefits early in negotiations, which should have been avoided.

EEL should focus on “How the quality processes are maintained in their unit,” this ensures that the pumps quality efficient as per prescribed standards.

EEL can convey how it will align its resources and infrastructure to complete Voltas order on Priority.

EEL should have given a Cost-benefit analysis as below table to convince that their product is real value for money.

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Suggestions (2)

(Concept Used) Cost-benefit analysis: While conducting demand analysis, it is useful to carry out an analysis of benefits received and the costs incurred by target customers.

(Above estimates are hypothetical and only for reference of costing vs benefit)

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Sr No

Particulars Amount

1 Cost of Per Pump Rs50,000 5,00,000

2 Transportation of Freight Costs – 2 Trucks 60,000

3 Installation 10 pumps 10,000

4 Repair & Maintenance Costs (12-18 months warranty) 10,000

5 Energy Savings Cost (Rs5/kWh and motor uses 11.0kWh for 5000hrs)

2,75,000

Suggestions (3)9

Thank YouGroup-VII

11

Manish Khandare 46

Rushabh Mogarkar 66

Saurabh Zulkantiwar 104

Tushar Bhadalkar 106

Vivek Arya 112

Prakhar Roy 116