For this assignment, please read the case material at first, then utilize your negotiation experience, common sense, or intuition to make a good plan for the negotiation.I attached the file below
coffeecontract_f_bdirector_s_.pdf
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Coffee Contract
Role of F&B Director(s), Statler Hotel
By Tony Simons & Thomas Tripp
You are Sandy Grant, Director of Food & Beverage
for the three-star Statler Hotel in Ithaca, New York.
The hotel is scenically located near the center of the
Cornell University campus and is attached to the
renowned School of Hotel Administration. You
assumed your position six months ago under a
mandate to increase the cost-effectiveness of the
hotel’s purchasing practices.
After conversations with the campus-wide food
service company (Cornell Dining), you have decided
to add many of the hotel’s routine purchases to
Cornell Dining’s supplier bidding process. In this
way, you plan to make use of the entire campus’
substantial purchasing power to secure the best deals
possible.
One item that you cannot purchase as part of Cornell
Dining’s bidding process is coffee. The Statler Hotel,
with its three dining establishments (Banfi’s, Mac’s
Cafe, and The Terrace/Statler Club) and in-room
coffee machines, uses more coffee than the rest of the
campus combined. Statler’s guests are demanding,
and you realize that many guests judge the quality of
a restaurant in large part by the caliber of its coffee. It
is extremely important that the Statler serve very
good coffee. The hotel has a reputation to protect.
Your current vender, LaRoche, sells a very good
product at a very fair price. Last year, you bought
approximately 10,000 pounds (approximately 4,545
kilograms) of coffee from them at $4.70/lb. LaRoche
annoyed you last year when they tried, in the middle
of a contract, to pass along price increases in
response to a very bad crop in Columbia. You
threatened legal action to enforce the contract, which
had a locked-in price, and they finally agreed to
continue supplying you at the same price.
Two months ago, you distributed a request for bids
for coffee suppliers for the contract that runs July
2003 through June 2004. Because of internal delays,
you later decided to extend your existing contract
through July and to extend the next contract period
also through July. A copy of the request for bids is
attached.
You know that Anderson coffee is superior to
LaRoche. In fact, you recently conducted a blind
taste test of the two brands against each other during
a training session for hotel general managers. The
managers preferred Anderson to LaRoche by a
margin of 3 to 1, with most of those managers saying
they “somewhat” preferred Anderson, and about 10%
saying they “strongly” preferred Anderson. Also,
Anderson’s “fair trade” policy of paying a livable
wage to independent farmers appeals to some of the
university’s stakeholders.
The only problem is that Anderson’s bid asks a much
higher price than LaRoche offers. Anderson asks
$7.94/lb. for their regular coffee. You are pretty sure,
though, that the price is negotiable. A friend of yours
works for a tourist attraction called “Colonial
Williamsburg,” and you understand that they buy
coffee from Anderson at just under $5.95/lb. You
realize, though, that you are unlikely to negotiate that
good a price, as your friend purchases around ten
times more coffee annually than does the Statler. On
the other hand, your friend does not offer the same
level of product exposure to current and future hotel
managers. You figure the Hotel School affiliation
might represent good enough publicity for your
coffee supplier that they might even be willing to
accept a contract below their cost.
In sum, you are willing to pay more to Anderson than
you currently pay to LaRoche because they offer a
superior product. However, the price difference is
simply too great at this point. The LaRoche product
meets your needs and is sold at a very fair price. If
you can upgrade the quality of Statler Hotel coffee
while remaining cost-effective, you think it will
impress your boss, Rick Adie, the General Manager.
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In conversations with Mr. Adie, you discuss other
available premium brands and decide that the quality
difference between the Anderson and the LaRoche
coffees is worth $2.70/lb. In other words, you are
willing to pay as much as $7.40 for the Anderson
coffee. Given the current effort at cost-cutting,
though, you know that increases in expenses will be
closely scrutinized. You figure that it is pretty
important for your job security for you to obtain an
excellent deal in this situation, which is one of your
first major negotiations for the Statler. Your manager
has suggested that every penny you are able to save
the Statler will translate to a bonus of approximately
$50 for you.
Summary of Key Points
All prices include delivery
LaRoche Price
$4.70/lb.
Anderson Bid Price
$7.94/lb.
Colonial Williamsburg’s Price
from Anderson
less than
$5.95/lb.
Annual Quantity
10,000 lbs.
Worst deal acceptable
$7.40/lb.
You arrange to meet with Pat Hammer, East Coast
Vice President of Sales for Anderson Coffee.
2
Coffee Contract/Role of F&B Director(s)
STATLER HOTEL, CORNELL UNIVERSITY
REQUEST FOR BID
The following bid request is for coffee products and coffee related services. The requested time frame is for a oneyear period beginning July 1, 2003 through June 30, 2004. Please review the enclosed details that may affect the bid
price.
PRODUCT: Colombian Coffee. Product shall be 100% Colombian coffee. Coffee will be provided in grind form
appropriate for the equipment owned by the Statler Hotel.
PACKAGING: The above items should be available in both 12 ounce and 2 ounce packets. The individual packets
should be gas-flushed or vacuum packed to maintain a shelf life of up to 6 months.
EQUIPMENT: The Statler Hotel currently owns their own coffee equipment with the exception of 3 Bunn-0-Matic
ten cup pour over machines. It is expected that the company awarded the bid will supply the hotel with the above
equipment at no charge while under contract. Furthermore, it is expected that coffee filters are provided at no charge
for all coffee machines.
EQUIPMENT REPAIRS/SERVICE: It is expected that the vendor will provide service repairs on coffee machines
at no charge. Any parts needed for the coffee machines owned by the Statler Hotel will be the responsibility of the
Statler.
ORDERS/DELIVERY SCHEUDLE: To be discussed once the bid has been awarded to vendor. The minimum
requirement is one delivery per 14 days although one delivery per week is optimal and preferred.
PRICING: Prices quoted are to remain in effect for the length of the contract beginning July 1, 2003 through June
30, 2004.
CANCELLATION CLAUSE: Vendor may terminate the awarded contract upon 60 days written notice with a copy
to both the Food and Beverage Director and the Purchasing Director of the Hotel.
Statler Hotel may terminate the awarded contract upon 60 days written notice to the vendor.
ACCEPTANCE TIME FRAME: Please submit your bid to James Robinnet, Purchasing Director of the Statler Hotel
no later than June 1, 2003.
In order for your company to calculate an appropriate price per pound for the coffee to be bid on, please note our
annual usage this past year was approximately ten thousand pounds.
In addition to the above, the Statler Hotel purchases flavored and decaffeinated coffees. In addition to the above bid,
please enclose a product/price list of the flavored coffees offered by your company.
If you have any questions in regards to this bid, please contact James Robinnet at 607-254-xxxx
Thank you.
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Coffee Contract/Role of F&B Director(s)
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