First of all, the proposal has identified everything that TOTAL was seeking to obtain. These were (1) the best prices at each location based on the overall purchasing volume for the group, (2) all quoted prices would be firm for one year, with a multi-year proposal including the escalation on cost of raw materials starting at the second year, (3) an annual rebate based on purchasing levels, and (4) suppliers were asked to include information on their quality assurance and drum collecting facilities.
Secondly, every element of the proposal was clear, concise and straight to the point. However, to increase its effectiveness, the proposal may need to assess more on the TOTAL’s needs, demonstrating to TOTAL that Van Leer has a clear understanding of their situation. On the other hand, the proposal has succeeded in identifying the problem- that being the high cost of the proposed unit process in France and outside of France. Thus, by offering rebates and establishing a cumulative discount policy on all purchasing in Europe, the problem of high unit costs will be improved.
Moreover, by providing information of their Quality Assurance programs and Drum Recovery and reconditioning program, their quality of services can be collaborated by both TOTAL and Van Leer. Assuming that TOTAL also has their own sets of Quality of Service policies, both parties will be able to negotiate with one another and exchange their policies to an agreement and implement on it. The proposal however, does not show the method on how the negotiation will be conducted.
This is crucial in guaranteeing atomicity property in the process given that both parties are honest throughout. – If TOTAL declines Van Leer’s offer, it would best if Van Leer holds firm on its price they quoted instead of countering it with a reduction in price. This is because there is no use in putting their business at risk of failure, endangering their operation’s survival. Furthermore, Van Leer were not the only ones affected by the rise in price of steel (15%), but other steel drum companies are also affected by it. Therefore, it is most likely that they were also forced to readjust their prices of steel.
Hence the chances of TOTAL switching suppliers were very slim unless the competition offered more comparable international discounts, while maintaining existing market prices- this too is very unlikely due to the high rise in steel prices. Moreover, even if TOTAL were to decline the offer, Van Leer will still stand to be one of the world’s leading steel drum manufacturer- with market share of 37% in Europe in 1995, whilst Blagden, a British company, holding 35% and Gallay-Mauser with 12% market share.