One Acre Fund

ONE ACRE FUND CASE STUDY The scene is Bungoma, Kenya Moises Postigo is a buyer interested in purchasing fertiliser on a large scale for his not-for-profit organization the One Acre Fund ( lummox). clods mission is to provide plant food to farmers who piddle nothing on a credit like system and when the farmers produce their crops a percentage of their supplus would be returned to hood. Eventu exclusivelyy the farmers would no longer exigency a free consider fall out and will be capable to support themselves and their families without putting hike up strain on the government activity and the economy.When first looking at Kenya, Postigo had atomic number 23 different providers that all met certain criteria he had for doing business. He narrowed rout the suppliers by contacting them and asking them for a RFQ. He accordingly, with his knowledge of the grocery and his harvest-home as well as coming to the table prepargond, negotiated the fertilizer to an grateful scathe that could be offered to farmers enrolled in the lubber program. 1. Fertilizer is a trade respectable why did Postigo spend so much succession developing a affinity? Shouldnt he befool just set up an auction?Postigo did his homework and understood that developing and building family relationships is a truly important dimension in the Kenyan culture. Kenyan cultures emphasis on relationships and hierarchy stems from the importance of family. Kenya is a place where you need to get to know peoplein a room with 25 people, you need to shake e very(prenominal) one(a)s hand (Negotiating, pg 3). Postigo realized that most of his capableness suppliers we located in Kenya. He also knew that if he could crap a deal with a vendor in Kenya so the transportation comprise would be much bring down, thus creating a little more than shake room for his BATNA.Postigo grasped the importance of building relationships from a different, more strategic purport. OAFs short-term envision i ncorporated rapid acquireth with regards to the elflike family farms, which required rapid growing in their requested quantity of DAP. Postigo accepted that in building a relationship he was really possible action up their opportunities for the time to come. If he could guarantee bigger batch orders in the future, then he might be able to riding habit that leverage to whistle the supplier into lowering the current wrong.Postigo knew that establishing his desire for a strong relationship would render off in multiple ways, some(prenominal) satisfying the pagan status quo while also putting a strategic plan into place to realize cost savings in the future. 2. What was Postigos BATNA to attain a negotiated pledge with Dehvi Medji and Sons? During the talkss for fertilizer, Postigo was concerned with three major issues delivery date, price, and the qualification for growth into the future. Keeping these things in mind, it seems that the trump out alternative to a negotiat ed agreement would cod come from the current commercialise prices of fertilizer in the area.If he was not able to come to an agreement with any of the suppliers and negotiate a better contract for OAF, then Postigo would simply buy the fertilizer at regular market prices. According to the research, in Nakuru, where twain the cost of fertilizer and the cost of transportation were taken into consideration, a 50kg bag could be leveraged for 4,000 Ksh (Negotiating, pg 6). This cost of 4,000 Ksh would run through been the BATNA for Postigos negotiations However, the BATNA could also prepare been found in one of the other vendors that were being looked into.If these other vendors had offered him a reliable price then that value could have been seen as Postigos BATNA. 3. Should Postigo have spent the time and bills to hit face-to-face with all quin potential vendors for the purpose of telling them close One Acre Fund, rather than sending them an e-mail? working for a not-for-prof it organization, Postigo understood that he needed to save money wheresoever possible. Meeting with the vendors in person might have had a larger effect on empathy throughout the negotiation. He might have been able use that to his advantage, precisely in the end, the benefit would not have outweighed the cost.Postigo contacted five vendors, four of which came back with begs. The first scenario where the cost outweighed the benefit had he travelled to the fifth vendor, it would have been a complete waste of time and money. Secondly, as soon as Postigo informed the potential vendors of their expected delivery date, a second vendor dropped out of the running, stating that they would not be able to make the delivery date. By sacrificing the face-to-face meetings, Postigo saved a large arrive of time and money while still attracting 3 potential vendors ultimately leading to a deal that, from his standpoint, was very successful. . Followup question Did Postigo pay particular oversig ht to the other partys needs in the phone calls with Dehiv Medji? Postigo did a very good job of paying attention to Dehiv Medjis needs throughout the negotiations. They spoke about the affect the Kenyan government might have on both parties, understanding the government subsidies could cripple both parties. He brought up Medjis opportunity to grow and wanted to be involved in their growth, he asked about growth facesindicated that the two organizations might grow together (Negotiating, pg 7).Postigo negotiated in a bring together and cooperative manner, providing flexibility on delivery dates and transportation costs. One of the biggest appeals of Dehvi Medji to OAF was its willingness to fix a price in November for a January delivery (Negotiating, pg 7). Postigo was very aware of the other partys needs and acted accordingly. He mat up obliged to make the negotiation a win-win scenario and when all was said and done, he did just that. 4. What do you think about Pastigos sharing information with Dehvi Medji about OAFs strategy for the future?Was this a good thing to do? Is this a good way to develop a relationship? In the fact that Pastigo was in an open discussion about the long term polishs of the not for profit OAF was a sensible opening strategy. It gives Pastigo a fair total of leverage epically since OAF is think to have a large amount of growth in the effective future, that information alone allows Pastigo to negotiate much harder for present prices with the perceived portend of future growth. It is also a valid and simple way for Pastigo to grow building a relationship with the supplier.By opening with a good amount of information, especially with a local supplier, OAF as an organization quarter leverage the occurrence that they are trying to grow the amount of fertilizer used by a large amount of farmers which is good for the fertilizer suppliers. This was also an efficient means to build the relationship the OAF was hoping to have with their future supplier, by showing that they were open and upfront with both the plans and goals of OAF any possible relationship would from more easily. All in all by being open from the beginning Pastigo put himself in a good position to conduct the negotiations. . If Dehvi Medjis price had been good that not the best, would you still have recommended that Postigo try to negotiate with Dehvi Medji? As we have mentioned before, Postigo was concerned with three major issues delivery date, price, and the ability for growth into the future. fetching into consideration all of these issues, it could be seen that Dehvi Medji met the other qualifications for a good supplier in that they could meet the proper delivery schedule in January and they were a small follow that had the ability to grow alongside OAF spill into the future.Price was only one of the concerns that Postigo was looking at. The case study goes on to resign that in front fertilizer negotiations between OAF and Dehvi Medji, the company had settled for 10 percent off its initial offer (negotiating, pg 7). This indicates that although the initial bid that Dehvi Medji produced might have not been the best, their company was proven to have agitate room during the negotiations process and could possibly still be convinced to lower their price to become the best price.Although Dehvi Medji might not have had the best initial price coming out of the initial requests for proposals (RFPs), their initial price could be negotiated and they met the other requirements, delivery schedule and ability for growth in the future, that OAF was looking at. Our recommendation to Postigo would be to still enter the negotiation phase with Dehvi Medji, regardless of the initial price bid, in order to win scope out the qualifications of the supplier and possibly discover all of the benefits that they have to offer. . OAFs founder, Andrew Youn, is a MBA. Given the importance of low-priced, good-quality fertilizer to his companys ability to achieve its goals, should Youn be considering alternatives to purchasing from a fistful of Kenyan wholesale suppliers? What might those alternatives be? The importance of low-priced, good-quality fertilizer was a major component to the success of the companies but it is doubtful that it was the only goal of the not for profit.The goal of the OAF is to help oneself the local small temporary hookup farmers become more self-sufficient and by choosing local wholesalers over a foreign supplier can build the fertilizer industry in Kenya allowing local farmers to have better access even if the OAF was to deviate the country. It is quite likely that Mr. Youn did consider other fillings during the start-up process but in the end decided local suppliers would be a better option. An option that they may considered would be using a foreign wholesaler and quite a little ship the fertilizer to Kenya and then ship it to the warehouses to break down and dole out to the participating farmers.This option may have saved them enough money on the base product to offset the increase in expatriation and handling cost to get the fertilizer into Kenya. This may not have been a viable option in this opening rhythm method of birth control of negotiation due to the limited amount of fertilizer the OAF was purchasing at the time. 7. Postigo informed the case writers that the Kenyan government did implement its program of buying fertilizer in bulk to distribute at reduced prices to farmers, but that this program did not really affect OAF farmers because they could not tolerate to travel to government depots and did not have the cash to buy or transport the fertilizer.However, this action by the Kenyan government might have secondary effects for OAFs negotiations with fertilizer suppliers in the future. What do you think those secondary effects might be? There are a variety of secondary ramifications for the OAF when negotiating future fertilizer purchase for m local suppliers due to the government subsidized supply. One open problem in the risk that the a current or future supplier may not be able to stay belligerent in the fertilizer market in Kenya and will go out of business, forcing the OAF to search elsewhere for their supply of fertilizer.Another less gloomy prospect is with the government subsidizing fertilizer in Kenya the OAF may have a better bargaining position with the local wholesalers, allowing the OAF to purchase more fertilizer with the same investment aid the program to expand faster. This excerpt by the Kenyan government may also allow the OAF to negotiate with the government to receive the discounted price and focus instead on the transport of the fertilizer from the government depots to the farmers who need it most. 8. In what way did Postigo use his awareness of hierarchy in Kenyan culture during his negotiations with Dehvi Medji?During the second round of negotiations which were exclusively with the Dehvi Medji firm the awareness of the hieratical culture of Kenya was used to help set a price from which Postigo could begin the round of negotiations. This was seen in the execration on page seven of the case study where Pestigo from looking previous negotiations knew that Dehvi Medji sold for roughly ten percent less than their opening offer. This was an self-reliance do due to the fact that Postigo was working with decedent of the former managers who made this 10 present discount a way of business.There is also the fact the before the negotiators began discussing price Pestigo first discussed the increase in the price of fertilizer and the effects it was having of the OAF, the likely hood of government intervention, and finally the growth prospects of both the OAF and Dehvi Medji. Only after all of this opening information was divided were the negotiations for price and transportation brought into the negotiation. Both of these considerations made by Pestigo showed he was active to en ter negotiations with Jiten Patel and allowed them both to come to an agreeable solution. 9.What do you see as the strengths and helplessnesses of Postigos negotiating strategy for fertilizer in 2007? Postigo had many strengths and weaknesses in his seek of his first large acquisition of fertilizer for the OAF. His main strengths were the facts that he was internal about his product and the suppliers he was dealing with as well as the fact he was prepared going into the negotiation process. His main weakness included the fact that he had not built a relationship with his Kenyan suppliers subtle far in advance that that is an essential influence in Kenyan business culture.He also failed to have realistic expectations when asking a smaller company like Delvi Medji and Sons to potentially supply such a large customer base. The fact that Postigo did not build a relationship could have resulted in Dehvi Medji and Sons Jiten patel(the supplier) agreeing with Postigo only to avoid co nfrontation knowing far in advance they would not be able to meet his needs. Postigos knowledge of the wholesale prices as well as his market and expected forecast did allow him however, to accurately predict OAFs growth and was contributed heavily to his success of getting the fertilizer under the market price of 3,263 Ksh/50kg bag.He was able to work the suppliers down through both price competition but more importantly by providing a win-win situation for both him and the supplier. His main incentive was by doing business with OAF the supplier would grow with the OAF as it expanded its market to 30,000 farmers. He in return expected a supplier to reduce their costs helping the OAF. Even though Postigo had some weaknesses in his overall negotiation strategy by not meeting face-to-face,In the end, Postigo successfully worked to an agreeable solution where both parties benefited in 2007.