Subject: Industrial Marketing

Topic/Case Name: Electrical Equipment Ltd

Background:

Key Persons:

Suresh Kumar- Regional Marketing Manager (Eastern Region) of EEL

Pradeep Dasgupta- Sales Engineer of EEL
Mr. Murli Bhasin GM of Voltas Ltd (Kolkata)
Mr. Sudhakar- Service Manager of Voltas Ltd (Kolkata)
Mr. Adi Contractor VP materials of Voltas Ltd.
Mr. Sameer Sinha- Purchase Executive of Voltas Ltd.

Case Summary:

Voltas acquired order for 10 pumps from Easter Coal Fields (PSU)
EEL had already sent quotation to Voltas for 10 nos. Flameproof motors
Competitors in market for EEL : Siemens, ABB, and Kirloskar
Voltas Ltd is an existing OEM customer for EEL

Product Specification:

Flame Proof motor:

o Make: EEL (40 HP, 1,400 rpm)
o Cost: Rs. 75,000 per pump
o Application: Underground Coal Mines
Centrifugal Pumps:
o Make: Voltas

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 1. Situation Analysis

Voltas Ltd was awarded Tender from Eastern Coalfields; following are the order terms and conditions

Order Quantity: 10 nos.

Penalty clause/ LD clause: @ 0.5% of total order value per week of Delay subject to maximum
ceiling of 10% beyond MAY 31, 2004
Factory inspection of 4 nos. of manufactured Pump sets prior to dispatch from Voltas factory
Installation date : Before 31.05.2004
Delivery at Voltas Ltd Kolkata Factory

Quoted offer by EEL:

Quoted cost: (per pump) Rs.75,000

Volume Discount @ 20 %: Rs.15,000
Final Total Quoted Cost: Rs.60,000
Delivery Period: 10 weeks

EEL and Voltas met for negotiation; following were the outcome of meeting:

Voltas Demands EEL offer post negotiation

Quoted Price less Rs. 60,000.00per pump
volume discount
Additional Discount Further 15 % discount Agreed to give 12% further discount
i.e. Approx. cost is Rs.50,000/-
Payment Terms 1. 10% advance along with order 5. 50% advance along with the PO
2. 10% on getting dispatch 6. Balance payment on delivery of
clearance from Eastern motors
Coalfields
3. 70% -30 days after delivery
4. 10% at expiry of warranty
period
Warranty Period Agreed 12 months warranty from Date of
Installation or 18 months warranty from
date of Dispatch, whichever is earlier.
Installation free of charge.
After sales Service Agreed During warranty Period: Free Service
Post warranty: Paid service

At the end of negotiation, Suresh was left with a question, whether EEL would get order and what
other possible negotiation they could do in order to get this order!

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 2. Analyze the behavior of Voltas Ltd for purchase of Flame Proof Motors

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. Right Choice of Vendors

Comparison matrix for Voltas:

Vendors EEL ABB Siemens Kirloskar

Discount/ Price
Payment Terms
Delivery Schedule
Warranty
After Sales Service
LD Clause
Technical
Specification

Compliance /not compliance to be filled in the row against each company and the best amongst the L1
and L2 can be awarded contract based on negotiations

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 4. Has EEL done a proper buyer behavior analysis?

Possible Behavior Analysis:

Buying Center/ Decision making unit for Voltas is;

Mr. Adi Contractor

Murli Bhasin - GM
Service manager at VP Materials Purchase Excutive
Kolkata Crucial for Cost
Sits in Mumbai A risk taker
User of Motors and Negotation
Also seen to be a Tough Negotiator
its maintainance
part for decision Decision Maker
making
Mr. Sameer Sinha
Sudhakar
(Purchase Dept.)

Suggestions:

EEL should have opted for more proactive - negotiation strategy.

Since EEL was called for negotiation for following possible two reasons:
o Either EEL was L1 amongst all other Quotes
o Strong good business relations
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 i.e. energy consumption and saving, long term relation etc.

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