One Acre Fund

ONE ACRE FUND CASE discover The scene is Bungoma, Kenya Moises Postigo is a buyer interested in purchasing fertilizer on a with child(p) scale for his non-for-profit organization the One Acre Fund ( palooka). thugs mission is to provide fertilizer to farmers who squander nothing on a credit like system and when the farmers produce their crops a percentage of their supplus would be returned to lump. Eventually the farmers would no longer need a free hand out and will be able to support themselves and their families without putting further strain on the government and the economy.When first looking at Kenya, Postigo had five different suppliers that all met certain criteria he had for doing business. He narrowed down the suppliers by contacting them and petition them for a RFQ. He and so, with his familiarity of the market and his product as well as coming to the disconcert prepared, negotiated the fertilizer to an acceptable monetary value that could be wrap upered to far mers enrolled in the OAF weapons platform. 1. Fertilizer is a commodity why did Postigo spend so practically time developing a relationship? Shouldnt he bind just set up an auction?Postigo did his homework and understood that developing and building relationships is a in truth 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 twenty-five people, you need to shake e rattling wizards hand (Negotiating, pg 3). Postigo realized that most of his potential suppliers we located in Kenya. He also knew that if he could make a deal with a vendor in Kenya thence the transportation bes would be much lower, thus creating a little more wiggle room for his BATNA.Postigo grasped the importance of building relationships from a different, more strategic purpose. OAFs short-term plan bodied rapid growth with regards to the small family farm s, which required rapid growth in their requested quantity of DAP. Postigo acknowledge that in building a relationship he was really opening up their opportunities for the future. If he could fasten coarser batch orders in the future, then he index be able to use that supplement to talk the supplier into lowering the current price.Postigo knew that establishing his desire for a strong relationship would profit off in multiple ways, two satisfying the cultural status quo while also putting a strategic plan into place to realize cost savings in the future. 2. What was Postigos BATNA to reaching a negotiated agreement with Dehvi Medji and Sons? During the negotiations for fertilizer, Postigo was concerned with three major issues auction pitch date, price, and the ability for growth into the future. Keeping these things in mind, it encounterms that the scoop alternative to a negotiated agreement would welcome come from the current market 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 re seem, in Nakuru, where both(prenominal) the cost of fertilizer and the cost of transportation were taken into consideration, a 50kg bag could be getd for 4,000 Ksh (Negotiating, pg 6). This cost of 4,000 Ksh would draw been the BATNA for Postigos negotiations However, the BATNA could also cave in been found in one of the other vendors that were being looked into.If these other vendors had offered him a current price then that value could vex been seen as Postigos BATNA. 3. Should Postigo kick in spent the time and capital to meet face-to-face with all five potential vendors for the purpose of telling them about One Acre Fund, rather than sending them an e-mail? Working for a not-for-profit organization, Postigo understood that he needed to save money wheresoever possible. Meeting wi th the vendors in person major power have had a larger effect on empathy throughout the negotiation. He might have been able use that to his advantage, exclusively in the end, the benefit would not have outweighed the cost.Postigo contacted five vendors, four of which came back with bids. The first scenario where the cost outweighed the benefit had he traveled 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 evaluate bringing 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 totality of time and money while withal attracting 3 potential vendors eventually leading to a deal that, from his standpoint, was very successful. . Followup question Did Postigo pay particular attention to the other partys needs in the phone calls with Dehiv Medji? Postigo did a very g ood job of paying attention to Dehiv Medjis needs throughout the negotiations. They spoke about the bushel 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 prospectsindicated that the two organizations might grow together (Negotiating, pg 7).Postigo negotiated in a fair and accommodative 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 felt 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 call 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 situation that Pastigo was in an open discussion about the long term goals of the not for profit OAF was a valid opening strategy. It gives Pastigo a fair union of leverage epically since OAF is planning to have a large amount of growth in the near future, that information alone allows Pastigo to negotiate much harder for present prices with the perceived promise of future growth. It is also a valid and simple way for Pastigo to light building a relationship with the supplier.By opening with a good amount of information, especially with a topical anesthetic supplier, OAF as an organization tooshie leverage the fact that they are trying to grow the amount of fertilizer utilise by a large amount of farmers which is good for the fertilizer suppliers. This was also an economical means to build the relationship the OAF was hoping to have with their future supplier, by showing that they were open and direct with both the plan s 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 but not the take up, would you inactive 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. Taking 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 company that had the ability to grow alongside OAF going into the future.Price was only one of the concerns that Postigo was looking at. The case study goes on to state that in previous 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 wiggle 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 tape the negotiation phase with Dehvi Medji, regard slight of the initial price bid, in order to further 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 buying from a handful 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 the local small plan farmers become more self-sufficient and by choosing local wholesalers over a unusual supplier can build the fertilizer industry in Kenya allowing local farmers to have better access even if the OAF was to leave the country. It is quite likely that Mr. Youn did consider other options during the start-up process but in the end opinionated local suppliers would be a better option. An option that they whitethorn considered would be using a foreign wholesaler and bulk ship the fertilizer to Kenya and then ship it to the warehouses to break down and disperse to the active farmers.This option may have saved them enough money on the base product to low gear the make up in shipping and handling cost to get the fertilizer into Kenya. This may not have been a viable option in this opening round 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 afford to travel to government depots and did not have the exchange to buy or transport the fertilizer.However, this action by the Kenyan government might have second-string 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 form local suppliers due to the government subsidized supply. One obvious problem in the assay that the a current or future supplier may n ot be able to preventive competitive 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 helping the program to expand faster. This choice 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 sentence on rascal 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 assumption made 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 shared were the negotiations for price and transportation brought into the negotiation. two of these considerations made by Pestigo showed he was prepared to enter negotiations with Jiten Patel and allowed them both to come to an agreeable solution. 9.What do you see as the strengths and weaknesses of Postigos negotiating strategy for fertilizer in 2007? Postigo had many strengths and weaknesses in his attempt of his first large acquisition of fertilizer for the OAF. His main strengths were the facts that he was knowledgeable 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 include the fact that he had not built a relationship with his Kenyan suppliers knowing far in advance that that is an essential procedure in Kenyan business culture.He also failed to have realistic expectations when ask a smaller company like Delvi Medji and Sons to potentially supply such a large client 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 face-off knowing far in advance they would not be able to meet his needs. Postigos knowledge of the wholesale prices as well as his mark et and expected forecast did allow him however, to accurately foreknow 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 significantly 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.