Test

Naturally what comes to mind at this point is the fact that De Havilland may consider cancellingtheir contract with Dollard upon short notice in order to take advantage of such lucrative deal despitethe possibility of paying contract cancelation penalty to the supplier. The question here is: should DeHavilland switch over right away or wait till August 1993 to start with Morton provided that thenegotiation was successful?In order to realize their potential cost savings and establish a long term relationship with Morton, DeHavilland may have to go through a long and painful negotiation process with Morton’s negotiationteam. There are few uncertainties and obstacles which have to be addressed and cleared before anynegotiation between the two parties. Strategic behavior is a potential obstacle to successfulnegotiation between De Havilland and Morton. Having at least two other vendors (DasComposites and Lakeside Industries) that made bids close to that of Morton, De Havilland couldoverplay their hands hoping that Morton would lower their prices even more. The question for DeHavilland here is also to ask themselves: will we be negotiating with the real decision makingindividuals or there are other decision making authority out there such as Devon, their parentcompany who may influence Morton’s decision? Same thing apply to us: is Bombardier aware of what we are doing and would certainly approve our decision? On the other hand, the fact that DeHavilland received favorable bids from other vendors may increase their bargaining power in the negotiation with Morton. Furthermore, the gain to De Havilland from thisnegotiation (part cost reduction, lower transaction costs etc.) is expected to be larger thanthe gain to Morton, which makes the former party to the negotiation to be more impatientthan the latter and as a result, the bargaining power of De Havilland further decreases. On theethical issue, will De Havilland try to exploit Morton’s current marketing strategy by...