SITXMGT002 - Establish and Conduct Business Relationships

Activity -Case Study D

Learner assessment guide and evidence

This assessment requires you to prepare for negotiations based on the case-study scenario.

You are required to do the following.

 Read the case study and answer the questions.

 You are to provide answers to each of the questions in a separate document using MS Word or
similar word processing tools. Your document should be professionally formatted with question
retyped and answered,
 You must answer all questions satisfactorily to achieve competency in the unit
You are the purchasing manager for a hotel complex. The hotel has a number of outlets.

 An upmarket bistro seating 200 and open Tuesday to Sunday (Friday and Saturday nights
average 300 covers, Sunday lunch and dinner usually average 150 to 200 covers).
 A public sports bar for up to 250 patrons.
 An informal lounge bar with seating for 60.
 A two-lane drive-through bottle shop.
 A gaming room with 70 poker machines.
 A small coffee shop seating 20, attached to the gaming room.

All stock required for the outlets must be requisitioned through your department. You’re responsible for
dealing with suppliers, placing orders, receiving deliveries, storing and distributing stock, contacting
maintenance and repair specialists as required, and managing the cleaning contractor.

You have the authority to negotiate contracts with suppliers to the value of $150,000 per annum on your
own. Above this amount, the assistant manager must negotiate with the general manager to obtain final
approval for all contracts.

The hotel’s owners have received approval to extend a section of the bistro into an outdoor garden dining
area which will seat an extra 100 guests. They’re demolishing a wall and replacing it with large glass
panels and doors. The outdoor area requires appropriate furniture, umbrellas, awnings, and additional
cutlery, crockery, glassware and service equipment.

They’re building a small bar in one corner of the garden area for use during busy periods or to service the
area if it’s booked for a private function. They’re covering one-third of the area closest to the doorways
leading from the internal bistro area with a permanent roof. For the cooler months, they’re considering
either attaching outdoor gas heaters to the roof area or purchasing freestanding heaters.
The renovations will take three months. An opening date has been set for the first Thursday in December.
Promotion of the new area commences in one month. Customers can make bookings six weeks prior to
opening. It has been forecasted that the new seating area will lead to a 40 per cent increase in business
in the bistro over the summer months.

You’ve been given the job of sourcing all furniture, large and small equipment, and food and beverage
service equipment required for the new dining area. You may decide to use current suppliers or locate
new sources. Price and the ability to supply the products and services within required timeframes will be
important considerations. Any contracts for equipment must include delivery and installation deadlines.

The bistro in its current format has been open for seven years. The food and beverage manager has
indicated that the current service equipment (especially the crockery) is showing stains and signs of long-
term use. Management will consider investing in new crockery and possibly cutlery for the whole bistro if
the price is within budgeted range. Otherwise, amounts required to increase current supplies will be
purchased. However, it must match or be similar to the current service equipment.

Choose two of the following areas, products or services to focus on for the purpose of your negotiations.

 Service equipment: glassware, cutlery, crockery, etc.

 Furniture: tables, chairs, service stations
 Large or small bar equipment for the external bar
 Décor: umbrellas, shade awnings, table centrepieces, decorative pots, water features or other
decorative items
 Outdoor heating systems
 Linen
 Garden supplies and/or ongoing maintenance

Q1: What two areas have you chosen to use as the basis for your negotiations?
 Furniture: tables, chairs, service stations
 Outdoor heating systems

Q2: What information must you research before you make initial enquiries with potential suppliers?
 Research regarding the state of the furniture and heating system markets in an economical or
financial perspective
 Research regarding the current supply and demand for the furniture and heating equipment in the
market
 Learn about the culture, behaviour of the individual or the company that’s about to deal with
 Gather necessary data about current market prices, costs, customer base, customer feedback on
the equipment to be purchased
Q3: Once you’ve contacted suppliers to negotiate with, research the people and the organisation.
Describe the results of your research and the cultural factors you’ll need to consider during
negotiations with the two different suppliers.
 Supplier 1
o After carefully doing the research and collecting necessary details regarding the supplier,
people and the organization identified some important details and some key cultural
factors that could affect the negotiation process with the supplier 1(Furniture Supplier)
 History and the background of the furniture company.
 What are they trying to achieve through the negotiation process?
 How the power and authority is distributed in their hierarchy
 Who is responsible for making decisions?
 What is their market share? How they gained their customer base?
 What are the quality standards they follow when producing and providing their
furniture equipment?

 Supplier 2
oAs the results of the research process, supplier 2 (Outdoor heating system supplier) also have
some key organizational and cultural factors that could affect to the negotiation process,
  What positions hold the power to make decisions?
 Their position in the market
 Their strengths and weaknesses regarding the heating systems
 What parties they have dealt with previously
 Type of the resources they possess
 Quality of their product and service
Q4: List and prioritise your objectives, negotiable and non-negotiable requirements and BATNA (best
alternative to a negotiated agreement).
Use table provided below as a sample to record your answers and submit to your assessor.
Supplier 1 Supplier 2

Objective of negotiation with furniture Objective is to have the best heating

Objectives
supplier is to get the same furniture system that survive for a long period of
of negotiation
equipment in right quality at right time with time with eco-friendly environment
a lesser cost
Prices of the furniture equipment Delivery and installation services
Negotiable
Delivery and installation of the furniture Payment methods and terms
requirements
Warranties and support services Will the system work properly?
Non-negotiable
Quality of the wood and the tools Support services
requirements

Prices of the furniture equipment to be Conditions of the system and the

BATNA
purchased durability of the heating system

Q5: What concessions (if any) are you prepared to make during negotiations to achieve your
objectives?
 Negotiations with Supplier 1
Offer a large order by connecting with another outlet of the hotel which the furniture items were
broken. And then ask for another 5% discount for the equipment
 Negotiations with Supplier 2
Heating system company need an advance at the first stage and the manager agreed to give it
using a bank loan. With that company plans to ask most durable heating system with lowest cost
Q6: Decide what roles team members will play during the negotiations.
 Negotiations with Supplier 1
Leader - an expert in furniture products should play the role as the leader
Good guy - think from both side when negotiating
Sweeper - summarise and take the negotiation as one thing
 Negotiations with Supplier 2
Leader – expert person in system side
Hardliner - who takes tough stance on everything as this system involves a huge cost
Bad guy - sometimes there may be members who always try to stop negotiations and destruct
them
Q7: List the internal and external issues that could affect this business negotiation as well as any
challenges you foresee occurring during the negotiation process. Describe how you would deal with
each one.
Use table provided below as a sample to record your answers and submit to your assessor.
Supplier 1 Supplier 2
 Some members are not aware  Members who have personal
about the new negotiation contacts with heating system
process - make aware all companies - ask all the
members about the processes members to provide quotes from
ongoing each company
 Need to get the approval from  Members request to have a
Internal issues general manager as the cost of substitute like standing heaters
tender increase 150,000 $ for rather that roof heating system
furniture equipment  Need of air conditioned systems
 Members may not like to have rather than heating system
the same type of furniture
equipment

 New laws regarding wood and  Have to get a license for

particular permits to transport operating such a heating system
wood and furniture equipment - within the business premises -
get the approval and all legal meet the particular authorities for
applications from all the legal compliances
External authorities  Heating system companies have
issues lots of rules and procedures
 Difficulties in getting same wood when installing them - tried to
materials - advertise in public to satisfy all the conditions that
have the same wood samples supplier required with lesser cost

 Challenge of having plastic and  Challenge is that to maintain high

steel equipment in the market
which are perfect substitute for
furniture equipment - according
Challenges
to the environment the hotel is
placed furniture are most durable
and attractive equipment than
other substitutes
durability eco-friendly system -
use technologies to have the
eco-friendly system and get the
certificate for the environmental
friendly requirement

Q8: Who will you communicate the results of negotiations to?

 To general manager, CEO and the board of directors of the hotel
 To operational management
 To all members of the hotel
 To the furniture equipment supplier and the company
 To the heating system supplier and the company
 To lessors and financial institutions, accountants, shareholders and the financial investors of the
hotel
Q9: In Role Play E you are required to role-play negotiations with the two suppliers you have
researched.
  Write a meeting agenda for the negotiations in the space provided.
 Agenda for Supplier 1 negotiations

AGENDA FOR NEGOTIATION MEETING WITH FURNITURE SUPPLIER

 Introduction for the meeting by introducing the all parties
 Presentation of the furniture equipment company about their tender
 Review the results of the presentation
 Discuss for the negotiation points
o About the prices of the equipment
o Quality of the equipment
o Delivery and the installation process
 Chance for the supplier to come up with negotiations
 Conformations of all negotiation points
 Discuss the activities to be done until next meeting
 Conclusion

 Agenda for Supplier 2 negotiations

AGENDA FOR NEGOTIATION MEETING WITH HEATING SYSTEM COMPANY SUPPLIER

 Introduction for the meeting by introducing the all parties
 Presentation of the heating system company about their tender
 Review the results of the tender evaluation
 Discuss clarification points
 Discuss for the negotiation points
o About the durability of the system
o Features of the system
o Warranties and other legal conditions
 Chance for the supplier to come up with negotiations
 Conformations of all negotiation points
 Explain monthly progress reports and reviews
 Discuss the activities to be done until next meeting
 Agree on action item list
 Conclusion
Case Study F
Learner assessment guide and evidence

This assessment requires you to develop contracts based on the negotiations you role-played in Role
Play E.

You are required to do the following.

 Refer to the research you conducted in Case Study D and the negotiations you conducted in
Assessment E.
 Document and submit a written contract for two suppliers/contractors.
 Respond to all questions.

Task 1

 Refer to the research you conducted in Case Study D and the negotiations you conducted in Role
Play E.
 Prepare two written contracts – one for each supplier/contractor.
 Use sample templates provided or create your own, for Contract 1 and Contract 2.
 Ensure the contract includes the key elements, components and inclusions to ensure it is legally
binding.
 Ensure you follow legal requirements that impact agreements in your sector, including consumer
protection where applicable.
 Decide whether you need any specialist advice to help you develop the contract. If you do, seek
advice as required.
 Submit the two completed contracts to your assessor.
 CONTRACT FOR SUPPLY AND DELIVERY OF FURNITURE ITEMS

INTERPRETATION
The contract is for the supply and delivery of furniture equipment such as tables, chairs and service stations
Purchaser - Victoria Hotel Complex
Supplier - D.K Furniture company

SOLE AGREEMENT
The contract constitutes the agreement between hotel complex and furniture supplier in order to supply
furniture items for the bistro of the hotel.

SCOPE
The supplier agrees to furnish the requirements of hotel complex
 Seating items - should produce using teak wood. Must be same to the sample designed provided by the
hotel. Seating includes managerial operational chairs and specially designed chairs for customers that suited
for the opening environment. Chairs should be matte finished
 Wood desks – desks should be made using jack wooden. Length should be 6’*5’ for all desks. All the desks
should complete without polishing that gives the real finishing
 Cafeteria furniture - mobile tables on rollers without benches Round and rectangular cafeteria tools with
staircase items

PRICE GUARENTEE
Furniture supplier has given 5% discount for the bulk order of chairs and tables. And 2.5% discount on
instalment and warranty conditions.
Orders will be limited to 500,000$ of net purchase value after discounts

PAYMENT
Payments can be made after the delivery or instalment of the furniture items. Agreed for cash or cheques
authorized by the company members. Payments must not exceed the days of 10 after delivering. Payments are
approved after checking the quality and the standards of the furniture items

TRANSPORTATION
Delivering of the products are being with the supplier and costs bear by himself. If any accident or any
damage happen during the transportation, then risks also must be bared by the supplier himself

INDEMNIFICATION
Contractor should indemnify, defend, protect and save supplier from the harmless actions and the supplier
can claim if there any wrong thing happened. Contractor should not settle any claim without a proper investigation

ASSIGNMENT
Hotel cannot assign any subcontractors for the agreed contract without the consent of the relevant party. Any
attempted assignment or transfer without said consent shall be void and of no effect

CANCELLATION
Any party can cancel the agreement with a written letter within 30 days of the signed agreement date. If any
party cancel the agreement that party must be disqualified by the state

RESOLUTION OF DISPUTES
Parties can use these steps to resolve disputes
- Settlement
- Mediation
- Adjudication
- Arbitration
All the terms and conditions above are correct to the best of knowledge of all parties
Contractor - ……………………………. Supplier - …………………………………
Date - ……………………………………. Date - ……………………………………
 CONTRACT FOR HEATING SYSTEM INSTALMENT

INTERPRETATION
The contract is for installation of a heating system
Purchaser - Victoria Hotel Complex
Supplier - HLC Heating system providers

SOLE AGREEMENT
The contract constitutes the agreement between hotel complex and heating system supply company in order to
install a heating system for the bistro of the hotel.

SCOPE
The supplier agrees to furnish the requirements of hotel complex,
A roof top heating system that should be environmental friendly. Should have a large capacity to heat
the environment. Durability of the system should be high.

PRICE GUARENTEE
Price for the system installation and preparation has a discount of 10% as it covers a huge area of the hotel.
Orders will be limited to 100,000$ of net purchase value after discounts

PAYMENT
Payments can be made after the delivery or instalment of system. Agreed for cash payment only. Payments
must not due the days of 10 after installation. Payments are approved after getting the certificate and the license
from the environmental authority

TRANSPORTATION
Delivering of the products are being with the contractor and costs bear by himself. If any accident or any
damage happen during the transportation, then risks also must be bared by the hotel itself

INDEMNIFICATION
Contractor should indemnify, defend, protect and save supplier from the harmless actions and the supplier can
claim if there any wrong thing happened. Contractor should not settle any claim without a proper investigation

ASSIGNMENT
Hotel can assign any subcontractors for the agreed contract with the consent of the relevant party. That
assignment can be done only for the tasks that the system company cannot do alone.

CANCELLATION
Any party can cancel the agreement with a written letter within 30 days of the signed agreement date. If any
party cancel the agreement that party must be disqualified by the state

RESOLUTION OF DISPUTES
Parties can use these steps to resolve disputes
- Settlement
- Mediation
- Adjudication
- Arbitration
All the terms and conditions above are correct to the best of knowledge of all parties
Contractor - ……………………………. Supplier - …………………………………
Date - ……………………………………. Date - ……………………………………
Task 2

 Respond to all questions.

Q1: According to organisational procedures provided in the case study D, who would you get to
approve the contracts?
 As purchasing manager can approve contracts up to $ 150,000 values per annum. If the
amount exceed should get the approval from General manager of the hotel. But before that
should get the approval from,
- Director board for the terms and the conditions of negotiation process
- Specialists such as lawyers, accountants
- Financial investors and institutions
- From all department heads in the hotel
 Also should get the approval for the contracts from the owners of the hotel
Q2: What information would you seek, review and act upon to maintain a sound business relationship
with both suppliers.
 Contract information about the orders
 Special events and the working days of the hotel. Anniversaries, birthdays etc.
 Personal preferences of both suppliers
 Ordering and sales history of both suppliers
 Keep cultural background in mind of both suppliers
 Keeping touch with sales data such as volume of business, sales orders
Q3: Describe how you would comply with agreed terms in the contracts.
 Always try to do the right thing according to the agreed terms and conditions
 Act ethically and responsibly
 Honour agreements within the scope of the authority
 Review the tasks and activities to see whether all are done according to the contract
 Conduct research gather data and take account of agreed key performance indicators
Q4: What KPIs would you take into account to check whether both parties are keeping up their ends of
the bargain?
 Internal KPIs
- Budget targets and sales figures
- Payroll costs
- Levels of customer satisfaction
- Achievement of specific deadlines
 Contractual KPIs
- Meeting delivery schedules
- Adhering to product specifications and quality standards
 - Paying invoices or commissions on time
- Meeting deadlines
- Achieving targets
- Achieving certain levels of satisfaction
Q5: In what circumstances might you need to adjust an agreement?
 If a party of the contract is not meeting their KPIs
 If the requirements of any parties’ change
Q6: If you had to adjust an agreement, who would you need to consult and share information with?
 All the parties including,
-Board of Directors, CEO, staff, head of departments, particular suppliers which the
agreement changed, customers, financial institutions, shareholders and anyone else
affected by the contract
Q7: Describe how you plan to maintain regular contact with the suppliers.
 Through face to face meetings
 Phone calls, text messages and through emails
 Skype conversations and video conferences
 Formal and informal meetings to contact
 Attending sporting events theatre or dinners
 Trade shows and exhibitions in product launches
 Corporative promotions or events