International Business Event: An Extreme Counter Offer
Doctor Ling, SongCast Cable’s Sixth v. P. of Products, was in entire control of the meeting. They sensed it was time to force more concessions from CyberWave’s negotiating team. CyberWave, typically the four-year incumbent email-based platform provider, had been quite uncooperative in renegotiating the actual contract. But with iWeb’s (a Singapore start-up company) cut-throat offer on the table, Dr . Ling had a real opportunity to drastically cut his growing email-based operational costs.
Dr . Ling looked directly at Mr. Hua, CyberWave’s Sales Movie director, stating in a silent, gentle tone “Mr. Hua, we cannot afford any longer in order to supplement CyberWave’s licensing charges for subscribers who subscribe to free accounts. As you will discover in the counter-proposal in front of you, all of us expect your company to cost nothing for these subscribers to come, but of course, we will pay for all those subscribers who opt for a ‘for fee’ package. ”
Attempting to mask his displeasure, Mister. Hua interjected “Dr. Ling, this is most difficult to comprehend. inch
Barely pausing, Dr . Ling did not respond and carried on, “We are also leaning in the direction of outsourcing the entire e-mail web hosting operations to the selected merchant. We expect ‘all’ functional and technical costs to become included: hardware and software programs, telecommunications bandwidth, and any kind of direct or indirect expenses associated with the migration of the customers to the selected vendor’s service. Furthermore, we will undergo a formal RFP process when we cannot reach a common agreement that meets our own satisfaction. ”
Dr . Ling glanced at the only United states in the room. He was surprised that Mr. Hua’s manager hadn’t reacted. He knew having been asking for a lot, but it had been his job to ask whenever possible. Dr . Ling knew which incumbent vendors detested official RFPs. He really failed to have the time to orchestrate the actual RFP process, but he’d do so if he believed he could put more tension on CyberWave to lower their selling prices. For all he knew, CyberWave might just be desperate enough to help agree.
Dr . Ling persisted, “Mr. Hua, I am sure that you are aware that a new vendor feature emerged — eWeb. They get crafted a very creative small business proposition that many within our corporation view as a long-term small business commitment. Obviously, I am definitely not at liberty to provide you with the main points of their proposal, but Rankings encourage you to be incredibly creative and aggressive with the business model. We are looking to give this contract for a three calendar year term. ”
Dr . Ling was not sure how is definitely subtle threat would be gotten. He liked CyberWave’s technological know-how and ingenuity, but he or she thought that they needed to take his business without any consideration.
He continued, “CyberWave and also SingCast have had a good business model over the last four years. But since discussed in our last appointment, SongCast feels that your business has not been proactive enough in locating a business model to lower the total cost of ownership. If you’d prefer our business, now is the time to show your commitment. ”
Tanker Wilson, the American in addition to Mr. Hua’s manager, wouldn’t believe what he was experiencing. Patrick could not remember the final time he heard of this “extreme” opening position for just a contract re-negotiation with a purchaser. Threats, massive price charité, and a competitive RFP must have been a lot to digest. It was a little while until all of his mental toughness to refrain from interrupting, these days he was going to take his / her cues from Mr. Hua. Since Mr. Hua kept stone-faced, he has the same. This was Patrick’s second trip to Singapore. After an even dozen years of selling globally, he or she knew better than to let his or her “American emotion” take control of his or her tongue. Instead of talking, he or she decided to write Dr . Ling’s points down on his take note pad. He wrote:
1 . Charge nothing at all for any new subscriber it does not sign up for a “for fee” account
* Reaction: Ridiculous! We have no power over “how” SingCast charges for packages. Whether they charge or not really, if a subscriber is using the software, we need to get paid.
2 . not Outsource entire e-mail functions
*Reaction – This could be a fantastic opportunity to generate new costs and leverage services from your 3rd party outsourced sub-contractor
a few. Outsourcing costs would have to contain: hardware and software fees, monthly telecommunications bandwidth prices, and all costs associated with the storage of the consumer accounts
3. Reaction – Need more actuality finding. A model in this way has revenue potential, and several risks (we could in financial terms lose our shirts). Undecided how we would account for in addition to control bandwidth costs
5. eWeb is the competitive dealer – Is Dr . Ling threatening us?
* Impulse – Very scary! Often the CEO, James Li, is undoubtedly an ex-CyberWave VP of Know-how. James was with the corporation for three years and was in control of the e-mail solution tool. He took three of the highest-quality developers with him to get started with the company in Singapore.
3. James knows our product or service inside and out of course, if he has built a new product or service – it is probably great.
5. Three-year expression for the contract. Looking for a start-up company model that lowers the overall cost of ownership
* Effect – Since he mentioned the new, probably safe to be able to assume that we have to change our pricing terms and the design.
SongCast was Singapore’s second market share broadband vendor. Following only two years from obtaining its government license to supply consumer services, SongCast has been on pace to go beyond MediaOne, the market share head for broadband connectivity and also consumer e-mail subscribers. SingCast’s multi-million dollar bet regarding wiring fiber-optic cable onto consumers’ homes was paying down. Consumers in droves ended up cutting the cord having MediaOne, primarily due to its very poor customer service, high prices, in addition to aging technology infrastructure. SingCast’s stock was hot, right up 42% in 9 several months. The shareholders were enthusiastic about SingCast’s new strategic increased exposure of consumers versus its preceding strategy of primarily directed at enterprises.
Dr . Ling seemed to be uncomfortable with all of the praise in addition to the attention he was receiving. Having been the visionary leader who convinced SingCast’s CEO in addition to the board to bet significantly on wiring the fiber-optic cable directly to consumers’ households. But with the corporate success, a couple of significant challenges were rising. First, SingCast’s server neighborhood was not keeping pace together with subscriber growth as SingCast underestimated just how popular their particular solution would be with Singapore consumers. Second, the initial written agreement pricing model with CyberWave was netting CyberWave a huge amount of money in licensing fees regarding “new” subscribers who can sign up for the SongCast services for free.
Dr . Ling understood early in the project the licensing fees paid to be able to CyberWave could become an economic issue, but he shed the argument with the marketing and advertising department. They were adamant the only way get MediaOne subscribers to change vendors would offer “free” accounts. Consequently, hundreds of thousands of subscribers got converted their basic private email accounts, but those lower than the predicted amount wanted the “for fee” offers. To the financial markets in addition to shareholders, the appearance of all these completely new subscribers was positive, playing with reality SingCast profit margins with these subscribers were really small and the cost of acquisition was high.
1 . Build two possible reactions in order to Dr . Ling’s opening and provide and support each along with the pros and cons of every reaction.
i. List brand new possible pricing models.
2. List ideas to control expenses.
iii. Suggest a new delete word Dr . Ling to recommend to the marketing department concerning SingCast product packages.
second. List two possible methods in dealing with eWeb Wizard as well as support each with plus and cons.
3. List any relevant issues that might pertain to this customer in Singapore.
Rob Day is actually the author of the soon to become published book “Steet Élancé for Global Business: An acceptable Guidebook for Global Company Executives”.