********PLEASE READ INFORMATION VERY CAREFULLY AND FOLLOW INSTRUCTIONS**************
Information necessary for Joseph Russo to negotiate with Patrick Lo
– It is related to the Canaan Group Negotiation and you will be playing the role of Joseph Russo and you will be negotiating with Mr. Patrick Lo.
General information
Patrick has two sets of important negotiations: one with Joseph Russo concerning royalty fees; the other with CP Rail regarding freight rates. For the Cache Creek container trans-loading operation to proceed, success was essential in both negotiations. It would appear from the information in the case that Hapag-Lloyd negotiated a base price of $1,825, which provides a cost savings of $555 per container (or 23 per cent). For the purposes of this negotiation, we can assume that Hapag-Lloyd is prepared to use the Cache Creek operation at that price, the other shippers may also be interested.
In addition, the cost savings shown above, other benefits of this proposed trans-loading facility include:
• Congestion relief at Port Metro Vancouver
• A reliable Shipping schedule and the elimination of delays caused by truck delivery bottlenecks
• A lower risk of delivery interruptions caused by trucker strikes
• No negative effects from a potential truck driver shortage
• The ability to consolidate inventory and containers at Cache Creek.
In preparation for your role play, you as Joseph Russo, need to think about the positions of strength you have in the negotiation with Patrick Lo. The following information is relevant for you in your role as Joseph Russo:
• Joseph was a 73-year-old entrepreneur who had been successful at investing in residential and commercial real estate in the Lower Mainland. He did not have any experience in logistics, but could see the potential for Cache Creek as a container trans-load operation.
• Cache Creek currently had contracts for rail-car storage and bulk commodity storage. Its biggest customer was Lafarge, which signed a 10-year contract for the storage of red shale for its cement operations in 2009. These revenue streams covered the overhead expenses and Cache Creek was operation at a break-even point.
• In addition to the multi-million-dollar initial investment in the purchase of Cache Creek in 2004, Joseph had recently invested $3 million in infrastructure to improve the capacity and capabilities of the terminal for container trans-loading. Canada’s federal government had matched this investment, for a total of $6 million.
• Joseph had a long-term perspective. He felt that it was just a matter of time before congestion at the port would force shippers to start using his terminal for container trans-loading.
• While Joseph liked Patrick and appreciated his enthusiasm, Joseph felt that he had assumed most of the risks through his investments in Cache Creek, and so he should benefit more. Joseph felt that the benefit sharing should be 80/20 or 75/25 in favor of Cache Creek. He would consider a 20-year lease on this basis.
• Joseph was familiar with the results of the pilot project conducted by Patrick.
Answer some questions about your role, your goals, and planned strategy for the upcoming negotiation. Also include your thoughts about the following :
answer the question on the word doc.
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