Case study: Catering debts

Aqua is a national supplier of bottled water. Catero, a contract caterer, is among its clients. Both companies are operating in extremely competitive environments and intend to be in the top three companies in their industry in the next five years. They have numerous outlets in major cities.

Aqua is organised around ten regional distribution centres. These centres bottle and distribute Aqua water products in their own regions. The pricing and invoicing of Aqua is controlled nationally. Regional centres send copies of the delivery notes to national headquarters.  All clients are invoiced by the head office, which receives payments directly, reconciles the amounts received with the amounts owed from the delivery notes, and processes the accounts through its central computer.

A similar arrangement operates at Catero with their local staffs, which operates catering facilities on their clients’ premises, sending to head office reports of the Aqua products they receive. When Catero receives invoices from Aqua, it reconciles these with the value of the products their sites have received, consolidates the amounts owing and issues payment orders to Aqua.

The Financial Director of Aqua reported to the Managing Director that a serious discrepancy had arisen between what Catero had paid and had been invoiced for the last seven months. The discrepancy amounts to $200 000.Despite several representations to Catero’s senior management, Catero is still denying that they owed Aqua this amount.

The Financial Director recommended that their MD should intervene with Catero” s MD and the amount outstanding should be reported to the Board. The annual contract value of Catero to Aqua was $2.2 million, equating to an annual net profit of $240 000. The Financial Director also reported that Catero had threatened to cancel their contract unless the disputed claim was dropped. He felt that the Catero contract must be suspended if Aqua did not receive the money owed.

(problem 1 and problem 2 only refer to the Case Study)

problem 1:

(a) describe the term “Interests” in the context of the negotiation. Determine two interests of Aqua and Catero in this dispute.

(b) Illustrate the term BATNA in the context of negotiation. Suggest probable BATNA that each party can switch to if they fail to agree.

(c)  Elaborate on the term negotiable issues. Determine Aqua negotiable issues and possible ranges of positions.

problem 2:

(a) What do you understand by the dispute resolution?

(b) In the above case study discuss two techniques of dispute resolution that the parties can employ to resolve the dispute.