Over the last several weeks we have researched various organizational structures and cultures.  Business is in constant change with many forces influences these changes such as global, local, legislative, cultural, etc. This week we consider how these forces impact the organization along with what managers can do when confronted with these forces.

In this discussion address the following:

 What factors within the economic environment affect businesses, thus management strategy?

 How do demographics shifts and technological developments create both challenges and new opportunities for business?

Scenario:

Justine Wood is the top salesperson for Morton Paper Company.  She also leads the sales team that supports Mortons largest client, Allied Office Supplies headquarters is located in Barcelona, Spain. Allied is an international office supply chain that is growing rapidly in the global market.  During the month of May, Justine and her team members, Andy Griffith and Ronnie Howard underwent intense negotiations with Allieds purchasing agent, Jack Black, and Allieds CEO, Cary Grant, to restructure the current sales contracts. 

The new contract spelled out Allieds yearly paper requirements (contracted sales amounts) as well as payment and credit terms. The negotiations had been particularly hard for several reasons:

Allieds sales had increased internationally causing shipping and customs duties to increase the cost to Morton, resulting in an increase in sales price to Allieds;

Morton’s sales have deceased domestically due to technological advances such as e-records, e-contracts, etc.

The volume of sales for Allied required Morton to offer a volume sales discount to remain competitive with other paper companies, though tariffs and other taxes impact profits for the company.

Mortons CEO (Jimmy Cricket) was reluctant to tie so much of the company’s future success to Allied.  The concern was raised because in the last six months, Allied was paying down the credit line every 60 days rather than in the 30 days that had been agreed to in the current contract.  Allied did not appear to have credit issues but Morton was not able to give interest-free loans for 60 days.

The world market has been challenging for their products and the executives have been talking about diversifying their products.

This week, in time for the Labor Day holiday vacation, the final agreement was reached between Morton and Allied.  On Friday evening, Justine was packing her belongings readying to leave the office for the holiday, when her cell phone pinged.  The caller was Jack Black, the Purchasing Agent for Allied. It appeared that a recent deal with UMGC tripled its need for copy paper from Morton.  This deal would raise the total contract sales to $2.5 million.  Black also made it clear to Justine that if the new terms were not agreed on by the end of that Friday evening, he would be prepared to look at an offer supplied to him by Mortons biggest competitor, King Paper.  Black further stated that, while Allied is pleased with Mortons work, money is always the most important factor in purchasing.  Allieds president wanted an immediate answer so he could go on vacation with a clear mind.  Justine was aware that most of Jacks talk was a negotiating technique but did not doubt that there is competition waiting in the background.  Images of last months teamwork ran through Justines mind as she listened to Black talk.

Overall, the months negotiation process had been long and difficult.  The thought of going over it all again to make the changes seemed mind-numbing to Justine.  Yet, making the decision on her own would mean obligating the company to an even greater cash flow commitment.  Her boss would not be happy with this obligation because he specifically warned her when they started that there was nothing to prevent Allieds from continuing to pay its bills every 60 days despite the new contract agreement.  Justine rationalized and thought to herself, Allied knows we are not likely to cut them off easily.  They are too big a customer to us.  However, the extra sales volume should offset the lost interest due for ten days in late invoices.”

Justine told Black that she could tell the CEO about the proposal.  When Justine hung up the phone, she thought about all the work that went into the external environmental analysis they did prior to the negotiations taking into consideration strengths, opportunities, and some of the concerns that came up in the world market.