Strategic Response and Adaptation for Morton Paper Company- Navigating External Challenges and Contractual Negotiations

Strategic Response and Adaptation for Morton Paper Company- Navigating External Challenges and Contractual Negotiations

What conditions in the external environment should Morton Paper Company be paying attention to? Present evidence found in the case study to support your choices.

Innovation is one of the external factors that Morton Paper Company should pay attention to. As explained in the case study, the company is losing business due to technological advancements in the form of e-records and e-contracts. Morton Paper Company is suffering due to these innovations in the technology industry, yet they lack control over the same aspects. Secondly, legal aspects that determine the tariffs and taxes that Morton Paper Company charges Allied affected its business. While it wants to remain competitive, Morton Paper Company cannot control the tariffs, yet they affect the profits negatively. Finally, the changes in the global market present challenges to Morton Paper Company, requiring the executive to review its current offerings for continued relevance and profitability.

What advantage does Allied have for re-negotiating the contract?

Allied can re-negotiate the contract to its favor using the claims of other companies’ competitiveness and their increasing sales in the international market. While Morton Paper Company is being affected by all the other external factors, it lacks a significant advantage in comparison to Allied. Allied can argue that other players in the market will be willing to offer the same services at a better price, especially for a company whose international sales are growing. Thus, this argument may twist the contract to favor Allied and oppress Morton Paper Company significantly.

In the short term, how should Morton respond to Allied’s demands?

Morton should accept the contract to continue working with Allied. However, it should emphasize that payments be made as stated in the contract. Failure to make these payments should attract action against Allied because it is a complete breach of contract.

Given the changing conditions in Morton’s external environment, what changes in its business strategy should Morton consider?

Morton should adopt the upcoming innovations and incorporate these into their product portfolio as a way of diversification. Finding a unique aspect to use as a competitive advantage in the global market is important for survival. Failure to adopt these changes may lead to a complete loss of business and possible closure.

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In this discussion, we examine how organizations may need to alter their business practices due to events in their external environment.

Please read the case study below and respond to the following questions. Use the information in the case study to craft your answers.

Strategic Response and Adaptation for Morton Paper Company- Navigating External Challenges and Contractual Negotiations

What conditions in the external environment should Morton Paper Company being paying attention to? Present evidence found in the case study to support your choices.
What leverage does Allied have for re-negotiating the contract?
In the short term, how should Morton respond to Allied’s demands?
Given the changing conditions in Morton’s external environment, what changes in their business strategy should Morton be considering?

Scenario:

Justine Wood is the top salesperson for Morton Paper Company. She also leads the sales team that supports Morton’s 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 Allied’s purchasing agent, Jack Black, and Allied’s CEO, Cary Grant, to restructure the current sales contracts.

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

Allied’s sales had increased internationally, causing shipping and customs duties to increase the cost to Morton, resulting in an increase in sales price to Allied’s;
Morton’s sales have decreased 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.
Morton’s 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 Morton’s biggest competitor, King Paper. Black further stated that, while Allied is pleased with Morton’s work, money is always the most important factor in purchasing. Allied’s president wanted an immediate answer so he could go on vacation with a clear mind. Justine was aware that most of Jack’s talk was a negotiating technique but did not doubt that there is competition waiting in the background. Images of last month’s teamwork ran through Justine’s mind as she listened to Black talk.

Overall, the month’s 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 Allied’s 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.”