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CASE 2

ACME WATER PUMPS AND THE NIGERIAN GOVERNMENT

A SALES CONTRACT

CASE SUMMARY

One of the major problems in Africa is water supply. One solution is pumping ground water, which saves time and effort for villagers who would otherwise have to walk for miles to sources, some of which are polluted. Another problem is maintenance of technical equipment. African buyers often purchase foreign goods, and they prefer goods that require minimum maintenance. In this case, the Nigerian government is considering buying equipment from an English producer.

The English have had a long tradition of economic and political involvement in Africa. In spite of the colonial nature of past relationships, the English still enjoy a good working relationship with many African governments. Many of the legal, educational, governmental, and value systems which exist today were established by the English and thus there is a common understanding of each other's culture and of how things should be done. However, one major difference is in the rigid government control in Nigeria and the possibility for corruption opened by the centralization of power and lack of democratic controls. This could create conflicts between the English system, which does not condone bribery, and the Nigerian system, which accepts it. Another area of possible conflict is the sense of superior-inferior relationship that may be a by-product of England's relative economic success and Nigeria's economic faltering. Pride will definitely be an issue, and any sense of a superior tone on the part of the English will be counterproductive.

CULTURAL BACKGROUND

Two groups will be selected by the teacher to present an analysis of the two cultures of negotiations in this case—England and Nigeria—along the lines discussed in Chapter

Cultural Awareness in International Negotiations on cross-cultural negotiations, such as (1) differing concepts of time, (2) the purpose of negotiations—deal versus relationship establishment, (3) approaches to decision making, and (4) the value and importance of protocol, ceremony, and so forth. Another important issue is tone. What tone should the English delegation establish and what barriers should be overcome?

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After each group has presented its culture, both teams will conclude by pointing out areas where, due to differences in the two cultures of negotiation, misunderstanding, frustration, and conflicts might occur.

QUESTIONS FOR DISCUSSION

1.Why can negotiations between industrialized and developing countries be particularly sensitive? Why might the two sides be skeptical toward each other?

2.What can be done by both sides to overcome this skepticism?

3.In gauging the balance of power, what advantages does each side have? How would you exploit the advantages of each side? How could each side use their advantages? What is the possible danger of pushing your advantage too far?

CASE

Acme Water Pumps, Ltd. is a major English manufacturer of irrigation equipment whose primary market is Europe, but which is attempting to penetrate the African market. They see a potentially enormous market for their almost maintenance-free J27 water pump. This pump was developed in light of maintenance problems in Africa. The pump is based on a limited number of moving parts, which reduces the need for maintenance and the possibility of breakdowns. They have sent a brochure to the Nigerian Ministry of Agriculture, which has studied the design and shown an interest. The Nigerian Ministry invited the Acme representatives to demonstrate the pump and were openly impressed by both its simplicity and its effectiveness. The ministry extended another invitation to discuss contract matters, which is the basis of this case.

The major items to be negotiated are:

1. Cost of the pump figured on CIF or FOB.

a. CIF (Cost, insurance, freight, where the seller is responsible for all of these expenses) or FOB (Free on board, where the buyer pays all costs from the moment the goods cross over the ship's rail)

b. Delivered at the Frontier, where the seller's obligations are met when the goods arrive at the frontier/border or Delivered Duty Paid, where the seller must deliver to the buyer's door and pay all of the duties.

2. Credit terms. A common credit term is 30 days, 1 percent, which means that the Nigerians will receive a 1 percent discount if they pay within 30 days of the billing