« Discussion 2 Smita Verma To bid or not to bid 10 hours ago Marvin is definitel
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« Discussion 2
Smita Verma
To bid or not to bid
10 hours ago
Marvin is definitely faced with a very important decision. There are several factors that he must consider before he makes a decision on whether he should bid or not to bid on the job.
1]Some of the points he may want to consider are as follows:
Current standing of the company: The case study states that the company has been doing well all this while and up until today. That goes to say that the bidding strategy that they employed all this while has been working for them in a positive light. From the fact that they have been winning almost all the bids in the past tells us that they seem to have maintained good relations with clients and have a string bidding strategy.
Goals and strategic objectives of the company: Marvin should pay close attention to what the long term goals are of the company. Is the company looking to build a consistent client base with this 10 year client job or is the company focusing on growing profit margins by working with other clients. The bid must be aligned with the firms strategy and long term goals. Determining the same will be imperative for him to decide whether to bid or not to bid.
Competitive landscape and environment of the company: Marvin must decide how important it is to safeguard its cost structure based on what the competitors have to offer. The must do an analysis on what are the key competitors of the company and how letting go of the 10 year contract would place them relative to its key competitors.
Cost benefit analysis: Marvin should do a cost benefit analysis and determine if the expected growth in profit margins through work with other clients will out weight the profit made by working on this client for 10 years. He must also determine if the loss in profit margin by taking up this 10 year job would be worth it.
He must also determine how important this client is. Is this client a major power in the market? Are there other synergies and benefits of working with this client long term?
2]To bid or not to bid:
Based on the above few points it makes sense for Marvin to not bid on this job. Marvin’s company seems to be in a very strong state and has long term goals of growing profit margins bye working on several clients. It will not make sense for them to reveal their cost structure as competitors will walk over them if they do so. Also this client would offer a consistent cash flow to the company but this cash inflow will not out weight the inflow that higher profit margins and work with other clients can generate. Also, alternatively, they can bid for the job but must add a caveat about not being able to share their cost structure completely. Thus, they will lose the bid and also incur the cost of participating in the bid, but this will help them maintain some relation with this client which could be lost if the completely do not participate in this bid at all.
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Explanation / Answer
Based on the above acse study, the decision as to bid or not to bid depends on the below mentioned pros and cons. Marvin must weigh the pros and cons which will help him decide whether he would want to bid or not.
Pros:
a. The client would give continuous business which would in turn keep the cash flow going for the company.
b. Good relation with the client organsiation would increase chances of Marvin winning the bid.
c. The Client company has been doing well until the present day and has potential to do well going forward as well.
Cons:
a. The cost structure has to be mentioned while bidding to the client which will increase the risk of competition taking over.
b. The profits gained from the business does not outweigh the profits that Marvin's company makes by working with other clients.
c. There is no guarantee that Marvin will win the bid even if he discloses his cost structure.
Based on the above pros and cons, Marvin's should decide on whether he would want to maintain the client or build up other client business where he would make higher profit margins. As per me, he should work on other client business and try to win on deals where he can make higher profit margins. It should be such that other clients are also inclines with the strategic points that are mentioned in the article, like continuous growth, strong long term policies etc. If the clients that he is working on other than the present client in question, they should qualify the above parameters, then he should definitely concentrate on building the other business.
If they dont meet with the above required criteria, then he should concentrate on building good relation with the existing client, as there is a strong future analysis of client business expected and they might end up cracking a good deal, by implementing good strategy to overcome competition.
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