Scott, the salesman for Standard Machine, has just received a call from Joann, the purchasing agent for Occidental Aerospace. Occidental has been one of Standard’s largest and most loyal accounts. Following Standard’s fixed price policy, Scott submitted his bid at list price, $429K. Now Joann has called to inform Scott that his bid was not good enough. She told him that one other competitor had bid “under $390K” and another “a little over $400K”. She tells Scott that to win this business; he needs to cut his price by an additional $22K. Although this bid is only for one piece of equipment, Joann reminds Scott that the company will be building two new plants over the next four years, representing “a lot of potential business.” Scott has gone to his boss Tony, the sales manager, to ask for an exception to the fixed price policy.
Why do you think Standard Machine is in this difficult situation with what was previously a loyal customer? What has changed? What would you do?

Occidental Aerospace it seems has recently changed to a competitive bid process. This has changed the dynamics of Standards relationship with Occidental. Occidental in reality views the purchase of the equipment as a purchase of a commodity when in reality it is the purchase of equipment and services. The machine tool industry has not seen alot of change in the last couple of decades the rise of the internet and global marketing has enable customers to shop worldwide for these types of machines at various countries, many of which have lower overhead costs than US firms can manage. this has lead to a rise in low cost, and usually low quality machine tools.
Scott had a hand in this by agreeing to compete in this bidding process between vendors. Scott should be conversing with Joann concerning Standard's unmatched superior product, yes they can get the same type of machine from another company