Mars Incorporated Harvard Case Solution & Analysis

Mars Incorporated Case Solution

Introduction

Mars is one of the largest businesses with a large number of purchases each year. Mars corporate culture focused on working on the principle of quality, responsibility, mutuality, efficiency and freedom. Mars is found in the industry where there are giant competitors are found such as Hershey, Nestle, and Wonka. To obtain fluency in its revenue, the business focuses on cost minimization by using the modern techniques of procurement. That why management decided to change its traditional procurement process into the online procurement process.

Questions

1. What are the basic types of auctions?

Ans: Auctions are basically a selling process used by sellers when they don’t have correct estimation regarding the price of the product. Prices of products are draw by different buyers according to their judgment about the products’ value and the highest bid would win at last. Following are different types of auction.

  1. Absolute auctions
  2. A type of auction where products are sold at highest bid made by buyer regarding the price of a product is known as absolute auctions. In this auction, the sale is granted, and the buyer seems to be more excited about the participation. Normally it has been more frequently used in the markets where there are a large number of sellers such as financial institutions and government agencies.
  3. Online auction
  4. The online auction is a most advance form of the auction which takes place by using the medium of internet. The format of the online auction may vary such as ascending English auction, descending Dutch auctions, first price sealed-bid Vickery auctions. The purpose of the online auction is to make auction process more simple and time-saving for the participants.
  5. Minimum bid auction
  6. In this type of auction, auctioneer accepts the bid which is made at the lowest price. The minimum price is always available stated by the auctioneer on the source of the auction such as broachers and advertisement papers. This auction not only reduces the risk of the seller to sale at lowest price level but also reflect the ability of the buyer to buy at the lowest price. Only limited auctions are selected by the seller and therefore the lowest one would win the auction.
  7. Reserve auction

 In the reserve auction, the minimum bid is not published, and a seller has reserved the right of acceptance or rejection of bid within a specific time horizon. A price of a product has predetermined by the seller who is not for the buyer. The process of reserve auction is start with the buyer's preparation and using a mean of RFQ (request for quote) which is provided on auction's website. After the preparation and posting of RFQ, different suppliers are invited to start the bid. Reserve auction not only help the buyer in the reduction of purchasing cost but also enhance market and procurement efficiency. (Manoochehri, 2008)

2. What features of the proposed Mars’ auction present implementation challenges?

Ans: Mars is one of the largest businesses who purchased more than $4 billion material annually with its fixed suppliers from a long period. Although, it create good relationship between business and suppliers in term of delivery conditions, quality specification, payment terms, price negotiation, best fit of supplier skills, joint development work, information sharing, etc. however there were some loopholes such as negotiations are based on arbitrary, one-on-one negotiation which restrict company in term of acquiring leverage in supply conditions, supply synergies and economies of scale......................

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