Case Study : The Pacific Oil Company

1731 Words Oct 17th, 2016 7 Pages
Overview of Case
The Pacific Oil Company, founded in 1902, experienced rapid growth throughout the early twentieth century, expanding into north Africa and eventually the Middle East. The company became one of the successful and largest worldwide supplier and producer of industrial petrochemicals. Their central product, Vinyl Chloride Monomer (VCM), is the base ingredient in Polyvinyl Chloride (PVC) which was not readily available to all companies producing PVC products until the mid to late 1980’s.
Due to the rarity of the product in 1979, Pacific Oil was able to enter into a major contract with a company called, Reliant Corp. It was written as four-year contract that resulted in the construction of a pipeline between Pacific Oil’s plant in Antwerp, France, directly to Reliant’s facility in Abbeville, France. At the end of the four-year contract it was understood that it would be necessary to renegotiate the contract. However, what was not taken in to consideration by Pacific Oil, was the fact that there were other companies who had begun to develop their own capabilities to produce the VCM.
By 1982, Pacific Oil and Reliant had renegotiated the original contract and extended it another four years with no specific changes to the original contract. During the next four-year period, the demand for VCM steadily increased within the market, meaning that competition would soon develop as new suppliers came into existence, and that would ultimately affect the prices…

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