Ashford 6 Week 5 Discussion 1 Your Initial Discussion Thread
Ashford 6 Week 5 Discussion 1your Initial Discussion Thread Is Du
Your initial discussion thread is due on Day 3 (Thursday) and you have until Day 7 (Monday) to respond to your classmates. Your grade will reflect both the quality of your initial post and the depth of your responses. Good Will in Price Bidding Sometimes, a bidder on a work contract may bid lower than what would maximize his/her profit from the contract and the reason for that is to create goodwill (to increase expected future business from the buyer). How would you value the goodwill that is obtained in this way? Guided Response: Think about an example that pertains to you.
If there is expected goodwill would you be prepared to bid lower to get a contract? Explain your reasons. In 300 words or more, please, provide your response to the above discussion question. Respond substantively to at least two of your classmates’ postings. Substantive responses use theory, research, and experience or examples to support ideas and further the class knowledge on the discussion topic.
Paper For Above instruction
Creating a strategic approach to bidding on contracts requires a nuanced understanding of goodwill and its valuation within the context of business relationships. Goodwill, as defined in managerial economics, is an intangible asset reflecting a company's reputation, customer loyalty, and potential for future business (Douglas, 2012). When a contractor bids lower than their profit-maximizing amount to secure a contract, it is generally done to foster goodwill—an investment in future opportunities rather than immediate profit. Valuing this goodwill involves assessing prospective benefits, such as increased future contracts, enhanced reputation, and strengthened relationships, against the immediate loss incurred by bidding at a lower price.
The key to valuing goodwill lies in estimating the incremental profits derived from potential future contracts that may result from the current bid. For example, if bidding lower secures a 20% chance of additional lucrative contracts totaling $500,000 over the next few years, the present value of these future gains can justify the initial lower bid. This aligns with the concept that goodwill is an intangible asset that could generate long-term economic benefits exceeding the immediate reduction in profits.
Consider a hypothetical scenario—if a contractor normally bids $100,000 on a project to maximize profit but chooses to lower the bid to $90,000 to win the contract and expects that this relationship will lead to three future contracts valued at $200,000 each, with an expected success rate of 50%, the valuation of goodwill would include the discounted value of these prospective deals. Such strategic bidding reflects a calculated decision where the anticipated long-term gains outweigh short-term losses, emphasizing the importance of quantifying future benefits accurately.
Personally, I would consider bidding lower if the expected goodwill — in terms of future contracts, reputation, or strategic positioning — outweighs the immediate profit loss. For example, in my previous work experience, effective relationship-building with key clients often led to repeat business, where initial concessions or lower bids served as investments into trust and future revenue streams. This reinforces the idea that goodwill valuation should encompass both financial prospects and non-monetary benefits.
References
- Douglas, E. (2012). Managerial Economics. San Diego, CA: Bridgepoint Education.