1.
Preparation
In order to prepare for the negotiation I will ask the following questions
1) Should I negotiate? Yes because a 15% increase will significantly impact Vurin’s profit margins
2) Research; in negotiation information is power
TechParts Inc.'s Potential Interests: Beyond raw material costs, they might be looking to improve their
overall profitability, secure long-term contracts, or gain exclusivity for future Vurin products.
To leverage on this I would prepare Vurin’s sales numbers, prepare a deal to offer them exclusivity, a
long term contract and profitability to some extent
Lastly I would Analyze my
BATNA: : Exploring alternative suppliers would take at least 6-9 months for qualification and ramp-up,
and initial costs might be higher due to smaller order volumes with a new supplier.
So right now at first glance my BATNA in this negotiation isn’t very strong so I’ll hold off on revealing it
until its needed
Vurin’s perspective
1) Stretch Goal: 4%
2) Most likely: 8%
3) Reservation price: 10%
BATNA ----Reservation price ------- Most Likely ---------- Stretch Goal
10% - $11 8% - $10.8 4% - $10.4
TechParts Inc Perspective
1) Stretch Goal: 10%
2) Most likely: 15%
3) Reservation price: 18%
BATNA ----Reservation price ------- Most Likely ---------- Stretch Goal
18% - $11.18 15% - $11.5 10% - $11
So the ZOPA (Zone of Potential Agreement) which is the region of likelihood of the deal is
8-15% realistically
Opening Statement: “I would first of all like to welcome all the Members of TechParts Inc that made
time out of their busy schedule to come for this meeting, it is much appreciated. Before we begin
discussions I, David Okoye on behalf of Vurin which to first and foremost acknowledge and applaud
TechParts Inc for their remarkable efforts these past 3 years as one of our top suppliers. Now taking this
into account and our existing company internal policies that states that whenever there is a
disagreement with one of our vendors, we ought to seek to come to an understanding first to
understand their point of view before making our decision, We are here today to work together towards
Our shared goal is continuity and long-term success for both firms”
3. Tactics I would use in the negotiations:
- I would avoid overconfidence as TechParts Inc is currently our only supplier and we currently don’t
have a very strong BATNA
- I would use the effect of availability by casually mentioning positive statistics of sales of electronics
worldwide and Vurin’s ratings or other partners to make them TechParts Inc believe that a continued
partnership with us in the long run might be beneficial even if they might have to make less gains right
now
- Then I would anchor on 7% as our counter offer to their price increase, this would be establish a new
focal point for the negotiations, I wouldn’t go too far inorder not to loose credibility in the negotiations
4. If TechParts Inc firmly insists on the 15% increase
- I would bluff by asking them to remember at the start of the meeting when I mentioned that they were
one of our suppliers and that we know from the news, market journals and our other suppliers that the
raw materials have increased and true the other vendors have increased their price but not as much as
TechParts Inc.
That while the other vendor’s prices are very economic for us, you can’t put a price on transparency, on
quality, on reliability, these are the values that make TechParts Inc one of our best suppliers and that’s
why while we know it’s a difficult ask, we want to enter a 5 year contract with TechParts Inc as our
exclusive partners to supply for us at this fixed price $10.7 (7% increase) and since we won’t be getting
supplies from other vendors, we work together to create a realistic plan for an increase in supply of the
chips
If they introduce new demands, I would kindly ask them to collate their thoughts after the meeting and
send us a formal email that if everyone was to start adding or changing the agenda of the meeting that
we won’t make any progress and urge us to stick to the meeting’s agenda and if the new demands are
still necessary to discuss then they can go ahead and send an official mail
5. To Close the deal, I would bring in the legal team to draft out a contract agreement using a
memorandum of understanding document as a framework for the future discussions
Then I would ensure that the following things are ticked
a) There is an agreement on both sides
b) There is consideration, TechParts Inc will lower their price, we offer them an exclusive contract and an
increase in purchases in the future
c. The matter at hand is of a legal nature
d. The legal team will record everything important on paper and include the parole evidence rule so that
whatever wasn’t included in the contract won’t be used against us should an issue arise in the future
6. Regardless of the outcome.
Good or Bad
1) I would keep in close touch with them, to make sure that once the contract is signed that TechParts
Inc and Vurin keep their end of the bargain (I would implement the contract to the best of my abilities)
2) I would start looking for alternative supplier to reach out to once the contract expires inorder to avoid
having to make such a huge bluff again