John Sardelli
LEAD 509
Exercise : Knight Engines – Excalibur Engine Parts
1.
What are the issues in the upcoming negotiation.
Price of piston and quality are my main concerns. Other concerns are branding and timely delivery.
Timely delivery is a given in the scenario.
2. Based on the review of all the issues, what is the “bargaining mix?” (Which issues do we have to
cover? Which issues are connected to other issues?
My main concern are the price and quality control of the pistons. The quality control plays a central role
in the price of the product.
3.
What are my interests?
My interests are to build a relationship with Excalibur Engine Parts. I am interested in purchasing these
products at a price of $600 or less. If we can reach a agreement of $600 p/item, we can possibly get the
contract and make a profit. On the other hand, I assume Excalibur is interested in doing business with
us to make a profit and get their brand noticed.
4. What is my resistance point—what is my walkway.
My resistance point is cost of delay. The cost of delivering the product late is not specified in the
exercise, but it is assumed that If the products do not get delivered on time our repeat business with the
client could be damaged substantially. Excalibur must put their commitment to timely delivery in the
contract.
BATNA: Knight Engines needs to make a deal of $600 per piston or less. We understand that Excalibur is
interested in branding their product because it is rumored they are trying to get government contracts
as well. Knight Engines has no idea what Excalibur Engine Parts BATNA is. We at Knight will strive for
the lowest cost possible in effort to secure the government contract so we will begin at $450 including
5% or adding it on later for rush delivery. $470 is the cost that Mordred Technologies Inc. can sell
similar products to us.
5. What is my alternative?
I have no alternative; Excalibur is the only place that can fill my order on time allowing me to put a bid in
with the government.
6. Defining targets and asking prices—where will I start, what is my goal.
I will start low at $450 per piston not including the 5% I have no problem adding it on later.
My target price is $530 per piston for 8320 units I will pay the 5% extra for delivery. Depending if it is
applied to the cost individually or on the total cost I am not concerned. I will pay a total of $600 with a
total contract cost of $4,992,000. This is my walk away.
I must have timely delivery; it has to be guaranteed. I must be able to return defective and unused
pistons that I purchase and are not needed.
I will try to get out of paying the 5% rush fee at the end of the negotiation by increasing the cost by 34% . If I can save 1% that is good.
Tangible
We are trying to maximize profits and minimize risk in regards to delivery time and defective product.
Intangible
We are trying to establish a good relationship so future deals can be made.
7. Who are my consultants and what do they want me to do.
I will tell them that the president is my consultant and that I have other people willing to take on the
order for $550.
8. Who are the opposing negotiators and what do they want.
Excalibur is the opposing negotiators.
I assume from the rumors they are trying to break into the government contract market and increase
revenue through profit. I would also assume they are trying to build a relationship with us.
9. What overall strategy do I want to select.
The overall strategy Knight Engines will select is to collaborate to develop trust and a long-term
relationship. I need to be competitive in my negotiation process because I need the deal and want
maximum profit to will take on the role have a chance to get the government deal. I will use the
negotiation of both the analytical and extrovert.
Beginning Gambits:
I will ask for a lesser price than I expect, $400.
If he offers me a price first I will refuse.
I will flinch at his proposals even if they are in my range in effort to reach his BATNA.
I will avoid confrontation and try to “feel his pain,” if he displays any.
I will play good/cop bad cop explaining that my boss “will not go for it.”
I will use the vise technique “You will have to do better than that,” and will focus on dollar amounts.
Middle Gambits:
I will not offer to split any differences.
I will ask for a trade off --lower price or discounted rush fee for branding rights on the pistons if they are
able to settle without it.
Ending Gambits:
Nibbling–discount on rush fee.
Tapering off concessions–I will try not to fall victim to this by the price raising. I will counter this.
Position for easy acceptance—I’ll offer to take him out to dinner and will come to them for quotes
before I go to the rest of the market in the future.
Negotiating Gambits:
I will try to be the person that is in control of the price talks. I will make it seem as If I do not need his
business, but value it. This involves not letting him write the contact.
“Will you put that in writing?”
I will concentrate on the issues which are price and quality control.
I will congratulate them on striking a deal with Knight Engines.
Unethical Gambits:
I will tell them that I have a potential client that guaranteed the pistons for $550.
I will tell them the president of the company is my consultant on this agreement.
10. What protocols need to be followed in conducting this negotiation?
The issue is price and quality and time but they said they can do two week turnaround on delivery.
The issues should be presented in a way where I do not give up that I have to have these pistons and
only have a two week turnaround time.
I will also take good notes during the negotiation so I can refer back to them.