Yekaterina Song
2010105918
Tue~Thur. 16:30 ~ 17:45
Exercise 5
Role Information
<Excalibur Engine Parts>
Well, it was one of the most interesting negotiations. Interesting was that in reality Excalibur
Engine Parts had kind a problem – it has already produced 10,000 pistons but could not sell it.
And now, Knight Engines Inc. comes and asks for rush order for 8,000 pistons. It means I can
charge higher price for such an order.
I was concerning about how to sell out all the pistons (10,000) but not only 8,000 and also for
quite a good price. I did not want to sell it for $100 because it less than its production cost, $480.
Any price less than $480 would mean that I lost. So, before negotiation I actually was ready for
any price which is no less than $100 per piston, because any price more than $100 is still better
than $100.
Since Switzerland was ready to pay $600 per piston, my start price for Knight Engines was
$600, but I was kind a afraid at the same time that Knight Engines will find the price too much
high and just will be willing stop negotiation or ask for dramatic price decreases. Their responded
that price $600 per piston is very high and they have an alternative $400 per piston, and asked to
sell them for similar price as my competitors. But I could not and did not want to do that because
cost price is $480 per piston. Then, I said “Yes, I also know about the competitor and their selling
price but don’t compare us, because as both of us know quality of our goods is different. Our
pistons have much better quality”. Knight Engines smiled and agreed but still was asking for
cheaper price. Most part of the given for negotiation time we were talking about price. Knight
Engines acted persistent about price issue and always reminded me that they can buy it for $400.
They asked to downgrade the price and I finally said, “Okay, the lowest price I can sell the
pistons for is $590”. Knight Engines said, “Just $10??” I also thought that it is so small discount
and said, “Okay, no less than $585 per piston”. They were about to leave me if I don’t give
substantial discount, they reminded me about my competitors’ selling price again.
In order to change their mind and make them stop to remind me about competitors, I gave them
an example telling that $400 per piston is not actual price, in reality it costs more to Knight
Engines. I said: “Suppose you bought 100 pistons for $400 from them and about 20-30 pistons
have defects. It means the price you bought for is not $400 but $500~$570 per piston. $400 x 100
pistons / 80-70 pistons. In addition, your company also has to maintain good image of your
company. What if you buy the pistons for $400 put it into engine, sell it and later on your engine
will have some problems because of these defected pistons? Demand and potential sales of your
Engines will be decreased. So for you it is better option to buy the pistons from our company
even though the price a bit higher.” Then they started to tell me that they have order from
Government. Since it was rumor I did not believe them and said that I don’t care much, without
these we have good sales. I just did not want to waste time on negation associated with
government order. Knight Engines asked again for lower price. I was shocked and said: “Hey,
guys? How much do you need I make discount for you?? I already made discount of $120,000
from initial price I asked! [($600 – $585) x 8,000 pistons]. They asked to downgrade the price till
$560 per piston. I said that it is too low, I cannot do that. Finally, I got an idea. I said, “Okay, I
can sell you pistons for $570 BUT only if you will order 10,000 pistons instead of 8,000”. Knight
Engines said they don’t need so many pistons, and I replied that anyway since they are producing
engines they will need the pistons and I suggested them to purchase the pistons in advance. They
agreed. I sold 10,000 pistons for $570. Very happy  Otherwise I had to sell it just for $100.
Challenging was that the Knight Engines representative always reminded me the lower price
that my competitor has, $400. What I learnt is that it is very effective while negotiation to give
plenty of undeniable logical explanations. In this case an opponent has nothing to do but to agree
with the fact. Also, even if I was ready to sell pistons for almost $100, I started negotiation with
$600, because I knew anyway Knights Engine will ask me lower the price and I will have to do
that, that’s why I started with higher price and was persistent not to make big discounts. It helped
me to sell for quite high price.
Exercise 6
Role Information
<GTechnica (Seller)>
What I learnt is that negotiation with an opponent will be more productive and easier to
hold if your partner (colleague) have similar, or same, thoughts and opinion with you about how
to conduct the negotiation, what price to set up as a first order price.
I think it is better for seller to call the price he/she wants first, but not asking "how much
you may offer to us?" and after that trying to raise up the price. Our first price we offered was
$45 after what they say, "Hey, we give you $30". Suppose, if they were those first who offered
the price. It would be difficult to ask $45 after their offer of $30. For them the price would seem
too much expensive. Since we set up the price first, we were kind a controlling it, and the
situation. We were leading and telling our conditions under what we could offer a certain price.
And they were those who just decided accept or not accept the price. We had kind a confidence
and did not afraid that if we don't discount the price up to certain level which is close to
competitor's price, they will go to our competitor and buy for $28.
They were keeping saying that $45 is too expensive and that the competitor's price is just
$28. But we had a strong tool, it was quality of our product. We just explained that it is not right
to compare us with that competitor whose quality as both of us know is worse than ours. And I
gave one example. "Everybody knows that BMW is high quality car and expensive. Also there
are very cheap cars in India which are selling for just $2000. Both of the products are cars but
how can you compare the prices and ask BMW to discount the price only because of their
competitor is selling just for $2000? Product might be the same but quality is different". They
were laughing and agreed. Then I added "Same here. Do not compare the prices. We know that
our product is kind an expensive but it is because of quality. Unlike competitors we have extra
costs associated with production. After we produce the product we do not sell it right away but recheck the quality. It requires additional costs (salary for additional workers) and time".
Also it is very helpful to find out do they really need your product or they really have same or
very similar alternative. If I see they really wanted to buy the product and don't wanted to lose the
chance, in this case we can hold the situation.
One more thing, when opponent asking to discount price for a certain level, it is not good just
agree. In exchange you kind a need to build some conditions which favor you. For example,
"Okay, we can discount the price for this level but only if you will agree continuously to buy our
goods for at least 1-2years" or "if you buy greater amount". Something like that. This condition
put them into dilemma: to buy for higher price but less amount or smaller price but greater
amount. In any case it is better for us. Also, putting conditions makes opponent not to be so
simply continue asking to downgrade prices, because now they know once they want smaller
price they have to sacrifice something.
AccelMedia told us that they need 18,000 processors but we had only 15,000 units. It
was challenging part of negotiation. I was thinking how to say them that we cannot provide
18,000 at once. I was thinking, if I say that we cannot do that, the AccelMedia may doubt about
prestige of our company because how come, if my company is prestigious and I cannot even
provide 18,000 processors. I also could not say that we already have order, because, I don’t know
whether it is like that, but I was thinking giving preference to another company in front of them
may seem kind a rude and they can leave me. Later on I came with a good idea, “Killing two
birds with one stone”. I said that, sorry we cannot provide you 18,000 processors because we
already have long-term contracts, and actually capacity of our company is more than 15,000
processors but since we have contracts most of the goods already sold out. We have high demand
for our products. By telling these I wanted to make them know that our processors are very good
so that we have few long-term contracts who bought these processors in advance. The first time
AccelMedia did not believe us. They thought I was lying, so one of them asked me, Why you
don’t want to sell us the processors? We need 18,000. I was laughing and said, “No, really, of
course for us it is also better. The greater order is the more favorable it is for us. But we really
don’t have 18,000 processors. It is true.” Then they asked, “Then, what to do? We need 18,000
processors”. Then I said, “Okay, what if you buy 15,000 processors now, and the rest 3,000 I will
deliver to you after one month?” They rejected saying that they need 18,000 and no less. I said:
“What the difference? Anyway, you cannot use all these 18,000 processors for production
purposes within one month. Use these 15,000 first and by the time you will be running out of
materials (processors) I will deliver to you the rest 3,000. Also, it is good for you. You don’t need
to invest the big sum buying 18,000 at once, take just 15,000 first and you can prove the quality
of our processors, then make an order for rest 3,000.”
Here is the outcome from the negotiation. The initial price I offered to AccelMedia was
$45. The lowest unit price I would accept for the GT7s was $30. The lowest price I would like to
receive for the GT7s was $35.
We (I and Dhania) agreed to sell to AccelMedia 15,000 units for $35.5, and next month
the rest 3,000 units for $33 will be sent to them. Also, if what we will sign a Contract on 1-2
years basis after the quality of our processors will be proved.
Exercise 11 – Twin Lakes Mining Company
Role information
<Tamarack City Council>
I, Assel, and Dhania were representative of City council. From the Mining Company side
there were also three persons: Jeffrey and two Korean male students (don't remember their
names). We were negotiating during two classes. Frankly speaking, at first class I and Dhania
were about to kill these Mining Company members. Really...
and Asel was not there, she went
out for a while, I am sure, if she was, she would love to join us to “kill” them too. The reason is
that Mining Company members were not serious about this negotiation process and were telling
some stupid nonsense and laughing, also their target was "to leave our city", but in reality it does
not work this way. No one mining company wants to leave city and closing their business without
any really serious reasons but they threatened us 3-4 times they will leave our city. Thanks God,
next class they were a bit more serious about this assignment, stopped laugh much, and tell
nonsense, so we could make an agreement.
Okay, our negotiation started from question by one of members of Mining Company:
"What is your offer?" I listed projects that have to be done and also cost of the projects. 1. Water
filtration plant construction 2. Road paving. Mining Company asked how much these projects
cost and how much money they have to give us. I said that Water Filtration Plant construction
cost about $50 M and Road Paving $2.4 M with maintenance of $300,000 a year. They said that
they cannot provide such amount but agree to pay 50% of dividends which is One million USD
per year. I was shocked because it was so little amount of money. I started to think where I will
take the rest sum from. Since there is no any other information about city’s industry I could not
find an answer and continued negotiation. I offered different possible alternatives including sum
ratio that has to be paid by them and us.
Initially I was planning to negotiate that all the costs associated with Water Filtration
Plant construction will be covered by Mining Company and Road paving will be made by City
Council including maintenance cost. So, I started to negotiate on Water Filtration Plant only.
Since I don’t know how much money do they make and how big the Company is, I asked whole
sum from the beginning which is 50 M. Of course they said “no”, they cannot provide such
money. Road Paving related deal was not so difficult to negotiate because sum was not so big, so
it took us not much time to make the Mining Company to be agreed to pave the road. It was
difficult to conduct negotiation related to Water Filtration Plant and less difficult was negotiation
on Taxation policy. Mining Company asked us to issue bonds for all sum of 50 M. Yes, it is also
can be solution but in this case the cost of Filtration Plant construction would cost us twice
expensive and also nobody give guaranty that all the issued bonds will be sold. I was thinking
about how to make Mining Company to give us 40M or 30M, and for rest 10~20M I will issue
bonds. So, I started to negotiate, decreased the sum gradually from 50M to 40M and at the same
time I was asking that interest for bonds still will be paid on 50/50 basis. Mining Company
authorities started to ask: “Hey, why WE should pay for this?” After what I and our team member
started to explain that they are the only one who pollute the air, as well as they use the road and
paving road will benefit them. So, paving road is kind a not for us but for themselves, so don’t
complain.
Finally we agreed that Mining Company will give us 10 M as a lump sum and every year
they will pay 50% of interest which is one million. As I wrote already, road paving cost will be
covered by Mining Company and maintenance cost by City Council. Tax discount is 37% from
Land usage $800,000 and Right of way $400.000. And negotiation on discount percentage from
other taxes 2 million we left for next round of negotiation because we were running out of time.
They asked us same 37% discount from 2 M. I said that it is too much and wanted to negotiate
but time was over. Also, I told them about $38,000 annually which we can get from recovered
iron. I offered them the sum at the beginning of negotiation when I asked 30 M as lump sum, but
since they give us only 10 M, City Council will keep the money.
Challenging thing was to find a balance. I was thinking how much money I have to ask
from Mining Company so that for the rest sum I will issue the bonds and all of the will be sold
out. In case if the Company would gave us a tiny amount of money, and after I issued bonds and
if the bonds could not be sold I would have to raise taxes for local citizens what I was not willing
to do. One more thing I learnt from the negotiation that it is getting more difficult to negotiate as
more people get to be involved into the process. Each one has his own opinion. This time I had to
come to a consensus not only with opponents who were three but also within our team members.
Exercise 15 – Job Offer Negotiation: Job Tech and Robust Rouers
Role information
< I am 2nd year MBA student >
Well, if it was real negotiation I would not put much effort to get the job from Robust
Routers because personally I like FourCom more. It is not me who cares much about size of
company. First, what I care about is position/title. If it is good position and tasks for the position
seems to be interesting, I will take the job. Second important thing is salary. The salary has to be
fair for the volume of tasks I will do and importance of my work. And size of Company is just 3rd
thing that can be important but not much.
We started to negotiate with salary. First offer from RR was just $80,000. That’s crazy.
It’s $21,000 less than I can be given by FourCom. I wanted to stop negotiation and I said: “Hey,
FourCom is giving me $120,000 (I calculated it with signing bonus), and size of your Company
is bigger. You suppose to offer me more than FourCom. No, I don’t want. I will work for
FourCom.” RR said they cannot give me more, bla bla bla. I said: “No, 120,000 and you don’t
need to give me signing bonus. And how about position you will give me? I want business
development position.” RR said they cannot give the position because they already have
somebody there and if they give me the position who will work as an Associate Product manager.
I said: “Put me into Business development position and for Associate Product manager chose
somebody from rest of interns you had, we were 50 of us”. RR said again that they cannot and
they don’t need anyone for Business Development Position. Okay then I was talking about salary,
tried to ask more. I asked them how much do they pay to translators. He did not understand me
and said he does not need translator. I said, I am not going to work as translator for you, just how
much do you pay? Then, I said you see I speak Russian, Korean, and English. It is kind a few
workers in one. Now, you don’t need to waste your money and hire translators, I can do the work,
and you can save money too. Instead of giving salaries to few workers, you just raise up my
salary, it will be cheaper for you. RR said they don’t care about such skills. I responded: “How?
With Russian language skills I can work on entering Russian market too.” RR did not know what
to say so he smiled.
Finally RR agreed to pay me $95,000. Title was Production manager. No signing bonus.
All the relocation cost will be covered by RR. Stock Option is 15%, and Annual bonus is 21%
based on salary which is almost $20,000. Two week vacations – one in Summer and one in
Winter.
This negotiation was not challenging much because from the beginning and during all
negotiation process I wanted to say: “I don’t want to work for you company actually. I like
FourCom most”. Anyway, the results are quite good I think. I am going to work for RR for one
year and see whether it is possible to get Business Development Position. If not, I will leave the
Company, and find another job which I like.
Exercise 13 – Island Cruise
Role information
< I am Mayor Gil Egan>
From the beginning of negotiation we immediately moved on discussion the main three
issues: number of visits per year, length of visits (days), and number of passengers on shore per
day. Since I felt that the Captain Stuart Bing will ask me to rise up the number of visits per year I
said that I need only two visits even though in reality I needed three. I was curious what will be
his “rate”. When he said the number of 12, I was shocked because of big difference between our
interests (3 vs. 12 visits) and I started to think how make him agreed with three visits or
maximum four but no more. I said, no, I need only two but no more. He also got shocked and said:
“Don’t you need money??? I cannot agree with two visits only. My business will be bankrupt.”
Captain Stuart Bing was persistent and asked me to allow him more visits and was telling that
both of us can earn money, but I said it is not all about money, as a Mayor I have to take care
about local citizens and environment too. I explained that frequent visits may negatively
influence on locals and environment too. He asked me details, and I said that the tourists may do
some damages in, let’s say restaurants whey they are drunk as well as steal things. Captain said
that his tourists are very good and they don’t steal things. Then I said, okay I allow you three
visits per year. He was shocked again and asked me ten visits. I stopped negotiate on number of
visits and wanted to hear how many tourists he wants to bring at once. I said that I need no more
than 300 passengers at once and no more, but he wanted to bring 1,100. I did not need so many
and said: “No, I need only 300”. Finally I agreed to accept 500 tourists at once. Then I asked
about length of visits where Captain asked me for two days because one day was not enough to
enjoy and see the places on the island. Actually, initially I also was agreed with the idea. One day
is not enough but since in my role play paper it was written that I have better not allow more than
one day, so I was doing so. He asked me for two days and I was thinking to give a concession
because actually it was not big deal and I was thinking that it is good if the tourists will leave
their money in local restaurants and hotels. We agreed that tourists will come at 8 a.m. and leave
next day after lunch between 1~2 p.m.
It was quite long negotiation and for both of us it was difficult to make concession
because our interests were different. I allowed to the Captain to bring his tourists five times a year,
500 passengers at once, and they will stay for 2 days. Also I made some conditions such as if
there will be any damages caused by tourists the Captain will have to cover the expenses or force
the tourist pay for it. In addition to it I asked to pay fine (penalty) because it will help to maintain
the order in the island. Captain easily agreed on it. So, we signed Contract.
What was the most challenging? It was not such a challenging negotiation except the fact
that if I would fail, the Captain could leave me. But I also had another alternative which was
Island Maid. The thing I did not like about Island Maid that it had old ship and the tourists don’t
like to spend money.
What I learnt from the negotiation is that it is important to be competent and know well
what is going on in, in this case, your island, what kind of positive and negative things
development of tourism can bring. It may help to have an advantage during negotiation because I
can explain why I don’t want so many tourists visit my Island instead of just saying that I am not
agree. Explaining reasons for my negative answer for Captain’s offer helped to “pull” him over
into my “side”.