In this scenario, I played the role of the seller. The seller listed his car for sale because he needed to raise $12,000 to place a down payment on a condominium. The Kelly Blue Book (KBB) value for the car was anywhere from $10,000 to $16,000, depending on the condition of the car. Unbeknownst to the seller, the buyer knew about the seller’s need to raise $12,000 for the down payment and could leverage this information to get a lower price for the car. Before starting negotiations, I wrote out my plan with the following key points: 1) start my offer at $15,000, 2) Go no lower than $13,000, 3) Highlight the excellent condition of the car, and 4) Be willing to offer a concession of paying the title transfer fees ($300 value). If the buyer’s …show more content…
The seller needed at least $225,000 to meet these financial obligations. As the buyer, I was unaware of the reasons that the seller was parting with his boat. The buyer was pre-approved for a $250,000 loan to buy the boat, plus he had $25,000 in savings, so the listing price of $270,000 was within reach.
I was much more prepared this week before we conducted negotiations. In my written plan, I established my bracket, the questions I would ask, and the negotiation cadence. My brackets were: a $210,000 opening position, a $240,000 target, and $270,000 as the bottom line. My cadence was set at raising the bid at irregular patterns: $210k, $229.3k, $236.2k, and $240.9k (if counters went that far).
As we started negotiations, I focused first on probing for interests by asking questions on why the seller was selling the boat and why he thought it was worth $270k. I used facts to make the seller rethink his asking price (mentioning another boat listing for $185k) and allowed that to sink in before making my first offer. In my first offer, I used logic to justify my opening bid of $210k ($185k for other boat, plus estimated $25k in repairs—budget from my savings
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One thing I overlooked was asking the seller to clarify why his boat was worth $270k from an objective point of view; his reasoning was primarily subjective. If I had discovered that there was no real data backing up the price of the boat, I could have used that to set my opening bid even lower. In the end, we closed negotiations at my first counter offer of $239,300.
Thinking back on this week’s negotiations, I believe I was much more confident this week. Creating an outline of how I wanted to frame my questions and establish my cadence made me feel more in control of the negotiations. I learned with the proper planning and framework, I can drastically improve my negotiation abilities.
One area I could improve in, however, is probing the seller for how they determined their data points (i.e., asking price). This information could help me determine how to shift my tactics. If the price were from a subjective point of view, I would use a more personal approach to come to an agreed middle ground on price. If the price were from an objective data point, I would need to come up with some concessions to bring the price down so the seller doesn’t feel like he is losing money or
A deal with these sales representatives seems like a good idea, they’re experienced and have most likely been doing this for a while. But not only is it illegal, it is strongly against my better judgment. This case is greatly related “value judgment”. It clearly demonstrates an unethical value judgement for me to participate in this deal. It is highly illegal, and wrong for me to steal from my
Deere & Company (Deere) has been experiencing a decrease in its profit margins for one of its aftermarket resale products, specifically the gatherer chain, over the past couple of years. Currently, the cost-price ratio is at 80% compared to last year’s 50%. The purchase cost for the gatherer chain has been steadily increasing, while the aftermarket price has been decreasing. Deere has been budgeting its price to match that of a major competitor, which has been causing the decrease. The company’s main supplier of its gatherer chain is Saunders Manufacturing, with which Deere has established a long term relationship. The owner of Saunders has a reputation of being a tough negotiator, and is someone who is known for not willing to share financial information about the company. However, the U.S. Department of Commerce has provided financial estimates in Saunders’ industry as follows: material spend, 42%; direct labor, 16%; indirect labor, 6%; Overhead, 20%. These percentages are helpful to Deere because they can be used in the negotiation process with Sanders. Since Sanders will not share any specific cost information, Deere is able to use these estimates as a way to justify Sanders reducing its prices. Using these estimates during the negotiations might also incentivize Sanders to provide accurate numbers for its specific manufacturing costs.
Lewicki, J. R., Barry, B., & Saunders, M. D. (2010). Negotiation: Readings, exercises and cases
A company known as Apex Art was recently asked to prepare a bid on 500 pieces of framed artwork for a new hotel. If Apex Art wins the bid, then the benefits would lead directly to sales representative Jason Grant, whose income relies on commission. In other words, he would receive a large sum of money as a result of the winning bid. The cost accountant for Apex, Sonja Gomes, prepared the bid and calculated the total product costs of the framed artwork to be $121,000. Since the company policy states that the pricing must be at 125% of full cost, Gomes provides Grant a total amount of $151,200 to submit for the job. Grant notifies Gomes that at the price of $151,200, the company is incapable of winning the job. He confesses to Gomes that he had spent $500 of company funds to treat the hotel’s purchasing agent to a basketball playoff game where the purchasing agent revealed to him that a bid of $145,000 would win the job. At first, Grant had no intention of letting Gomes know of this information because he was sure that she would have developed a bid that would be below the amount that the purchasing agent told him about, $145,000. Therefore, he thoroughly explains to Gomes that if the company does not take advantage of the important information that the purchasing agent had revealed to him, then the $500 of company funds that he had spent would go to waste. Nevertheless, Apex Art would still generate some profit if it wins the bid at $145,000 because it is higher than the full cost of $121,000. In order to come to fair grounds, Gomes advises Grant to use cheaper materials for the frame, which will assist him in attaining a bid of $145,000. Since the artwork was pre- selected and thus cannot be altered, the total amount of cost redu...
The book Getting Past No by William Ury starts with an overview of negotiation and the reality of amateur negotiating which almost always end with the dreaded No. It also discusses the importance of negotiation and its impact in our daily lives. Truly, one cannot start and end the day with no negotiating taking place, from the kind of meal we partake to trying to haggle with the parents for a later sleeping time. As Ury states, negotiation is the process of back-and-forth
Negotiations styles are scholastically recognized as being broken down into two general categories and those are distributive bargaining styles and integrative negotiation styles. Distributive bargaining styles of negotiation are understood to be a competitive type of negotiation. “Distributive bargaining, also known as positional bargaining, negotiating zero-sum, competitive negotiation, or win-lose negotiation, is a type or style of negotiation in which the parties compete for the distribution of a fixed amount of value” (Business Blog Reviews, 2011). This type of negotiation skill or style approach might be best represented in professional areas such as the stock market where there is a fixed goal in mind or even in a garage sale negotiation where the owner would have a specific value of which he/she would not go below. In contrast, an integrative negotiation approach/style is that of cooperative bargaining, or win-win types ...
Lewicki, R. J., Saunders, D. M., & Barry, B. (2010). Negotiation Readings, Exercises and Cases (6th ed.). New York, NY, US: McGraw-Hill.
Lewicki, R. J., Saunders, D. M., & Barry, B. (2005). Negotiation, Fifth Ed. New York, NY: McGraw-Hill Irwin.
Lewicki, J. R., Barry, B., & Saunders, M. D. (2006). Negotiation: Readings, Exercises and Cases (5th ed.). New York: McGraw Hill.
Viking Investments negotiation was based on Pat Olafson (Viking) and Sandy Wood (Wood Crafters) trying to reach an agreement on the loan owed by Sandy ($200,000), the rent ($10,000) and the over-run ($250,000) for the job done. There were four members involved: Chelsea'an (Pat’s Lawyer), Kesha (Pat Olafson), Destiny (Sandy’s Lawyer) and myself (Sandy).
Negotiating styles are grouped into five types; Competing, Collaborating, Comprising, Avoidance, and Accommodating (Colburn, 2010). Even though it is possible to exhibit different parts of the five types of negation styles in different situations, can see that my tendencies seem to default to, Compromise and Accommodating. In reviewing the course work and reviewing my answers for Questionnaire 1 and 5, I find that the data reflects the same assumption. The accommodating profile is one where relationship perseveration is everything and giving what the other side wants is the route to winning people over. Accommodators are well liked by their colleagues and opposite party negotiators (Colburn, 2010). When analyzing my accommodating tenancy in negations, I find often it is easier to give into the demands when they are within a reasonable range. I often consider it the part of providing a high level of customer service. It has been my experience that continued delaying and not coming to an agreement in a topic will only shorten the window in which you will have to meet the request since. The cons to this style are by accommodating highly competitive styles the accommodator can give up to much ground in the process. “Giving away value too easily too early can signal to your negotiation counterpart that you've very deep pockets, and your gift is just a taster of bigger and better gifts to come”. The other negations type I default to is compromising. Compromising “often involves splitting the difference; usually resulting in an end position of about half way between both parties’ opening positions” (Colburn, 2010). In the absence of a good rationale or balanced exchanged concessions, half way betwee...
My partner and I played the roles of the sellers. Prior to the negotiation we discussed what our reservation point, our BATNA and our target point were going to be. The reservation point was basically given in the write up of the case. We needed $488,000 after taxes or $580,000 before taxes. If we received less than this we would not be able to continue our plans to sail around the world. At this point we had not discussed attempting to make the pie bigger and pursuing the option of working when we return.
Negotiation has been used as a vital communication tool not only in business but also in social intercourse. It helps people make common agreement and avoid conflict. So we need to use the tactics which we learned from this course and books to do more practice, only in this way we can gain advantages in negotiation.
Sia’s maximum that he would be willing to pay, is $12,000 and Mike’s minimum he would be willing to accept is $10,000. An agreement, if one is reached, will create $2,000 in integrative value compared with no deal, because Sia one-sidedly values the car $2,000 more than does Mike. How that $2,000 is divided between them whether, let 's say, the price agreed to is $10,000, $11,000, or $12,000 is a matter of distributive negotiating: any gain for Sia means pain for Mike, and the other way around. It’s, therefore, fair to describe this as generation of $2,000 in distributive value, distributed in accordance with distributive negotiating skills. On the other hand, what if Mike is an exceptional mechanic and enjoys spelunking in his spare time. Sia, conversely, can’t fix anything, and he hates having to take his car to unfamiliar mechanic shops since he fears that they will take advantage of him. These details propose that more integrative value might be created by the sale of the car if Mike will guarantee to repair any item that breaks for 9 months after the transaction. Let’s assume, for example, that this would cause Sia’s maximum price to increase to $12,500, while Mike minimum price would increase only to $10,200. Any deal that incorporated the repair agreement would be collaborative because it would generate more integrative value than the parties could achieve through the sale of the car alone. The additional $300 can be explained as the value that can be created by the negotiators’ integrative negotiating skills. “In addition, positive emotions make the parties less contentious and more optimistic about the future, which, in turn, increases the chances they will search for multiple alternatives and find a better integrative—win–win—agreement.
Jeremy, G. T. (1989). How to negotiate better deals. London, UK: Gold Arrow Publication Ltd.