Negotiation strategy planning

The chief operations officer (COO) reviewed your negotiation strategy planning template and decided that you and your team are ready to brief the chief executive officer (CEO). He would like you to review the negotiation scenario with your team and prepare a PowerPoint presentation to the CEO for final approval. Negotiation Scenario Introduction This scenario provides the background and essential information elements for a contract negotiation between ABC Manufacturing Company and XYZ Plastics. This scenario is designed to stimulate a discussion of the negotiation process, contract pricing, negotiation strategy, techniques, and ethics. Scenario Description Overview You will assume the role of the regional manager for ABC Manufacturing Company. Your company manufactures DELAMIX blenders, and you are negotiating terms with a supplier of a critical component in your manufacturing process (XYZ Plastics). You receive 1,300 units monthly at a delivered cost of $2.50 per unit. You project needing 1,900 units for the next 6–12 months and perhaps as many as 2,000 units ongoing after that. You have been satisfied with the supplier’s quality; however, late deliveries have forced you to schedule overtime to meet customer orders. An out-of-state vendor (QMP Imports) has offered you a 10% discount for the 2,000 units per month for a one-year contract. Your boss has authorized a contract negotiation team of 2–3 members. The COO would like to reduce the overall contract price by 10–15%. The CEO negotiated the initial contract with XYZ Plastics when he started the company and would like to continue working with the company because of demonstrated quality, responsiveness, and loyalty. Background The COO of ABC Manufacturing and the senior vice president of XYZ Plastics have been meeting and talking frequently regarding the vendor contract renegotiation. XYZ Plastics is an industry leader and has been the primary vendor to ABC Manufacturing for 42 years. XYZ Plastics contracted a new raw materials provider to reduce material shortages. XYZ Plastics is aware that its past delivery issues are a major discussion point, and it is prepared to offer a reduction in unit price (to be negotiated) along with a guarantee of on-time delivery before or on the required delivery date. Currently, XYZ is the only company in the United States that manufactures this part. ABC Manufacturing Company would like to continue to claim “made in the U.S.” in its advertising. XYZ Plastics is aware that ABC Manufacturing Company will require additional units in the out-years and would like to secure the contract for continued growth. A new member of the ABC Manufacturing Company team has a contact in XYZ Plastics that offered to provide information on the manufacturing cost and profit per unit and other confidential proprietary information in exchange for a finder’s fee. Task Description In the previous Units, you worked on developing a Negotiation Strategy Planning Template. Now, you will use this template to prepare a presentation based on the scenario described above. Your presentation should follow the format of the Negotiation Strategy Planning Template. You will review the negotiation scenario and develop each section based on the information provided. This will be your final Key Assignment Negotiation Strategy Presentation for the CEO. The final presentation will consist of 12–15 PowerPoint slides with 100–200 words of speaker notes per slide. The presentation should have the following sections: Purpose of negotiation Desired outcome Pertinent information Interests, desires, and motivations Sources of power Walk-away alternative Ethical considerations Negotiation team Recommended negotiation strategy You will submit your presentation and your final Negotiation Strategy Planning Template.

Sample Solution

Negotiation Strategy Presentation for the CEO

Purpose of negotiation

The purpose of this negotiation is to renegotiate the contract with XYZ Plastics, our primary supplier of a critical component in our manufacturing process. We are currently paying $2.50 per unit, and we would like to reduce the overall contract price by 10-15%. We are also seeking a guarantee of on-time delivery before or on the required delivery date.

Desired outcome

Our desired outcome is to negotiate a new contract with XYZ Plastics that reduces the overall contract price by 10-15% and guarantees on-time delivery. We would also like to maintain a good relationship with XYZ Plastics, as they have been a reliable supplier for many years.

Pertinent information

Full Answer Section

XYZ Plastics is the only company in the United States that manufactures this part. ABC Manufacturing Company would like to continue to claim "made in the U.S." in its advertising.

ABC Manufacturing Company is projecting to need 1,900 units for the next 6-12 months and perhaps as many as 2,000 units ongoing after that.

QMP Imports, an out-of-state vendor, has offered ABC Manufacturing Company a 10% discount for 2,000 units per month for a one-year contract.

Interests, desires, and motivations

ABC Manufacturing Company's interests, desires, and motivations include:

Reducing the overall contract price
Guaranteeing on-time delivery
Maintaining a good relationship with XYZ Plastics
Continuing to claim "made in the U.S." in its advertising

XYZ Plastics' interests, desires, and motivations include:

Maintaining a good relationship with ABC Manufacturing Company
Securing the contract for continued growth

Sources of power

ABC Manufacturing Company's sources of power include:

The ability to switch to a different supplier (QMP Imports)
The volume of business that it provides to XYZ Plastics

XYZ Plastics' sources of power include:

The fact that it is the only company in the United States that manufactures this part
The fact that it has been a reliable supplier to ABC Manufacturing Company for many years

Walk-away alternative

Our walk-away alternative is to switch to QMP Imports, the out-of-state vendor that has offered us a 10% discount.

Ethical considerations

We will conduct this negotiation in an ethical and professional manner. We will be honest and transparent with XYZ Plastics, and we will respect their interests and concerns. We will also avoid any conflicts of interest.

Negotiation team

The negotiation team will consist of the following members:

Regional Manager
Director of Procurement
Senior Engineer

Recommended negotiation strategy

We recommend the following negotiation strategy:

Prepare thoroughly by researching the market, understanding our own needs and interests, and identifying our sources of power.
Build rapport with the XYZ Plastics team by being friendly, respectful, and professional.
Open the negotiation by clearly stating our desired outcome and explaining our rationale.
Be willing to listen to XYZ Plastics' concerns and interests.
Be prepared to walk away from the negotiation if we are unable to reach an agreement that is in our best interests.
Use a variety of negotiation tactics, such as logrolling, bracketing, and split the difference.
Close the negotiation by summarizing the agreement and putting it in writing.

We believe that this negotiation strategy will help us to achieve our desired outcome of reducing the overall contract price by 10-15% and guaranteeing on-time delivery. We are also committed to maintaining a good relationship with XYZ Plastics.

Conclusion

We are confident that we can successfully renegotiate our contract with XYZ Plastics. We have a strong negotiation team and a well-thought-out strategy. We are also committed to being ethical and professional in our dealings with XYZ Plastics.

We are here to help

We have crazy offers

It’s quick and easy to place an order. We have an efficient customer service that works 24/7 to assist you.It’s quick and easy to place an order. We have an efficient customer service that works 24/7 to assist you.

We are here and ready to help

Order Now