EXCALIBUR ENGINE PARTS – NEGOTIATION PLAN
1. What is your BATNA (Best Alternative to a Negotiated Agreement)?
Sell the pistons to Hanks Super Monster Tractor for $300 / piston
2. Why it is the “best” alternative? * No other viable alternative available if we decided to go without major losses. * Better than not selling at all considering the poor demand for specialized pistons in the market
3. How acceptable your BATNA is to you?
This is a very poor BATNA to sell the pistons at a significant loss
4. What are the implications of this acceptability for the way you approach this negotiation? * I’ll try to cut the deal with Knight Engines even if requires to offer some concessions. * If there are no profits for this quarter then the trust of the shareholders will be at stake.
5. Does it seem (initially) that one party is more dependent on getting a deal than the other party is? If so, what are the implications of this potential imbalance?
Initially, it does look like we are more dependent on getting a deal with Knight Engines as our BATNA is very poor and we need a good outcome to avoid losses this quarter. But having said that it looks like the other party is also dependent on us because they need to fulfill an order with the government. Also, purchasing 8000 good quality pistons 2 weeks would be a difficult task for them.
6. Decide what the relevant issues are that you want to negotiate. Issues: a. Sales price b. Number of pistons c. Advertising Excalibur on the Knight Engine chassis d. Quality control insurance fee for individual testing e. Rush fee
Priorities:
Very important: a. Sales price, b. number of pistons
Important: c. advertising Excalibur on the Knight Engine chassis, d. Quality control insurance fee for individual testing
Not so important (if they agree upon advertising Excalibur on Knight Engines): e. Rush fee
7. Resistance point(s) : Price less than $300/piston
8. Target Points: 1. $ 560/piston + 10% insurance + Excalibur name on Knights Engine chassis 2. To sell 10000 pistons
9. Opening offer: $ 600/piston + 6% Rush Fee + 10% Insurance + Excalibur name on the Engine chassis
10. Rationale: Little higher than our TP and with the negotiation its highly likely to close the deal with Excalibur’s goals achieved.
11. Do you prefer to make the first offer or attempt to get the other party to make the first offer? Explain. Yes I would prefer to make the first offer because we exactly know how many issues we are there in the negotiation to be addressed and we are sure of our Target Points.
12. Analyze the Other Party/Parties.
In your estimation, what are they generally trying to accomplish here?
8000 quality pistons within 2 weeks to fulfill an order from government. So reputation is important to them to be able to de repetitive business.
13. What are their issues? a. Dead line b. Quality and any price involved for insurance c. Price/piston
14. What are their interests? a. Sales price/ piston – Probably very important because they would they would have compared the prices with our competitors in the market. And we are aware that some companies offer the same Class pistons (low grade though) at $ 400/ piston. b. Quality – As they are supplying the Engines to fulfill the govt. contract this would mean a lot if they want to do repetitive business. Also their reputation would be at stake if they don’t meet the quality standards. c. Number of pistons – They need at least 8000 pistons d. Dead line: 2 weeks – They probably lost a deal with other piston supplying company that is why they need a rush order
15. Prepare for Seeking Information.
What key pieces of information do you want that you (a) realize that you don’t have and Their BATNA, RP and TP 15. (b) anticipate that the other party likely does have?
They also would want to create a long term relationship with us
16. Prepare some specific questions you will ask to try to get this information. a. Do you have any potential supplier for these pistons? b. Quality target, if any? c. Budget Target? (To know their TP and ZOPA)
* Trinadh Mamandur
Student # 10938937 