NNEG08V

Demon’s Paperwork

Vision Ecosse is a major advertising agency which combines acute creative power with a sound feel for commercial realities. Its directors enthuse creative as well as commercial success. They contract out some specialist services to freelance specialists, leaving Vision Ecosse to concentrate its resources on creative staff.

There is competition to work for Vision Ecosse because of its high reputation in media work and the prestige accounts it attracts. This has led Vision Ecosse to exploit its bargaining power on occasion, particularly with newly formed independent suppliers. One such is Demon Photos, a specialist photographic agency, which has accepted several low price assignments for Vision Ecosse. ‘We might as well benefit from Demon’s hunger now because if they succeed and become established in the business as they surely will, they will charge us through the nose,’ said the MD of Vision Ecosse. Initially, Vision Ecosse staff congratulated themselves on acquiring the services of Demon Photos at such good (low) rates; their work is excellent and their service terrific. Further investigation revealed that their paperwork creates 20-30 per cent extra work (and telephone calls) to reconcile their despatch notes and invoices. Work spent on sorting out the Demon Photo’s account detracts from credit control and accounts payable for the rest of the supplier and client base. With this in mind, the accountant at Vision Ecosse had suggested that if it would help to sort out the paperwork, it could be worth paying Demon up to £45 per photo set instead of the current £25, and they would still be saving money as it would free up so much time from the accounts staff each month.

Vision Ecosse’s accounts department complains that invoices seldom carry the appropriate reference numbers, or they are incorrect, the contents in the photo-cases do not match the despatch notes they come with, or the invoice received later, and the photo sets are often incomplete, necessitating several part-deliveries over different days. Reconciling the paperwork inevitably delays payment to Demon Photos of its invoices, whose credit control people send annoying ‘pay up or else’ letters to Vision Ecosse. Demon Photos protest that the misleading paperwork is mainly the fault of Vision Ecosse. It accuses their staff of constant changes in the priorities of the work they order. Demon Photos often have to change their shooting arrangements at the last moment, which is inconvenient when the locations are in different parts of the country and a photo crew wastes time travelling; its people in the photo labs are badgered to deliver products one-or-two at a time by Vision Ecosse personnel; and Vision Ecosse is so far behind with payments for completed work (often already published in glossy magazines or on bill boards) that Demon Photos’ bank is questioning its cash flow. ‘Low prices,’ said its MD, ‘are the root of this problem and as the amounts owed are small compared to the amount we are owed, we feel Vision Ecosse is exploiting its position to delay payment for as long as it can. If we had known how much paperwork VE would cause us, we would have charged more to pay for more back office staff. If we can increase our prices to £60 per photos set, we could see a profit from this client and begin to grow the business, but the least we could accept is £35 which will cover the bare minimum of extra staff to help us maintain this contract.” Managers in both firms have asked whether the relationship with the other is worth the hassle.

Questions

1. What are the interests for Vision Ecosse and Demon Photos?

(8 marks)

2. How could the contentious issue of price be expressed as a distributive bargain problem?

(8 marks)

3. How could constructive debate help to resolve this negotiation problem?

(8 marks)

4. Discuss a possible proposal that Vision Ecosse might give to Demon Photos to resolve this negotiation.

(8 marks)

5. If the new price for the photo set is agreed as £39, what are the respective buyers and sellers surpluses?

(8 marks)

Essay Questions

Essay 1

Negotiator – very aggressive and domineering. How are we going to deal with him?” asked Ramos. “Easy,” replied Martinez, “I’ve always found being tough in a negotiation very effective. I don’t see why that should change just because he will be tough too.” “Surely that won’t work. If both of you play tough, then it can only end in deadlock. Maybe we should contrast his behavior, and be submissive?” suggested Ramos. Martinez replied, “That won’t work either, he’ll just take advantage of us, at least if we play tough and aggressive he can’t do that!”

What advice would you give to Ramos and Martinez about practicing the purple principle of assertive conditionality when dealing with any aggressive Red, submissive Blue, or assertive Purple negotiating style?

 (20 marks)

Essay 2

Trish and Jean have been neighbors for 20 years, but they haven’t spoken to each other for over 15 years. Trish had complained to Jean about the size of her hedge; it was blocking out the sun from her garden, and she wanted it cut down to size, or else. Jean had not liked being told what to do, and besides if it were too low, there would be no privacy, so she had refused. Trish retaliated by refusing to let Jean use the shortcut down her path for Jean to put her bins out. It meant Jean had to use her path, but to get to it had to lift her bin up three steps. It was very inconvenient. Neither Trish Korean were happy, but they refused to talk about it to each other or be the first to back down. Using this context, how does the prisoner’s dilemma game assist our analysis of negotiation?

(20 marks)

Essay 3

“I think that my work over the past year warrants a pay increase, above the rate of inflation,” said Chen. “I have achieved all the targets you set, and my work quality is undeniable.” “While I agree your work over the past year has been excellent, there is simply no room in our wages budget to give any increases this year,” responded Wu. “You have put me in a difficult position. I really need to increase my pay, I have a baby on the way, and my family needs to buy a more suitable car. If I can’t get the pay rise I deserve from this company, I will have to think about changing my job.” Using the above case, show why the distinctions between interests, issues and positions are important in negotiation?

(20 marks)