NNEG08V

Case Study

Stefan had been sent out today by his wife Ingrid with instructions not to come back until he has finalized the deal in their new kitchen. After weeks of searching for the perfect kitchen, Ingrid had decided she wanted the ‘Cuisinere’ style from Kitchens4U. It was one of the more expensive ranges, but it had just the right look for the house and, after all, ‘quality kitchens pay for themselves when it comes to selling the property,’ or so she had told Stefan when he complained about the cost.

The most important thing was that Stefan had to order the kitchen today. If the purchase is delayed any longer, there would not be enough time to have it fitted before Christmas, and since Stefan had made the mistake of inviting several of his relatives to stay over the festive period, having the new kitchen is imperative – at least according to his wife. And Stefan liked nothing more than to keep his wife happy; after all, if Ingrid was happy, so was Stefan.

Stefan was never one to simply agree to a price. The original quote from Kitchens4UWas for £12,500. The price, he was told, included everything from the units and appliances to delivery, and their fitting by the store’s experts.

Stefan’s original budget for the new kitchen had been £9,000 but, as usual, Ingrid wanted only the best, and the price had shot up. Stefan needed to negotiate a better price with the salesman from Kitchens4U if he was going to afford the project and keep Ingrid happy. He was prepared to go as far as £11,500 (the total in his savings account), but any more than that and it was no longer affordable. The closer he could get to the original budget the better.

Jonas, the salesman for Kitchens4U, was thinking about his options for his appointment with Stefan. He knew there would be pressure on his price – after all, it was expensive, and he had seen the look of surprise on Stefan’s face when he had visited the store. Jonas just hoped the pressure would not be too great as he needed this sale today. It was the end of his sales quarter, and he was within reach of his quota; with this sale, he would earn a substantial bonus and a free weekend trip to Barcelona. He was prepared to do almost anything to achieve the sale, but he couldn’t sell the kitchen for a loss. The lowest price he could consider is £10,000. Of course, going that low would result in an uncomfortable meeting with his manager on Monday.

There could be some flexibility if Stefan were prepared to take the kitchen sooner than the usual six week delivery as a brand new range was due to arrive in 2 weeks and clearing out the old stock would be advantageous. It would mean the stock could be delivered to Stefan in 2 weeks, but would not be fitted until the usual six weeks as the fitters were booked that far in advance. If this was possible, Jonas had permission from his manager to reduce the price by a further £500.

Required:

1. What are the interests of Stefan and Jonas?

(8 marks)

2. Represent the above problem as a distributive bargaining problem.

(8 marks)

3. What tradables could Jonas and Stefan use to improve the negotiation?

(8 marks)

4. What proposal could Jonas suggest to Stefan?

(8 marks)

5. If the purchase price is agreed at £10,950, what is the buyer’s and seller’s surplus?

(8 marks)

Essay Questions

Essay 1

To: Sean@callitquick.com

From : Kim@MegaCorp.com

Sean

We liked your proposal for the use of your call center facilities. However, there are several aspects we would need to discuss (price, schedules and quality guarantees) before we can agree to use your company. Can you come in for a meeting on Friday to finalize the agreement?

Kind regards

Kim

Kim Southgate

Purchasing Manager

How could the 4-phase approach to negotiation benefit Sean?

(20 marks)

 

Essay 2

“John can you help me decide how to tackle my negotiations next week?” asked Ruby. “What is the problem?” inquired John. “Well, on Monday I am meeting Erik, and he is very aggressive and always demands discounts. Then on Wednesday, I am meeting with Stuart, who is always very quiet, cooperative and happy to agree with most of our prices. And finally James, who is quite assertive and likes to trade. I am just a little confused as to how best to behave with each of them? Should I match or contrast their behaviors?”

Explain how the different styles of behaviour are best tackled by Ruby.

(20 marks)

 

Essay 3

“It’s very simple Steve, we like your quality workmanship, and can agree that your furniture is second to none on the market. However, your prices are simply too high for us. We would be more than happy to place a large order with you, but only if you reduce your prices by 40%.”

The use of manipulative ploys is commonplace, but are they helpful in a negotiation?

(20 marks)