Case Studies ( Negotiations )

Mohammed was the Sales Director for a tool manufacturer that specialised in high-grade professional building tools, and had a secondary set of less sturdy (and less expensive) ones for the DIY market. They had a good relationship with the local trades and some medium-sized stores in a couple of nearby cities. Their reliability and quality products had finally opened the door to the biggest DIY superstore in the country, something they had been wanting for eighteen months. Mohammed has a meeting this afternoon with the Purchasing Manager, Virgil, from HomeHouse Inc.

Mohammed has prepared the following:

Contract term of three to five years, with a minimum of 10,000 units per annum, with a price of 1 million per annum (flexible by 10%), and no buy-back guarantee. Delivery from seven days.

He is confident that he can secure a deal, but the meeting takes a very different turn:

Mohammed: Thank you for your time, it is really important to us to secure the contract with HomeHouse, we are sure we can make a successful partnership, for us both.

Virgil: Tell me your terms, I really dont have time for long drawn out meetings.

Mohammed: Of course. We would be looking for a five-year contract, for a minimum of 10,000 units per annum, at a cost of 1m per annum. We can deliver to your main depot within two weeks of any order.

Virgil: You must be joking? You are a new supplier and need to prove yourself before making such ridiculous demands. We are the only retailer in the country that can provide you with such a large customer base, but only if the deal is right.

Mohammed: Oh, of course. I understand. Perhaps we could reduce the price to 900,000 per annum?

Virgil: You are wasting my time. The deal will be 700,000 per annum, 10,000 units with a buy-back guarantee from you if they dont sell. The contract will be for one year only, renegotiable at that time, and if you have proved yourself perhaps we can look at the price at that time only. We will require a five-day delivery turnaround.

Mohammed: I dont think I can agree to that, how about ...

Virgil: Take it or leave it! You wont get a better chance to sell your goods to a bigger market, and I wont pay any more for an untested product. You have until the end of today to agree or I will take my business elsewhere. Goodbye.

Mohammed was left shocked. Maybe just getting his foot in the door of HomeHouse was enough, and when it came to renegotiating next year he could make it up?

Questions

1. What are the Interests for Mohammed and Virgil in this case?

2. How could a Preparation Planner help Mohammed prepare better for the negotiation?

3. Virgil is not keen on having a Debate. Why is that not helpful?

4. Virgil is using Ploys to get what he wants. How can Mohammed deal with this?

5. Write a Bargain that Mohammed could suggest to Virgil