CHAPTER 5 Ordering Products: Pricing Decisions APPLICATION EXERCISE You are the buyer for a small seafood restaurant chain that purchases several thousand pounds of shrimp each month. This item is by far the most expensive item pur- chased by your chain, and the price has been going up for the last three months. You have scheduled meetings with each of the three ap- proved vendors, and they know your primary concern is price. They also know you will not accept a product of lower quality 1. What is your negotiation objective? 2. What steps should you use as you prepare for the negotiation session? 3. What will be your going-in position for the desired outcomes from the negotiation session? 4. What are your possible fall-back positions during the negotiation? 5. Review Exhibit 5.7 and explain how you might num several of these factors into a negotiating advantage. 6. What are three strategies that you will use during the actual negotiating session? 7. What are some factors you will consider as you decide which vendor should supply the shrimp? REVIEW YOUR LEARNING Select the best answer for each question. 1. Which is true about the prices charged by the most 3. Which concept is a traditional view of pricing? A. Buyers cannot influence purchase prise actors that may impact the negotiating abilities of buyers and vendors. Preparation includes considering these factors. other factors might be important for both parties? Exhibit 5.7 FACTORS IMPACTING NEGOTIATION ABILITIES OF BUYERS AND VENDORS Buyers Have a Better Negotiating Position When: Vendors Have a Better Negotiating Position When: They are professionals. - Company representatives are professionals. They pay their bills on time. - Payment processing problems are minimal - Large quantities are purchased. The buyer's service expectations are met Their quality standards are reasonable. There are few errors in product delivery . Commonly used (not specialty) products are The quality of their delivered products consistently purchased meets the buyer's standards. They practice ethical purchasing procedures. They are ethical in all interactions with buyers They provide value in the vendor-purchaser relationship They provide value in the buyer-vendor relationship The vendors have an ongoing interest in continuing the The buyers have an ongoing interest in continuing relationship the relationship Their organization has a reputation of being a good - They help the buyer resolve problems. community citizen They desire a win-win relationship with the buyer. - They desire a win-win relationship with the vendor. They have a long-term relationship with the buyer. - They have a long-term relationship with the vendor They provide important information to the purchaser. 133