Name: Malay Pant Roll No.

- 19DM100

PGDM- Batch 2019-2021

Course Code & Name: Negotiation & Influencing Skills

Written Test Paper Set by: Dr. GP Rao Total Marks- 50

Negotiation Team- Roles & Responsibilities

Leader
Chief Procurement Officer

The procurement department is responsible for purchasing the supplies of raw materials which
are used in production. The CPO will lead the negotiation as he is most experienced and can
handle the situation and maintain good relations with the vendors

Spokesperson
Product Manager- A product manager is responsible for making the strategy of product
development. During the negotiation, he can influence the other party by explaining them the
requirements for developing the required product

Sales Department Head- Sales Team is the one which meets the customers. They can provide
the first hand information about how the product is perceived by the customer and what all do
the customer look for. They can base their arguments on logics and facts collected from the
customer reviews. This will help in selecting the best quality products.

Finance Department Manager- He is required for giving inputs on pricing decision. This is
done by keeping on mind the various costs incurred by the organization. All the payment are
approved by the finance department, so the facts and figures presented by the head of the finance
department can influence the other party.

Observer
Human Resources Manager- HR manager has the most experience in handling people. They
can understand the mindset of the other negotiating party and make sure that the negotiation
keeps on track. They can understand the behavior of the people in the negotiation and can mold
the facts accordingly.
Supply Chain & Logistics Head- He can help in understanding the various technical aspects of
the deal. This can help in closing the deal with maximum profit to our side.

Notes Taker
Industrial Relation Manager- The role of an IR Manager is preparing and distribute
information for management to be used during the collective bargaining process. This helps them
to act as middlemen in a negotiation.

Best Alternative to a Negotiated Agreement (BATNA)

The best alternative to a negotiated agreement or BATNA (no deal option) refers to the most
advantageous alternative course of action a party can take if negotiations fail and an agreement
cannot be reached. The BATNA could include diverse situations, such as suspension of
negotiations, transition to another negotiating partner, appeal to the court's ruling, the execution
of strikes, and the formation of other forms of alliances.

We have divided the critical spare parts into Moderate critical spare parts and Highly critical
spare parts. Moderate critical parts are those which are not specifically required with high
quality. Whereas, highly critical parts have to be of good quality. Its mentioned that to develop a
new competent supplier, it will take 6 months, so we are making use of a local dealer for
moderate critical parts.

Moderate Critical parts

• Purchase from a local dealer at local prices.

• Pay him extra and provide him more business which will ensure not high quality but
workable one. The delivery of parts and training of operators will be on our terms.

Highly Critical Parts

• We purchase the Highly critical parts from the existing supplier for six months, agreeing
to his terms and conditions and meanwhile develop the local dealer.
 Highly Critical Parts
Moderate Critical Parts Local Dealer Charges Rs. 5000/part
Rs. 7500/part(50% more than
Local Dealer Charges Rs. 2000/part Supplier Charges local) + Rs. 400/part (Quality
charges)
Units Required 1000 Units Required 1000
Price of Highly Critical
Price of Critical parts Rs. 20 lakhs Rs. 79 lakhs
parts

• Highly critical parts to be purchased from the supplier not in one go but in specific
interval of time which will put pressure on the supplier.
• Total Expenditure for Critical Spare parts- Rs. 20 lakhs + Rs. 79 lakhs= Rs. 97 lakhs
• We will have to compromise a bit on quality but it will be managed till we develop our
new supplier.

Zone of Possible Agreement (ZOPA)

The term zone of possible agreement (ZOPA), or bargaining range, describes the intellectual
zone in sales and negotiations between two parties where the respective minimum targets of the
parties overlap. A ZOPA exists if there is an overlap between each party's reservation
price (bottom line). A negative bargaining zone is when there is no overlap. With a negative
bargaining zone both parties may (and should) walk away.

• After looking at companies’ performance in past years and reviewing the costs incurred
by the supplier, we have come to a decision to negotiate between 30% and 35% including
the costs of spare parts and quality charges.
• The decision has been made after reviewing the cost incurred by the supplier on various
spare parts and keeping in mind his profits too.
• ZOPA has be made by studying the BATNA of supplier.
• The cost incurred by the supplier and his profit calculation as per our proposal is given
below.
 Moderate Critical Parts Highly Critical Parts
Local Dealer Charges Rs. 2000/part Local Dealer Charges Rs. 5000/part
Rs. 3000/part
Demanded by Rs. 7500/part (50% more than
(50% more Demanded by Supplier
Supplier local)
than local)
Cost incurred by Rs. Rs. 5000/part+Rs. 400 (quality
Cost incurred by supplier
supplier 2000/part+Rs. charges)
Supplier's Profit Rs. 800/part Supplier's Profit Rs. 2100/part
Our Proposal Our Proposal
Rs. 2700/part Rs. 6750/part (35% of local
Proposed Price
Proposed Price (35% of local charges)
Cost incurred by Rs. Rs. 5000/part+Rs. 400 (quality
Cost incurred by supplier
supplier 2000/part+Rs. charges)
Supplier's Profit Rs. 500/part Supplier's Profit Rs. 1350/part

• Total Expenditure for Critical Spare parts- Rs. 27 lakhs + Rs. 67.50 lakhs= Rs. 94.50
lakhs
• This includes both the price of the spare parts and the quality charges.
• The supplier has to supply all the parts in one month.
• For training the operators, supplier can provide the online training in English. We can
have person proficient in Hindi as well as English. He can later impart the training to our
operators.
• In this case, the supplier is not incurring a great loss and we are also getting a fair deal.

Negotiation Strategy & Plan

There are three approaches which can be used for negotiation. These are:

• Strategic Approach- Both the parties are indifferent in terms of power and position.
More chances of losing as the supplier may find another customer with higher value.
• Concession Approach- Negotiation is done by providing concession to other party. To
get the deal done, a large amount of concession has to be provided which can lead to a
loss to the manufacturer
• Integrative Approach- Here, a win-win situation is created for both the parties. The
other party feels empowered and both the parties are benefitted. This can help in long
term relationship. The supplier feels that the deal is made in his choice and he will put his
best efforts in making the deal successful.
Recommended Strategy- Integrative Approach
• We will try to negotiate with the supplier on 35% price of the local goods including the
quality charges. This has been determined by looking at the company’s performance and
operational expenses.
• He has to provide us the spare parts in one-month time.
• As far as training is concerned, the supplier can provide one of our operators who is
proficient in both Hindi & English. He can then train others accordingly.
• As per the calculations above, the supplier will have to cut some of his profits. This loss
is minimal for which we can make a good counter offer.
• So, all in all, it is a win-win situation for both the manufacturer and the supplier.

Our Offerings
• We will provide him bulk orders for next 3 months which will ensure constant business
from us.
• The payment schedule will be made in such a manner that the full payment will be made
before the delivery of the last batch of spare parts. 25% of the payment to be made when
order is given, then on every delivery equal payment to be made. This will ensure timely
payment.
• We can ensure him that if our market share increases by 15% due to this vehicle launch
in a particular time, we can make the next deal more attractive by ensuring more margin
for him. An offer of 10% additional discount can be provided to the supplier.
• We can provide him business from our subsidiaries in other states which will make the
supplier more powerful than its competitors.

Do’s and Don’ts

Before the negotiation
• Study about the people with whom your negotiating. We should know what are their
strong points on which they can play.
• We should know about the past dealing they have done. This will help in understanding
the techniques used by the other party.
• Prepare all the figures and facts which will be used during the negotiation.
• Prepare your ultimate goal. We should know what exactly do we want.
• Think about all the possibilities which can occur during negotiation and be prepared with
the counter attack.
During the negotiation
Do’s:

• Take a friendly approach. Greet everyone with smile. This gives a positive vibe.
• If the party has come to you, thanks them for giving time and if you have gone to the
party, thanks them for inviting you over for the deal.
• Give time for introduction to everyone.
• Appreciate the other party. This makes them feel empowered.
• Try to get as much comfortable as you can with the other party by doing general talks.
The more comfortable both the parties are, more are the chances to close the deal.
• Try to find some common ground during negotiation.
• Listen to what others want to say and analyze what they have said.
• Be calm and patient when you put your requirements forward.

Don’ts

• Do not be aggressive. It leads to nothing.

• Do not interrupt when the other party is speaking even if it is wrong. Let them complete
first.
• Do not deviate from the topic.
• Avoid conflicting situation.

After the negotiation

• First work is to analyze the finalized deal.
• Check what all facts have been finalized and prepare a minute of the meeting which has
to be sent to all the people involved.
• Framing the Draft of the deal, getting it signed by heads of both the parties involved.
• Appreciate them and thank them for co-operating and for the agreement.

Guidelines to manage situation like Unusual Aggression, Criticism,

Unfair Tactics
• Unusual aggression can be managed by taking a firm stand in a negotiation. A general
note to all to calm everyone can will be useful. First of all, listen to that person by
calming down others, then ask the person politely to calm down and that his point will be
taken into consideration.
• Criticism can be dealt by taking a break and let everyone understand what is going on. IF
a person is criticizing, he doesn’t have to be argued upon. You can ask for a window of
 clarification. This will make other person understand your point and the situation can be
brought back to normal.
• If the other party is playing unfair during negotiation, it is not correct to get aggressive
and show them their mistake on the face. This can give a negative impact. Here, you must
be strong on your facts and figures. Take notes all along and remember everything.
Always remember, everything is negotiable. The other party is just playing on what you
have not worked upon. So, just keep calm, do not rush into any decision. Co-ordination
among the team members must be strong. If one fumbles, the other must take over the
conversation. Don’t try to prove anyone wrong.