MM 5009

DECISION MAKING AND NEGOTIATION

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By:
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Muhammad Irfan Rizqi

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29119201

YP 61 C
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Lecturer: Dr.Eng. Pri Hermawan ST,MT.

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MAGISTER BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT

INSTITUT TEKNOLOGI BANDUNG

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 2020

A. DESCRIPTION OF THE PAST/PREVIOUS NEGOTIATION

Overview
When I was an undergraduate student at Brawijaya University, I was chosen as head of
committee of company visit to 3 companies. First, we visited to PT. Sri Rejeki Isman Tbk in
Sleman district, Second, We visited to PT. Unilever in Yogyakarta district, and the last, visited
to PT. Mega Andalan Kalasan in Sleman district. I had an assignment to arrange the event
from the preparation, the permissions to the company, the accommodation of participant.
Total of the participant is all of student in Industrial Engineering Brawijaya University batch
2015 around 171 participants. The purpose of the event is to learn about the process in the
company, adding more knowledge, and feel the experience when soon work in the company.

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When I arrange the event, the big problem that I faced is the price of the rent bus. The details

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of the budget will be explain in table below.

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Income Outcome Outcome

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Student 70.000 x 171 = Rental bus 3 x 2.600.000 = 3 x 3.000.000 =
Payment Rp. 11.970.000 Rp. 7.800.000 Rp. 9.000.000
Funds from Rp. 1.000.000 Lunch and Snack 180 x 25.000 = 180 x 25.000 =
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Universities Rp. 4.500.000 Rp. 4.500.000

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Others (Administration, Rp. 1.525000 Rp. 1.400.000

Permission, and survey)
Total Rp. 13.825.000 Total Rp. 13.825.000 Rp. 14.900.000
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Problem (Rent the bus)

From the table we can see if the budget is deficit around Rp. 1.075.000. Our target is to get
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the lower price (from actual price to expectation price). On the other hand the bus rental
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companies target want to deal at actual price. The first problem is when negotiation with bus
rental companies, the price of rental bus is too high for us for the committee. Our budget
doesn’t cover it so we should try to negotiate with the bus rental companies. So we from the
committee came to the office and try to negotiate with the management of bus rental
companies. Price which offer from bus rental companies is Rp. 9.000.000 for 3 bus but our
budget is Rp. 7.800.000. We need to minimize or delete the gap between the price that they
offer and our budget.

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 Identification of Position and Threat
Committee Bus Rental companies
Position Rent the bus with expectation price Offer the bus with actual price
Threat Search another bus rental The agreement doesn’t reach the deal
companies
Dilemm We really need to rent a bus They risk lose the order
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Negotiation will be occur if someone can help or hurt. In this problem we want to hurt the
bus rental company with decrease the price of rent. The reason why we do that is because the
budget for company visit is limited and if the agreement doesn’t reach the deal the employee
of bus rental company possibility will not get or lower incentives or bonus. For the bus rental
companies they will also lose their opportunity cost from our ordered.

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Alternative

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1. Search another bus rental companies.

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2. Deal with bus rental companies and decrease the budget of food and snack.
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3. Renegotiate with bus rental companies by doing sponsorship agreement.
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BATNA (Best Alternative To Negotiate Agreement)
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From the three alternative that written, the BATNA is alternative 3 or Renegotiate with bus
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rental companies by doing sponsorship agreement. For example like the logo of the bus rental
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companies will be put in our clothes or our banner, and if our department want to go
somewhere we will always use this bus rental companies (subscriber).
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ZOPA (Zone of Possible Agreement)

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From the graph we can see the ZOPA is between Rp. 2.750.000 until Rp. 2.950.000 while our
desired price is Rp. 2.600.000 and bus rental company desired price is Rp. 3.000.000. The
agreement is deal at point Rp. 2.900.000.

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 Result from negotiation
When we negotiate with the bus rental companies, in this case we are not able to manage the
negotiations properly because we went into traps which is called winner’s curse. Actually we
are not happy with the result because we get the agreement but its still far from the price that
we expected. We get deal at point Rp. 2.900.000 from the first offering Rp.3.000.000. At that
time we cut the budget for food, survey and snack to cover the price of rent bus. We only
think about distributive approach but we don’t think about integrative approach.

B. PROPOSAL OF IMPROVEMENT

What are the cause of your traps?

From this problem we can get this case, we caught by traps winner’s curse so from this traps

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we can know if we get not good result or under expectation. When we go to the office of bus

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rental companies, we overconfidence if our position will be accepted easily but unfortunately

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our offering is rejected. They argue if the condition of the companies is in difficult situation
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because the profit of their company decrease significantly. When deal agreement at point Rp.
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2.900.000 from Rp. 3.000.000 so we should re arrange the budget. At that time we sacrifice
the budget of food, survey and snack to cover the price of rent. The budget of food and snack
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decrease from Rp. 25.000 to Rp. 20.000 so indirectly cause the quality and quantity of food
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and snack, after that we need to eliminate budget for survey.

Proposal to improvement?
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Actually to prevent the traps we can think about scenario that will effect to win-win solution
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and create mutual gain. We can choose integrative approach rather than distributive approach.
We can think about multi issues than single issues. It will be more effective and efficient to
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know our why rather than our what. In integrative approach we use log rolling technique. We
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can offer a package to the bus rental companies. So we will get benefit from our agreement.
We can renegotiate with bus rental companies and create a sponsorship agreement to them.
We can get cheaper price and the bus rental will get free marketing from our event. The logo
of the company will be put on our banner so their logo will be more familiar with people and
it can be attract customer to order bus from the bus rental companies. It will help to expand
the bus rental company in marketing side. We should improve in order to get bigger pie. If the
company agree with the re negotiation it will larger the pie and also the portion of the pie.

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 How the proposal will eliminate the traps or improve the negotiation result?
By using integrative approach and log rolling technique, I think with this tool we will get
bigger pie than before and we get same slice of the pie because both of side get benefit from
the agreement. If this action works, both side can reach their purpose and reach their
objectives. It will improve the quality of result in negotiation, it means the bus rental
company will decrease the price of rent bus and they will get marketing from our event.

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