Business to Business Marketing

Assessment 3: Negotiation Report

Retailer: Nguyen Thi Bao Khanh (20081065)
Manufacturer: Du Ngoc Khanh (19984344)

Goals and priorities and approach to the negotiation:

The following report is the results and explanations of a negotiation between Retailer Five and
Sydney Shirts, which I represent as a distribution manager. According to Wang et al (2013),
successful supply chain management (SCM) comprises activities to resolve the conflicts
occurring by the demand and supply of both resources and services. Therefore, negotiation is a
crucial application for decision making and final joint agreement when the conflicting arise
between the supply chain management members. As I represent to dealt with Retailer Five, I was
given all the factors to be proposed in the negotiation by the Head Office, and I has all authority
to negotiate with the new Merchandising Manager of Retailer Five. At the same time, the Head
Office also gave some forecasts for the factors that the Retailer Five would propose in the
conservation.
This conversation aimed to come up with the new mutual agreement on the modification of some
aspects of the previous orders. As determined by Hutt and Speh (2013), this is the modified re-
buy in the buying process of the business market, which the buyer consider the great value of
seeking additional information or approaching alternative solution. The factors to be settled
including the increase in the minimum quality ordered each time, margin cut, adding more
advertising, expanding the shelf space, and guarantee a substantial commitment to Sydney Shirt
with reliabilities and benefits. On the other hands, the requests from Retail Five comprised of the
extension of product line, decrease the filling cycle of orders, more special promotion, more cash
discount per period, and create special design packaging.
The priorities of this negotiation for Sydney Shirt is the achievement of brand awareness in the
final users’ perspective as well as increase firm’s reputation and maintain the relationship with
the retail partner. To gain this objective, it is important for a Manufacturer to compresence the
whole situation in the conversation with retailer, which require the wisdom to bring a win-win
situation between two parties. Also, some financial benefits were prepared for a trade-off. Stated
by Kluwer (2016), to attain an agreement in a negotiation, it is necessary to sacrifice of yield
something to gain other thing in return.
Rationale behind the final agreements
Sydney Shirts has been considered as a valuable shirts brand in the market with high quality
products, differentiation, large product line and nationally advertised. At the same me, Retailer
Five has played an important role among all Sydney Shirts’ retailer, which estimated about 40%
of total sales volume per year of Sydney Shirts. Therefore, the negotiation is needed to reach the
mutual agreement in peace and lead to a long-term cooperation as a buyer-seller relationship
between two parties. A long-term cooperation has brought to many benefits to the supplier firm,
which will help the firm to build up the innovation capability to catch up with the customer firm
when it exists a gap between the two parties (Prihadyanti, 2013). Besides, to build a good buyer-
seller relationship, factors such as mutual goals, trust, performance satisfaction and commitment
are notable (Powers & Reagan, 2007).
The negotiation began with the proposal of Retailer Five for investing in a special knit wear
range, which could initially replace 2.5% of the current supplying to Retailer Five and the remain
proportion would still be the usual shirts range. In one hand, it is possible that this new product
line will increase brand awareness for us. Also stated by Thompson (2020), expand the product
line with as a part of product-development strategy could strengthen the visibility and credibility
for the firm as well as boost the market share and raise customer loyalty. On the other hands, this
extension line could cause cannibalization and raise a signification cost for Sydney Shirt, which
account for $250,000 per year. Therefore, I agreed with Retailer Five in this term with the
condition of cancelation if the term does not work in 4 months.
In regard to the request for Retailer Five, I asked to increase the order quantity from 500 units to
600 units as the fact that we could gain the benefit of 7 cents per units from decrease the
distribution cost. Even though Retailer Five announce the cost for them in this term up to 3 cents
per unit, this term was still agreed as it will minimize the possibility of out-of-stocks for them.
The retailer agreed the margin cut of 3%, which meant a $30,000 (see Appendix A) of margin
will drive into Sydney Shirts, I assure that retailer will receive a better deliver service, quick
resolution and support from Sydney Shirts by then.
Since advertising is a powerful weapon in the market, it is important for us to to convince the
value of it for both parties to come up with the agreement of investing in advertising twice a
month. The study of Ghafoor Awan et al (2016) found that advertising have crucial impact on
consumer in term of buying behavior, which certainly helpful for company to promote their
product and create awareness. The term was agreed with the splitting cost of 50% for each side
because it is beneficial for both Manufacturer and Retailer. Following, the concept as well as the
idea of advertising such as tradition advertising or digital advertising will be discussed with
professional marketing team and based on the consensus between two parties.
The negotiation kept up with the agreement from Retailer Five with the proposal of expansion of
Sydney Shirts’ share of the current space by 10% and placing the trolley initially in the haft or
their stores. The main 75 stores will be placing the trolley later if the initial once work well. Due
to the benefit for both parties on increasing sales, Retailer Five agreed to bear half of the trolley
cost, this meant it will cost $30,000 (see Appendix A) for both Manufacturer and Retailer in this
term. In addition, the expansion space contributed to the increasing in our competitive
advantages in comparison to other competitors. Moreover, since the visual appealing are well
received by the customer, the customers tend to be remembered Sydney Shirts, and thus,
improving our brand recognition. According to Loya et al. (2015), the in-store displays will
attract the customer and encourage them to make purchase, even though the product from the
shelf was not planned for purchase. This strategy also led to the better customers understanding
as it meant we received their response and improve quickly in the factor of adding more space
and displays.
The more space also means the more product availability, and the stock outs could take place
since the agreement above aimed to generate more sales. Therefore, we agreed to fill orders in 7
days instead of the usual 10 days. This will cost us a significant amount of $175,000 (see
Appendix A) per year. The justification is to prevent any “out-of-stock” for Sydney Shirt,
because the customer would choose the alternative brands products to purchase, thus, the
relationship between us and the potential customer or event loyal customer would be broken by
this. Out-of-stocks not only disappoint customer, but drive-up cost throughout the supply chain
as the consumer will either purchase substitute product or switch the store to find the wanted
items (Corsten & Gruen, 2005)
To remain competitive retail sector, yearly special price promotion was agreed to increase to
four. Retailer Five extremely guarantee the increase in price promotion will contribute to the
greater increase in sales and maintain competitive advantages as the historical track from
Retailer Five informed that these strategies gave rise to the store traffic growth. According to
URUN (2014), price promotion encourage customer to make purchase decision toward a new
brand or a new product, especially when a promotional product have high-quality and good
external appearance, they will be more likely to try that product. The detail plan was agreed that
the sale-off campaign will carry on during the four big holidays including New Year Holiday,
Easter season, Black Friday, and Christmas. These occasions are completely appropriate for
launching a shopping promotion to compete with other rivals because customer tend to go
shopping more during this time.
Retailer Five asked for a cash discount period to 15 as an alternative for the current 10 days cash
discount. This will affect negatively on our working capital management or even leads to a
financial shortage in case we might not have enough liquidity to balance the company activities.
However, it is important to maintain the relationship with retailer and compete with other
substitute brand at Retailer Five, this term was agreed with the modification to 11 days. This still
result in a higher Net Margin, which account for $5000 (see Appendix A) each year.
Continually, they asked us to supply special designed packaging for 10% of current units’
volume for three months and take full responsibility for the cost. The purpose for this suggestion
is the intention to celebrate their store’s “25th” anniversary. Since we already accepted the term
of increasing to fours special price promotions per year to attract the customer, it seemed to be
saturated if we exposed the special packaging for up to three months. Therefore, we just agreed
with the term with one month’s providing the special packaging, and there is no extra cost for
them. This acceptance was observed as the gift from Sydney Shirts to Retailer Five for their
“25th” anniversary and also make our product appeal exceptionally.
The ongoing commitment between Retailer Five and Sydney Shirts was recognized as one of the
most important factors in this negotiation. Note to mention, Retailer Five has been revealed as an
significant middleman among all of our distribution channel. As a result, some sort of promise
was proposed to Retailer Five since we wanted to prolong this relationship. In particular, retailer
assure the minimum quantity of each orders from our company as well as the target minimum
sales of Sydney Shirts’ products. This also means that the availability of our products in all retail
store chain of Retailer Five, which assist to maintain our profile in the market and grow the level
of brand recognition for Sydney Shirts.
At the same time, we promise the availability of product quantity and the maintenance of product
quality as well as assure the present of size for any wear range product. Also, we promised to
continuously innovate and trending catch-up to Retailer Five, giving them the most valuable
products that meet customer’s need and enhance customer satisfaction.
In addition, a long-term cooperation needs the efforts to help each other’s when necessary that
could be able to come up with the right solutions and development for both sides. Therefore, it is
very valuable that Retailer Five promise to provide forecast of future demand. An accurate
forecast helps reduce uncertainty occurrence and understand customer approach to a brand better
and thus shape the marketing attempt (Lui, 2016). In doing so, Retailer Five and Sydney Shirts
will send representatives to meet each other’s every six months to examine the historical date
and the achievement as well as to discuss upcoming event in all terms to come up with new
agreement for improvements and developments.
Conclusion:
Generally, the modified re-buy situation of the negotiation ended up successfully as all term that
needed to be approach resulted in an approval between two firms with modification. In regard to
the financial aspects, the majority of decision were more likely to be favorable for Retailer Five.
However, the benefits for Sydney Shirts excess the financial cost that the we have to bear. Thus,
we gained a stronger brand image and brand recogniztion by increasing promotion, in-store trolly
and in-store product display at Retailer Five. The new range of knit shirt possibly upgraded the
customer satisfaction in the greater number and attract new target market. For the customer
relationship purpose, it was agreed that the cash discount periods for Retailer Five will increase
to 11 days instead of 15 days as they proposed. Also, the agreement on taking fully cost for the
celebration packaging is observed as our gift for the retailer to maintain this relationship. Thus.
we are confident to state that the relationship with Retailer Five will grow after this negotiation
by the clearer sense of the depth and length of commitment that both parties have gone through.
 References
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 Appendix A

Term Result for Manufacturer Result for Retailer

Increasing quantity ordered Gain: 500,000 x $0.07 = Loss: 500,000 x $0.03 =
from 500 to 600 unites $35,000 $15,000
Cut 3% on net margin per Gain: 500,000 x $2 x 3% = Loss: 500,000 x $2 x 3% =
unit $30,000 $30,000

Advertising twice monthly Loss: 500,000 x $0.02 = Loss: 500,000 x $0.02 =

$10,000 $10,000
Cost of 75 Trolleys: Loss: $800 x 75 x 50% = Loss: $800 x 75 x 50%=
$30,000 $30,000
Special line of knit shirts Loss: 500,000 x $0,5 =
$250,000
Fill orders in 7 days Loss: 500,000 x $0.05 x 7
instead of the usual 10 days = $175,000
days

Increase the yearly special Loss (if): 500,000 x $0,05=

price promotions $25,000
Increase the cash discount Loss: 500,000 x $0,01 x 1 Gain: 500,000 x $0,01 x 1
period to 11 days days = $5,000 days = $5,000
Specialy designed Loss: 500,000/12 x 1 month
packaging for onee month x $0,03 x 10% = $175
TOTAL: Loss:$430,175 Loss:$80,000