“REAL LIFE EXAMPLE OF NEGOTIATIONS ”

Subject -  Negotiation of supply chain management .

Submitted To,
Tanjila Hossain
Lacturer

National Institute Of Textile Engineering & Research.

Nayeerhat,Savar,Dhaka.

Submitted By,
MD. AL-AMIN
ID# MBA-2102006(2nd batch)
MBA in Textile & Appparel Value Chain.
National Institute Of Textile Engineering & Research.
Nayeerhat,Savar,Dhaka.

Date of Submission- 11/11/2022

 Moving to a New Town
Imagine that I and our family have moved to a new town. We’re living in a month-to-month
rental and have finally found the perfect house to buy. Unfortunately, the seller is being
unreasonable.
The house is on the market for $600,000, but our research, backed up by our broker’s opinion,
tells me it’s overpriced. By our estimate, a fair price would be $500,000, but when I offer that
amount, the seller tells me that we are “not even close” and doesn’t counter. I think the seller is
in denial about the slump in the housing market, which has affected prices in our town quite a
bit.
Sellers are looking at the prices paid for their neighbors’ houses a few years ago, while buyers
are looking at comparable transactions from the past few months to try to determine the “fair”
price. I might consider creative deal structuring to break through the resulting impasse. Start by
noting that the typical house purchase is a very “tight” deal: once the seller commits to a
particular buyer, the seller can’t (legally) sell the house to someone else, even if offered a
substantially higher price.

In our circumstance, a “loose” deal structure might provide a way forward. Imagine that I make a
slightly higher offer (it is, after all, our “perfect” house) of, say, $525,000. Then give the seller
60 days to keep shopping the house. If a better offer comes in during that time, the seller has the
right to walk away by paying me a “breakup fee”—say, $25,000 or less.
This deal structure creates value based on the different beliefs about the value of the house. In
effect, I’m saying this to the seller: “I think the house is worth $600,000, but I think we won’t get
a better offer than my $525,000. I’m so confident in my belief that I’m willing to give you 60
days to prove me wrong. If you do find a better price, I’ll keep looking for the perfect house. If
you don’t find a better deal, we’ll close in 60 days at my price.”

Negotiation in US vs UK
Although this kind of deal structure isn’t very common in the United States, it’s actually the
norm in the United Kingdom. There, a homeowner can formally accept an offer from one buyer
but remain open to competing offers up until the moment of closing. The British even have a
word to describe what happens when a third party jumps a deal: gazumping. The buyer can even
buy “gazumping insurance” against getting gazumped.
As we can see, real-estate sales in the United Kingdom are a free-for-all until the moment of
closing. The point isn’t that the British system is better—in fact, gazumping can wreak havoc on
people’s lives. But in certain situations, creative deal structuring might break through the
impasse.

END