Contract Negotiation Assignment Exploring The Stages Of Negotiation
Question
Task:
You will engage in a negotiation for a celebrity endorsement advertising campaign
Assessment Description
You may be nominated to represent the advertising corporation and will receive email instructions
from the company CEO including:
1. Appointment to represent the company as their agent for the negotiation of the endorsement
contract;
2. Specific instructions about the desired endorsement contract fee and advertising campaign
timeframe;
3. Information about the projected revenue to be raised from the advertising campaign;
4. Contact details of the agent appointed to represent the celebrity.
Alternatively, you may be nominated to represent the celebrity and will receive email instructions
from the celebrity’s manager including:
1. Appointment to represent the celebrity as their agent for the negotiation of the endorsement
contract;
2. Specific instructions about the desired endorsement contract fee and advertising campaign
timeframe;
3. Information about the projected revenue to be raised from the advertising campaign;
4. Contact details of the agent appointed to represent the advertising company
Assessment Instructions
Stage 1: Pre-negotiation (700 words)
You must answer the following questions:
1. What is your client’s BATNA? What is your client’s reservation value?
2. What is the other party’s BATNA? What is the other party’s reservation value?
3. What is the ZOPA range? What is your strategy for creating value?
Include at least fifteen academic references in your answers to the above questions with a
minimum of five references coming from academic journals.
Stage 2: Negotiation (300 words)
You must:
1. Enter negotiations with their counterpart for the endorsement contract;
2. Maintain a communications log that captures the date, method, items discussed, and
outcomes of each communication.
Stage 3: Post negotiation (400 words)
You must prepare a 1 page letter to your client advising the outcome of the negotiation.
Answer
1. Identifying BATNA and Reservation Value of Client
The present report on contract negotiation assignment is shedding light on the concept of BATNA which can be defined as an alternative process of negotiating agreement which helps to implement a contract successfully (Sebenius, 2017). This process has been considered by both the parties in an agreement while the agreement cannot be made in the normal course of action (Jung et al., 2019). The process provides benefits to all the parties in the contract and this is why the technique is popular throughout the world (Patel and Rubin, 2016). The possible zone of agreement can be easily identified by considering the technique of BATNA and it helps to make an agreement at a reasonable price (Davies, 2019). Based on the case of Elite Sports Stars, it has been found within this contract negotiation assignment that Hard Core Health wants to pay contract price only 434780 AUD. In terms of negotiation of advertisement campaign, Elite Sports Stars wants to make agreement at 15% more than existing price which is 499997 AUD. The Elite Sports Stars has intended to make a contract with the client De Grandis Sporting goods wants to endorse tennis shoes. In this case the Client does not pay 499997 AUD initially and De Grandis would try to pay fewer amounts and that would be BATNA of the client. As for example if De Grandis wants to pay 470000 as contract price, that would be BATNA of the client.
According to Kennedy, (2017), Reservation Price or Value reveals the least positive point at which the buyer and seller makes the agreement. The case explored in the contract negotiation assignment evaluates the reading of Lewis, (2015), that the reservation price is considered at last in the agreement for completing the contract effectively. In the case of Elite Sports Stars, it has been found that the BATNA of De Grandis is 470000 dollars but actually the client has intention to pay fewer amounts. The contract price which has been offered by Hard Core Health was 434780 AUD, but and De Grandis also wants to pay that if it is possible. Hence, 484780 AUD can be considered as the reservation value of the client which reveals that the price is least favourable point.
2. Identification of BATNA and Reservation Price of other Party
Based on opinion of Turipanam et al., (2018), it can be said here in contract negotiation assignment that best alternative negotiating process is essential to implement a contract successfully. Considering the importance of best alternative process of negotiation, it may be concluded that BATNA is an important element of contract (Baarslag, 2016). In respect to BATNA of Elite Sports Stars, it is found that the company wants to make contract 15% more than 434780 AUD. It implies that the actual intention of making the contract is 115% of 434780 dollars = 499997 dollars. From the case, it is transparent that the reservation price is 499997 AUD and best alternative negotiating price (BATNA) is 434780 AUD. Elite Sports Stars has dealt with Hard Core Health but the offered price of the client has been seemed very low to the company and this is why the organisation wants to make contract with De Grandis. The contract negotiation would be made for Novak Djokovic and this is why the organisation wants to make lump sum contract with De Grandis.
3. Range of ZOPA and Strategy of making Value
According to the research conducted for the case of contract negotiation assignment, the zone of possible agreement can be considered as bargaining range in which there is a possibility of making the contract. As stated by Marsden and Siedel, (2017), ZOPA is an important element in case of negotiating parties and if both parties cannot reach the range of ZOPA, it has been identified that there is a negative bargaining zone. Actually, ZOPA helps to provide advantages to all the parties in a contract after making successful bargaining in the agreement (Roy and Menasco, 2015). As mentioned by Kaufman et al., (2018), the increase in the value of ZOPA helps to improve the reservation value in case of an agreement. The interpretation of case explored in the contract negotiation assignment reveals that settlement range of purchaser is 434780 to 470000 AUD and on the other hand, the range of ZOPA in case of seller is 450000 AUD to 499997 AUD. Hence, the range of ZOPA in this case can be considered from 450000 dollars to 470000 dollars. In order to enhance the value of agreement, it is important to the seller to increase contract price at the beginning stage (Yu et al., 2017). Subsequently, the bargaining has to be made tactfully which would provide benefits both the parties (Brett and Thompson, 2016). The present context of contract negotiation assignment also examines that the price has to be reduced slowly at the time of bargaining which would ensure advantage to the seller and it would create value also for two parties in the agreement (O'Neill, 2018).
Figure 1: Range of ZOPA
(Source: Corporate Finance Institute, 2019)
Second Stage: Negotiation Process
1. What is the role of Contract Negotiation in the second stage within the context of contract negotiation assignment?
According to O'Neill, (2018), negotiation is the important element in respect to the implementation of contract and offering is an essential part of negotiation. This is because negotiation between purchaser and seller has been made considering offerings. In case of making contract with De Grandis, it has been found that offering of contract price is essential. Based on the contract price at which both parties are mutually benefited is considered in the contract. The study examined in the contract negotiation assignment revolves around the Elite Sports Stars wants to make effective contract with De Grandis at reasonable price but the contract price would be fixed at which both the parties would be benefited. The negotiation would be made by the seller for the endorsement contract to by offering 499997 AUD and after that negotiation would be started from the buyer’s perspective. The final price would be fixed after a constructive negotiation considering range of ZOPA.
2. Communication Details
|
Date |
Methods of Entire Communication |
Discussed Matter |
Outcome |
|
13/09/2019 |
Through e-mail |
· Making proper interaction with the customers · In depth discussion in respect to the contract agreement with De Grandis · Interpretation of contract price offered by other parties |
· Essential elements of contract have been identified · Customer has identified details of contract price |
|
14/09/2019 |
Through video conferencing |
· Details of BATNA and range of ZOPA · Effective evaluation of range of contract negotiation |
· The Zopa range has been considered from 450000 AUD to 470000 AUD · The last offered price of the seller is 450000 AUD |
|
15/09/2019 |
E-mail method |
· Price of the contract |
· The contract would be made 470000 to 499997 · The contract cannot be made below 450000 AUD |
Table 1: Communication Log
(Source: Created by Learner)
Third Stage: Process of Post Negotiation
Preparation of Letter to the Client in this segment of contract negotiation assignment regarding the outcome of the Negotiation
|
To It has been hereby inform you that the 499997 AUD would be considered in case of making the contract in order to maintain from the advertisement campaign. The company has already received an offer of 434780 AUD from Hard Core Health but that has not been accepted to make a big deal with De Grandis. It has been requested to the Purchaser to make negotiation considering reasonable contract price. The seller wants to reduce price maximum of 450000 dollars and ZOPA range for the endorsement contract would be started from 450000 AUD. The client has considered the price 470000 as BATNA and the De Grandis wants to pay the contract price offered by Hard Core Health but seller is not agreed to enter into the contract at price 434780 AUD. The contract of advertising campaign is going to make for representing the tennis player Novak Djokovic and this is why the contract would be made at a high price. The communication log has been made in details with date and methods which would help to make the contract successfully. The communication log would be considered as it would provide a clear picture in respect to the contract negotiation. Hence, in terms of outcome of the negotiation it can be said that if the contract can be made between 470000 AUD to 499997 AUD, the same would create a win-win situation which implies that it would create mutual benefit to both parties. Hence, the main motive of contract negotiation outlined in this report on contract negotiation assignment is to make the agreement profitable and the endorsement contract would represent Novak Djokovic which is the important part of contract. If the contract can be made at a good price, that would create value to both the parties in the contract. Considering seller’s alternative and buyer’s alternative the contract would be made between purchaser and vendor. Hence, benefits of both the parties would be considered in the contract and it would help to implement the agreement successfully and advertisement campaign would provide effective result Thanking You, |
References
Baarslag, T., (2016). Exploring the strategy space of negotiating agents: A framework for bidding, learning and accepting in automated negotiation. Contract negotiation assignment Springer.
Brett, J. and Thompson, L., (2016). Negotiation. Organizational Behavior and Human Decision Processes, 136, pp.68-79.
Corporate Finance Institute (2019). BATNA - Definition, Importance and Practical Examples. [online] Corporate Finance Institute. Available at: https://corporatefinanceinstitute.com/resources/knowledge/deals/what-is-batna/ [Accessed 12 Oct. 2019].
Davies, N. (2019). Fundamental principles surrounding negotiations. Journal of Building Survey, Appraisal & Valuation, 7(4), pp.377-386.
Jung, H., Kosmopoulou, G., Lamarche, C. and Sicotte, R., (2019). Contract negotiation assignment Strategic Bidding and Contract Renegotiation. International Economic Review, 60(2), pp.801-820.
Kaufman, S., Ozawa, C. and Shmueli, D., (2018). Negotiations in the public sector: Applying negotiation theory to multiparty conflicts. Négociations,3(1), pp.59-73.
Kennedy, G., (2017). Strategic negotiation. Routledge.
Lewis, H., (2015). Bids, tenders and proposals: winning business through best practice. Kogan Page Publishers.
Marsden, G.J. and Siedel, G.J., (2017). The Duty to Negotiate in Good Faith: Are BATNA Strategies Legal. Berkeley Bus. LJ, 14, p.127.
O'Neill, B., (2018). International negotiation: Some conceptual developments. Annual Review of Political Science, 21, pp.515-533.
Patel, B.N. and Rubin, G.D., (2016). Deal or no deal? Negotiation 101. Journal of the American College of Radiology,13(6), pp.756-758.
Roy, A. and Menasco, M.B., (2015). Seller’s information sharing strategy to counter a bid from a rival supplier: A study of negotiations in two cultures. Contract negotiation assignment Journal of Marketing Theory and Practice,23(4), pp.455-469.
Sebenius, J.K., (2017). BATNA s in Negotiation: Common Errors and Three Kinds of “No”. Negotiation Journal, 33(2), pp.89-99.
Turipanam Alamanda, D., Ovinia Saraswati, P., Sidiq Adi Prabowo, F. and Azhari, M. (2018). Study of Open and Sealed Auctions in Astra Credit Companies Using Batna and Zopa. International Journal of Engineering & Technology, Contract negotiation assignment 7(3.21), p.217.
Yu, C., Wong, T.N. and Li, Z., (2017). A hybrid multi-agent negotiation protocol supporting supplier selection for multiple products with synergy effect. International Journal of Production Research,55(1), pp.18-37.
