Strategic Negotiation Strategy: Microcomputer Associates' New Car Deal
Question
Task: How did Microcomputer Associates strategize their Negotiation Strategy for a new car, and what are the key concepts guiding their approach?
Answer
Issues most important by developing a Negotiation Strategy
Price:
Since price directly affects Microcomputer Associates' budget, it is of utmost importance. Securing cost-effective assets while optimising resources is in line with the company's objective of negotiating a cheaper price (Prado & Martinelli, 2018). The Negotiation Strategy must include a improved financial allocation within the company is made possible by a decreased buying cost.
Warranty:
A warranty indicates how long a car will last and what kind of maintenance it will cover. An extended warranty period is beneficial as it lowers the possibility of repair costs and guarantees that the CEO's car stays in working order. This is consistent with Microcomputer Associates' emphasis on dependability and minimising unanticipated expenditures.
Extras:
Optional extras like moonroofs or navigation systems improve the comfort and utility of the vehicle. Setting extras first is in line with Microcomputer Associates' intention to give the CEO a car that is completely furnished, which demonstrates the company's dedication to the comfort and well-being of its workers.
Air Bag Levels:
Airbags and other safety measures have a big influence on occupant safety. The company's attention on worker safety is demonstrated by giving greater airbag levels priority, which is consistent with Microcomputer Associates' basic values and risk reduction techniques.
Financing:
The total cost of the car is influenced by the financing rate. Getting a lower financing percentage guarantees cost effectiveness and fits well with the business's financial objectives, allowing for more effective resource distribution across the organisation.
Delivery Date:
In order to satisfy urgent business demands, a closer delivery date is necessary. Getting a faster delivery fits with Microcomputer Associates' need to fulfil operational needs and timeliness while giving the CEO a dependable car as soon as possible.
Your BATNA, Reservation Price, and Target
BATNA (Best Alternative to a Negotiated Agreement): 12,000 points
represents the anticipated value in the event that a deal with the existing seller cannot be achieved. For the buyer to determine whether the conclusion of the Negotiation Strategy is better than this option, this information is essential (Berlin, 2008).
Reservation Price Determination: 40,000 points
is the price at which the buyer will not accept payment. computed using the given budget, expenses, and internal evaluations. Aiming for less than this amount guarantees the consumer a good deal.
Target Points for the Negotiation Strategy: 50,000 points
Embodies the perfect result that the consumer hopes to obtain. It is within the buyer's reasonable range but over the reservation price. Reaching or exceeding this goal guarantees the consumer a very good price.
Calculations
The breadth of the necessary improvement in the Negotiation Strategy is shown by the difference between the reservation price and the BATNA. Here: BATNA (12,000) - Reservation Cost ($40,000) = 28,000 points are the difference.
The negotiating margin for the buyer's satisfaction is determined by the difference between the goal and reserve prices. Here: Margin: 10,000 points (Target: 50,000 - Reservation Price: 40,000).
Assessing the negotiated deal's suitability in relation to the buyer's intended outcome and the available alternatives is made easier by comparing it to these measures.
Your sources of power
Knowledge of being in a buyer's market:
Leverage comes from knowing you are in a buyer's market. This context suggests that sales of the Plymouth Takeover automobile model are going slowly, indicating either poor demand or excess inventory (Poell, Nieborg, & Duffy, 2023). With the seller probably ready to sell, this knowledge puts the buyer in a stronger position to negotiate for better terms, discounts, or other benefits.
Specific need for the car for the CEO, creating urgency:
The buyer's negotiating position is strengthened by the urgency resulting from the car's imminent demand for the CEO of Microcomputer Associates Inc. There is a pressing need for a new corporate vehicle, which suggests a deadline. Because of this haste, the buyer might play on the seller's desire to close the sale as soon as possible in order to suit their demands by emphasising accelerated delivery, rapid transactions, or favourable conditions. By portraying the buyer as a driven and sincere buyer, this gives the buyer negotiating advantage and may result in better terms or concessions.
Issues of important to your opponent
Price:
It is likely that the seller views the sale price as their first priority. It has an effect on their profit margins and is consistent with their goal of obtaining the maximum amount of money from the sale of the Plymouth Takeover (Ahearne, Atefi, Lam, & Pourmasoudi, 2022).
Delivery Date:
The seller places importance on the delivery date in order to strike a balance between fulfilling customer needs and expediting inventory turnover. They might try to meet consumer expectations and maintain effective inventory control by setting a fair delivery schedule.
Warranty:
The vendor would be concerned about making sure the warranty conditions meet both consumer expectations and industry standards. It has an impact on client satisfaction and could be a reliable indicator of the automobile, which influences decisions to buy.
Financing:
The conditions of the financing may be essential for the seller to enable sales. They look for financing packages that entice purchasers and enable them to complete transactions quickly.
Color:
Buyer interest can be influenced by colour preference, even if it is not as important. To speed up sales, the vendor may take into account colours that are in stock or that have greater market demand.
Extras:
Extra features and accessories enhance the car's overall attractiveness. In an effort to improve the value offer, the seller may try to upsell additionals.
Audio:
The car's attractiveness is enhanced by the calibre of the audio system. A good audio arrangement might sway consumer choices and affect the vendor's sales approach.
Air Bag Levels:
Safety features are important, but the vendor may not think as much of them. Despite being vital, they can believe that most consumers would be satisfied with conventional safety standards and concentrate on other factors to increase sales.
Your opponent’s assumed BATNA, Reservation Price, and Target:
Assumed BATNA: 10,000 points
This projected value is the seller's expected backup plan in the event that talks with the current buyer break down. In the event of a negotiating standstill, it indicates the seller's next best line of action and indicates the least acceptable conclusion.
Assumed Reservation Price Determination: 48,000 points
The vendor determines the minimal amount they are prepared to take, or the expected reserve price. It is computed using internal evaluations from the seller, cost factors, and profit margins.
Assumed Target Points for the Negotiation Strategy: 58,000 points
The seller's desired result from the negotiating process is reflected in their envisioned objective. Although it is more than the reservation price, it is within the seller's reasonable range. Achieving or exceeding this goal guarantees the vendor a very positive result.
Calculations:
The range of improvement anticipated through negotiating efforts is indicated by the difference between the assumed BATNA and the assumed reservation price: 38,000 points separate the assumed reservation price of 48,000 from the assumed BATNA of 10,000.
The margin the seller hopes to attain is shown by the difference between the assumed goal and the assumed reserve price: Margin: 10,000 points = Assumed Target (58,000) - Assumed Reservation Price (48,000).
The seller may make sure they get a favourable agreement within their expected range by using these predicted indicators to inform their evaluation of negotiating outcomes.
Your opening move/first strategy:
Initiating Negotiation Strategy Close to Reservation Price:
The buyer's first approach is to start the bargaining process with an offer that is somewhat near to their 40,000 point reserve price. By doing this, the buyer assumes a cautious stance and works to negotiate a good price within their reasonable range without disclosing their maximum readiness to spend up front.
Stressing Urgency for a Shorter Delivery Date:
The buyer's approach consists of stressing the urgent business necessity and the requirement for a quicker delivery date. This is in line with the CEO's urgent need for the automobile, which might be used to accelerate talks and get a faster delivery date.
Response to opponent’s strategy
Strategic Flexibility on Non-Critical Issues:
The buyer may show flexibility on less important negotiating topics, such as colour choice or specific extra features, in reaction to the opponent's tactics. The goal of this strategic manoeuvre is to obtain power on more important negotiating points, like price or delivery schedule, while making a compromise on non-essentials (Hugoh & Näslund, 2023).
Highlighting Benefits of Swift Sale:
In response, the buyer focuses on highlighting the benefits of a quick sale for the seller and how a quick agreement serves the seller's best interests. The CEO's urgent need for the automobile is emphasised by this strategy, which may encourage the seller to accept better terms or accelerated discussions.
Relevant concepts/strategies from the textbook for this Negotiation Strategy
Reservation price and BATNA understanding
It is essential to comprehend that the Best Alternative to a Negotiated Agreement (BATNA) is 12,000 points and serves as the backup plan. The Reservation Price is 40,000 points. These ideas are emphasised in the textbook as standards that help negotiators evaluate reasonable boundaries and options and reach mutually beneficial agreements.
Power dynamics in Negotiation Strategys
When discussing power disparities in Negotiation Strategys, the textbook places a strong emphasis on how having knowledge about the market—such as slow-moving automobile models—can give leverage. Recognising the buyer's urgency, having excess inventory, or using less common colours (like yellow) can help define power changes and shape bargaining tactics.
Importance of trade-offs and priorities
Prioritising matters according to importance and readiness to make concessions on less important points are advised for negotiators. This idea is consistent with optimising value by being adaptable on non-essential components to get leverage on important concerns, guaranteeing a well-rounded negotiating approach.
Strategies for maximizing value in Negotiation Strategys
Value maximisation procedures are recommended by the textbook. This entails making a cautious opening offer that is near to the reservation price, using urgency to conclude deals more quickly, and being flexible on non-essential matters. A systematic approach to obtaining favourable conditions without making undue concessions is necessary to maximise value.
Relevant concepts/strategies from outside research
Analysing market conditions for Negotiation Strategy advantage
The importance of market analysis is emphasised by external research, which is consistent with the notion of slow-moving automobile models in Negotiation Strategys. Negotiators might obtain bargaining power by strategizing based on market dynamics and identifying less popular colours (like yellow) or surplus inventory through market research (Jamaludin, 2021).
The significance of establishing win-win situations
Studies underscore the significance of striving for win-win situations. Aiming for mutual gains throughout the Negotiation Strategy is consistent with adding value for both sides. A win-win situation is created when the negotiating conclusion takes into account the seller's excess inventory and satisfies the buyer's urgency.
Using integrative Negotiation Strategy strategies for mutual benefit
The importance of integrative negotiating tactics is emphasised by outside sources. By investigating solutions that take into account the requirements and interests of both parties, these strategies concentrate on increasing the pie. Using integrative tactics in the vehicle Negotiation Strategy might entail integrating choices to achieve mutual benefits (e.g., faster delivery at a favourable price), which can promote a more cooperative negotiating atmosphere.
Excel Spreadsheet for Calculations:
Bibliography
Ahearne, M., Atefi, Y., Lam, S., & Pourmasoudi, M. (2022). The future of buyer–seller interactions: A conceptual framework and research agenda. Journal of the Academy of Marketing Science, 1-24 retrieved from https://link.springer.com/article/10.1007/s11747-021-00803-0.
Berlin, J. (2008). The fundamentals of Negotiation Strategy. Canadian Association of Radiologists Journal, 59(1), 13 retrieved from https://www.proquest.com/openview/d4af9c73d67bcbb288aedfd9f62b7b79/1?pq-origsite=gscholar&cbl=34862.
Hugoh, T., & Näslund, D. (2023). Performance effects of operational efficiency and bargaining power through different types of growth. Department of Business Administration Civilekonomprogrammet, 1-88 retrieved from https://www.diva-portal.org/smash/get/diva2:1772508/FULLTEXT01.pdf.
Jamaludin, M. (2021). The influence of supply chain management on competitive advantage and company performance. Uncertain Supply Chain Management, 9(3), 696-704 retrieved from http://www.m.growingscience.com/uscm/Vol9/uscm_2021_35.pdf.
Poell, T., Nieborg, D., & Duffy, B. (2023). Spaces of Negotiation Strategy: Analyzing platform power in the news industry. Digital Journalism, 11(8), 1391-1409 retrieved from https://www.tandfonline.com/doi/full/10.1080/21670811.2022.2103011.
Prado, L., & Martinelli, D. (2018). Analysis of Negotiation Strategy strategies between buyers and sellers: an applied study on crop protection products distribution. RAUSP Management Journal, 53, 225-240 retrieved from https://www.scielo.br/j/rmj/a/GFRHGKbhBDdpDHFtZRx88xg/?lang=en.
