Negotiations Skills

The chief operations officer (COO) reviewed your negotiation strategy planning template and decided that you and your team are ready to brief the chief executive officer (CEO). He would like you to review the negotiation scenario with your team and prepare a PowerPoint presentation to the CEO for final approval.

Negotiation Scenario

Introduction

This scenario provides the background and essential information elements for a contract negotiation between ABC Manufacturing Company and XYZ Plastics. This scenario is designed to stimulate a discussion of the negotiation process, contract pricing, negotiation strategy, techniques, and ethics.

Scenario Description

Overview

You will assume the role of the regional manager for ABC Manufacturing Company. Your company manufactures DELAMIX blenders, and you are negotiating terms with a supplier of a critical component in your manufacturing process (XYZ Plastics). You receive 1,300 units monthly at a delivered cost of $2.50 per unit. You project needing 1,900 units for the next 6–12 months and perhaps as many as 2,000 units ongoing after that. You have been satisfied with the supplier’s quality; however, late deliveries have forced you to schedule overtime to meet customer orders. An out-of-state vendor (QMP Imports) has offered you a 10% discount for the 2,000 units per month for a one-year contract. Your boss has authorized a contract negotiation team of 2–3 members. The COO would like to reduce the overall contract price by 10–15%. The CEO negotiated the initial contract with XYZ Plastics when he started the company and would like to continue working with the company because of demonstrated quality, responsiveness, and loyalty.

Background

The COO of ABC Manufacturing and the senior vice president of XYZ Plastics have been meeting and talking frequently regarding the vendor contract renegotiation. XYZ Plastics is an industry leader and has been the primary vendor to ABC Manufacturing for 42 years. XYZ Plastics contracted a new raw materials provider to reduce material shortages. XYZ Plastics is aware that its past delivery issues are a major discussion point, and it is prepared to offer a reduction in unit price (to be negotiated) along with a guarantee of on-time delivery before or on the required delivery date. Currently, XYZ is the only company in the United States that manufactures this part. ABC Manufacturing Company would like to continue to claim “made in the U.S.” in its advertising.

XYZ Plastics is aware that ABC Manufacturing Company will require additional units in the out-years and would like to secure the contract for continued growth. A new member of the ABC Manufacturing Company team has a contact in XYZ Plastics that offered to provide information on the manufacturing cost and profit per unit and other confidential proprietary information in exchange for a finder’s fee.

Task Description

In the previous Units, you worked on developing a Negotiation Strategy Planning Template. Now, you will use this template to prepare a presentation based on the scenario described above. Your presentation should follow the format of the Negotiation Strategy Planning Template. You will review the negotiation scenario and develop each section based on the information provided. This will be your final Key Assignment Negotiation Strategy Presentation for the CEO. The final presentation will consist of 12–15 PowerPoint slides with 100–200 words of speaker notes per slide. The presentation should have the following sections:

Purpose of negotiation
Desired outcome
Pertinent information
Interests, desires, and motivations
Sources of power
Walk-away alternative
Ethical considerations
Negotiation team
Recommended negotiation strategy
You will submit your presentation and your final Negotiation Strategy Planning Template