In this weeks blog, I will be discussing the negotiation tactics I will be using for my case exercise referring to "Knight Engines and Excalibur Engine Parts". First, a little background information referring to the case exercise, I am the VP of Sales for Excalibur Engine Parts and I am selling a special type of piston. Excalibur Engine Parts have been unsuccessful and just recently had an order terminated, rendering 10,000 pistons made and no buyer. Thankfully, Knight Engines contacted our company for a rush order of 8,000 units and would like to do business if all negotiations work out.
More facts about the case:
1) Was charging $600 per piston to original 10,000 unit order
2) Typical selling price $560 per piston
3) Cost of each piston to be made $480
4) Told Knight that there would be at least 5% charge extra for each piston considering the rush order
5) Extra 10% over selling price for quality control guarantee or buyer is responsible for defects
6) Competitors sell similar product for $400
7) Knight is in possible association with a Government Contract that can gain future business
While brainstorming for the right negotiation strategy, I want to look at my priorities and my outcome concerns. I would like to see all 10,000 units to not have a loss in this quarter and gain stockholders trust. However, I also need to consider the option of building and gaining a relationship with Knight Engines in hopes to gain a government contract. Thus, my first tactic is to keep my original offer above and aim at a selling price of $600 per unit, with a 5% fee for the "rush" order, and to push for the quality guarantee deal of 10% charge for all 8,000 units. This original offer is worthy because of the short time frame Knight Engines needs our pistons and facilitating our first need of higher sales.
Secondly, I will try probing/testing Knight and finding out their wants and needs in the deal. Most importantly probing for answers about the government contract. If Knight does have a contract with the government, I believe the best option is to "tweak" my original offer and work towards a collaborative strategy and try to build a strong relationship. In order to build a relationship, I will most likely have to distribute value accordingly and give something now in order to get something in the future. Since Knight and Excalibur have not done business with each other before, I want to gain their trust and really show the sincerity of our company and wanting to meet their needs. While also adding a concession towards a contract with the government through Knight Engines. I think a reasonable proposal is to drop the rush fee of 5% and to ensure the quality parts without the 10% charge as well in order to gain future needs. However, I will need to refer to a cautionary note to ensure that I am not over collaborative in this deal and will need to distribute my values according to my findings of Knights needs and wants.
Chart A.
Referring to Chart A., Collaborative strategy is the most beneficial in this case because we both have resolutions to both our needs and a high importance to both relationship and outcome. We are trying to gain a "Win-Win" approach by gaining a mutual gaining relationship. A relationship is more beneficial to Excalibur because we sell a rare commodity engine part, and having a relationship, gains future sales. Therefore, gains company growth, pleased stock shareholders, and quality parts that satisfy Knight Engine's needs.
