The cinnamon Case: Sales negotiation - The seller

The cinnamon Case: Sales negotiation - The seller 

The trading company Mahek Masala Products Pvt is a famous for selling spices in Kerala, in Southern India. They just acquire an entire lot of 1,000 kilogram of high-grade cinnamon. They are trying to sell it. For this offer, they have two potential buyers but this negotiation was with Offshoot Intermediaries Limited. I was in charge of selling the cinnamon lot to Anthony who was the CEO of Offshoot. We started presenting the companies and the condition of the deal to create a trustful atmosphere, and then, we started to speak about the price. I was a little bit in a stronger position than my counter partner because he accidentally revealed me his BATNA, which allow me to make the first offer. I asked him to be sure and reformulated his information before making my proposal. He told me that he couldn’t go up to Rs 600,000 for the entire lot, so I started at 750,000 which was my best-selling price. I was feeling very comfortable at that moment because I could propose more than his price which allow me to negotiate it and not lose too much without revealing my own BATNA. Of course, it was too much for him and I try to convince him using objective arguments, playing on his actual situation with the government. In fact, for him, it was the perfect option to arrange his problems with the quality of one of its drug formulations, because the cinnamon I sold was a product with exceptional quality. Moreover, it will be good for Offshoot to reassure its consumers and gain in popularity. He offered me a price of 550,000 because he told me he had also other cheapest options with a second-grade cinnamon powder and that he can’t afford my first price. I tried to create value to strengthen my BATNA, who was selling the whole lot at the best price possible or selling 700kg for Rs 390 per kilograms. My walkaway price was Rs 360 per kilos to cover all the associated costs necessary to clean the cinnamon. That mean, that any offer beyond this price would be acceptable to me.

We had some difficulties to negotiate the price and we had to stop the negotiation various times to recalculate the best price of the zone of possible agreement. We were negotiating to find a price between Rs 360 per kilograms and Rs 750 per kilograms. But as my counter partner had some figures regarding the additional prices which affect its final price, he was a little bit lost and the negotiation starts to get difficult for him because he revealed me information he should not, like the last price he is willing to pay regarding to other alternatives he had from other providers. I was in a stronger position because the BATNA of my partner was not clearly define and weak, so it was easier for me to impose my price. During all the negotiation, I felt in a superior position which allow me to make a very good profit at the end of the agreement. I could take more advantages of the situation but I was concerned by my partner behaviour and I left money on the table. Furthermore, at the end we reached a win-win agreement satisfying both of us. Offshoot bought the entire lot for Rs 590,000 which is a little bit less than his walk away price and comparing with the initial purchase price (Rs 290,000), I sold the whole lot for a good acceptable price.

At the end of the negotiation both parties felt happy and I was satisfied of my offer. However, to improve my negotiation skills I need to stay more neutral and not be affected but my counter partner behaviour which can be disruptive. I need to be more persuasive when I am negotiating the price and try to not reveal too much information that can help my opponent to define my walk away price or best alternatives. I was happy to use the strong argument of the quality of the product and the good reputation of the company which help me to strengthen my position in the deal. I could have done better insisting of the other prospective buyer Marex Pharma Ltd to pressure Offshoot. That way, I could showcase that he could lost a very good offer. He may be open to pay more to get this opportunity.  Next time I should ask more questions and take time to resume the other side arguments in order to make the best deal possible.

Game: Win as much as you can

Win as much as you can:

Knowing if your partner is going to play a “Y” or “X” considering the interests of the group is very difficult to guess. Even in a trustful negotiation it’s impossible to trust the other negotiators, because everybody wants to win more and can betray the rest of the group for its own interests. Successful deal comes with cooperation. Thus, negotiations are always more productive when parties freely share information about their interests and goals. But that requires trust, which is difficult to implement at the bargaining table.

Building trust requires time and taking some risks, especially at the beginning of a new partnership or business relationship. The risk of the failure of the negotiation get bigger if both party don’t trust each other. When there is a lack of confidence between negociators, there are different ways to improve trust in negotiation. That means create guaranties and process progressively. Trust is necessary to facilitate sharing information with the other side and reduce all the risks involve by the negotiation. Creating value in the agreement can make the party more open to share their data’s because negotiation can break down when each side doubts the other's abilities and intentions.

The mains tools that can be use in negotiation to build trust are:

• show to the other side you know information about their culture, history and that you are interested in their business
• justify your positions and explain your moves in the negotiation 
• ask questions and be open to answer the ones of the counterpart 
• try to create link with the other side. This will produce more loyalty and empathy in the negotiation

Comment on the article : Negotiation analysis: An introduction

Negotiation analysis: An introduction

Before negotiation, the parties should prepare some questions to make the better deal they can. For this, 7 basics questions can be answered to make the negotiation analysis. They concerned the BATNA, the parties, their interests, the value which can be created, the various obstacles that the agreement can face, the influential power of the parties in the negotiation process and the ethnic concerning the personal beliefs of the parties.

First of all, to make a negotiation successful, it is necessary to know what will happen if the respective parties don’t reach an agreement.  For this, the Best Alternative To a Negotiated Agreement (BATNA) is the best solution to take a decision: accept the deal or continue to negotiate to reach more convenient alternatives. Parties need to be creative to imagine new alternatives and also keep attention to the environment of negotiation. Both parties should considerate their BATNA to reach the zone of possible agreement (ZOPA), where they both can find a compromise. One of the most important task in negotiation is to understand better how each party view its alternatives. Knowing the BATNA and its various issues constitute the basis of the negotiation analysis, and this search need to be previous to the beginning of the negotiation.

Then, it is essential to identify clearly the parties in the negotiation to be sure to present your arguments to the right person and do not give too much information. Other person can interfere in the negotiation process; hence it is very important to identify them and define which impacts they can have on the agreement, just as well in a positive way to improve the opportunity to serve better the needs of one party or in a negative way, at the expense of the other party.

For this, the interests of the person in the negotiation need to be taken into account. If negotiators don’t define well at the beginning their interests, they have less chances to improve the potential value of their deals. Sometimes, the parties can lie on their interests to make a better profit but according to the article, it is very important to focus on interests and not on positions. The definition of the interests starts at the same moment as the definition of the BATNA, and the identification of the parties included in the negotiation. It’s important before but also during the negotiation and even more at the end when the agreement is redefining and ready to be implemented. As the interests, the strategy need to be adapted to the various changing goals.

Moreover, another question which can be relevant is concerning the creation of value in the negotiation. To develop it, the negotiators shouldcompare their own interests with the ones of the other parties. To be successful, they must not be completely revealed in the negotiation to make a better deal. The fact that people does not place the same value in the same agreement keep other opportunities of agreement available. In negotiation, this difference is the most important material to create value and this is not only concerning the price. The creation of value can be represented in a two dimensional ZOPA diagram which show on the vertical line the seller’s interests and on the horizontal line the buyer’s interests. It will be a mistake to considered a negotiation as a win-lose or win-win negotiation because it is possible to create agreements that create value for both parties. In a word, value is created by capitalizing on differences and not especially by finding a common ground.

The negotiation process can face various barriers and identify the different obstacles is a key fact in the negotiation analysis because even with a ZOPA, an agreement is not secure. The first obstacle set out by the article is the strategic behaviour. Well formulated strategies are an average between benefits and risks in a specific negotiation tactic. The second one is a psychological or interpersonal barrier because emotions play a huge role in negotiation. None of the party can completely control its own destiny. And the last one is an institutional obstacle. The legal constraints may avoid value creation and to overcome institutional barrier new policies need to be created.

Another question is concerning the power, asking how can parties influence the negotiation process. The bargaining power can be the strengths or weaknesses of the BATNA, that means to expand the power, the party can attack the other side of the BATNA by worsening the consequences of a proposal refusal. In a word, the bargaining power is a reflection of both party knowledge and skills, and for people who manage this well, it is a real advantage to negotiate favourable terms for the agreement.

To conclude, the last question is about the ethics. To act responsibly 5 categories of principles should be addressed to the negotiator:

1. The question of candor: level of honesty in the negotiation
2. The fairness of the agreement: importance of the distributional fairness
3. The potential use of force in negotiation: importance of the popular opinion
4. The impact of negotiation on bystanders: what are the impacts of the negotiation on outsiders
5. Moral issues when one party is negotiating on behalf of others.

As a conclusion, we can say that effective negotiation requires a strong framework including means and ends. In the framework of the BATNA it is essential to identify clearly the fundamental interests and the potential value creating of each party and accept the various obstacles which can interfere in the negotiation process and lead to moral and ethical issues. To be successful a negotiation need to be well analysed and implemented with a good strategy based on the skills and knowledge of the parties who have a constructive behaviour during the negotiation.