Scenario 1 Part 1 .1&your Digital Footprint

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Scenario 1 part 1 .1 4

Part 1

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Part 1

Ann manages the purchasing functions at Sunrise Press, a small company specializing in printing catalogues. To accommodate its expanding business, the company has decided to buy two new printing presses.

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Ann determines the technical specifications for the new presses and an optimum budget for the purchase. She then talks to colleagues in the printing industry, shops around for possible manufacturers, and schedules meetings with sales reps from the three most promising vendors. Her goal during the meetings is to determine the best possible deal offered by each manufacturer.

1 Part Equals

Scenario 1 Part 1 .1&your Digital Footprint

After Ann meets with two of the potential vendors, she schedules her third meeting—with Jim, a young sales rep from Helio, Inc. Helio is the leading printing press manufacturer and the company Ann hopes to select—if she can negotiate a good price.

How might Ann best prepare for her meeting with Jim?

Scenario 1 Part 1 .1 3

Scenario 1 Part 1 .1&your Digital Footprint

Scenario 1 Part 1 .1 4

  • Correct choice. By talking with references and gathering information, Ann can begin to assess Helio's position, interests, and needs. Additional strategies for assessing Helio's position include: reading trade-journal articles about Helio and, if Helio is a public company, examining its annual report and other public filings.

    By comparing Helio's bargaining position with that of Sunrise, Ann can begin to identify the ZOPA ('zone of possible agreement')—the area in which she and Jim may strike a deal that benefits both companies. As a simple example, if Helio isn't willing to sell Sunrise the presses for under $500,000, and Sunrise isn't willing to pay more than $550,000, the ZOPA for this deal is somewhere between those two figures.

  • Not the best choice. In preparing for a negotiation, Ann shouldn't lock herself into a rigid sequence of moves ahead of time. Instead, she should prepare to be flexible during the negotiating process. She can't know with any certainty at this early stage what numbers will emerge during the negotiation. Flexibility will enable her to explore a fuller range of interests, needs, and concerns and therefore help design a deal that benefits both Sunrise and Helio.

    Mutually beneficial agreements are better than distributiveor zero-sum agreements (in which the more one party gains, the more the other loses). When two parties strike a deal that they're both happy with, they'll be more likely to forge a strong relationship that will benefit them during later dealings.

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  • Not the best choice. Telling Jim the budget early in the negotiation process would only reveal Ann's reservationprice—the least favorable point (i.e., highest price) at which Sunrise would be willing to make a deal with Helio. If Jim knows her reservation price ahead of time, Ann may lose her ability to bargain with him for a lower price. Rather, she should keep her reservation price to herself, and use the figure to estimate a zone of possible agreement. This is the area between her reservation price and what she thinks Jim's reservation price might be.