Negotiation Report

Ngoc Yen Vy Nguyen - 1146857

Lawrence Kinlin School of Business, Fanshawe College

MGMT-3070 Negotiation Principles

Professor Bruce Stead

October 28, 2024

1. Negotiation Strategy

As the procurement manager of a consumer electronics company, my negotiation strategy is a

combination of collaborative and competitive approaches.

The collaborative strategy will focus on fostering a long-term partnership with Global Mining
Corp to ensure a reliable supply of key raw materials, including lithium and cobalt, which are
essential for the company’s flagship smartphone production. Building a strong, sustainable
relationship is important for securing a steady supply in a market that is highly competitive due
to the rise in electric vehicle (EV) production and tech-related industries.

However, the competitive approach is necessary when negotiating critical terms like pricing and
payment conditions, given the volatile market environment and rising demand for raw
materials. The goal is to strike a balance between obtaining favorable terms while also
accommodating the supplier’s rising costs, thus allowing both parties to benefit from the
relationship.

2. Negotiation Tactics

Several tactics will be employed during the negotiation process:

 Anchoring: I will start by proposing a price per metric ton that is lower than our ideal
target price. This will create room for negotiation and allow flexibility in making
concessions later in the discussion.
 Concessions: In exchange for a better price or more favorable payment terms, I will be
willing to offer flexibility in the contract duration and volume commitments. For
 example, the supplier may be more inclined to offer price reductions in exchange for a
higher volume commitment or multi-year contract.
 Bundling: To make the negotiation more efficient, I will propose bundling key issues
such as price, volume, and payment terms into a single package. This helps streamline
the negotiation and allows both parties to make compromises in different areas while
moving toward a final agreement.
 Deadlines: Emphasizing the urgency of securing these materials will be another tactic.
Since the production of the new smartphone model depends on timely raw material
deliveries, I will communicate that the delay in finalizing this agreement could disrupt
our production schedule and the product launch. This will put pressure on the supplier to
agree to terms quickly.

3. Interests (Buyer’s Interests)

From the perspective of the procurement manager, the following interests are key to achieving a
successful negotiation outcome:

 Stable Pricing: Due to rising demand for lithium and cobalt, securing a stable price for
these raw materials is crucial. The company wants to avoid any price fluctuations that
could negatively impact profit margins. A fixed price agreement or a long-term contract
with limited price adjustments would help manage costs more effectively.
 Timely Delivery: Ensuring the raw materials are delivered on time is essential to keeping
production schedules on track. Any delays in delivery could halt production lines, which
would significantly impact the launch of the new smartphone. Therefore, I will negotiate
for clear delivery timelines, with penalties for delays or non-compliance.
 Sustainability and Ethical Sourcing: My company has a strong commitment to
sustainable and ethical sourcing practices. Ensuring that Global Mining Corp complies
with environmental standards and labor regulations is a priority for maintaining the
company’s brand reputation and corporate social responsibility. I will seek assurance that
the supplier adheres to these practices as part of the long-term agreement.
 Favorable Payment Terms: To maintain healthy cash flow, I will aim to secure net-60
payment terms, allowing the company more time to manage financial obligations. This
will be a critical point of negotiation, as the supplier typically offers net-30 terms. I will
offer other concessions, such as a higher volume commitment, in exchange for more
favorable payment terms.

4. Opposition’s Interests

Based on the supplier’s perspective, I anticipate that their primary interests will include:

 Maximizing Profits: Global Mining Corp is looking to increase its profit margins,
especially with the rising demand for lithium and cobalt in various industries, including
electric vehicles. This gives the supplier some leverage, as multiple industries are
competing for these materials.
  Volume Commitment: The supplier will likely push for a higher volume commitment
over a multi-year contract. This would help them secure stable demand and optimize their
operations. In return, they may offer better pricing for a larger volume commitment.
 Price Adjustments: Due to market volatility, the supplier may want to include a price
adjustment clause in the contract. This would allow them to increase prices in response
to rising extraction costs or global demand fluctuations.

5. Necessary Issues to Negotiate

The key issues that must be negotiated in this scenario are:

1. Price per Metric Ton: The goal is to negotiate a stable and competitive price for both
lithium and cobalt to protect against market fluctuations.
2. Volume and Commitment: Securing the required volume (1,500 metric tons of lithium
and 800 metric tons of cobalt) while negotiating for better pricing by agreeing to a multi-
year contract.
3. Payment Terms: Aiming for net-60 payment terms to maintain cash flow, while the
supplier may offer net-30 as their standard. Flexibility here will be crucial.
4. Delivery Schedule and Reliability: Clear terms for timely delivery, including penalties
for delays, will be essential to prevent disruptions in production.
5. Sustainability and Ethical Sourcing: The supplier must comply with environmental and
labor regulations, which will be a point of negotiation for long-term partnership
agreements.

6. Prioritization of Issues

1. Reliable Supply and Timely Delivery

2. Price per Metric Ton
3. Sustainability and Ethical Sourcing
4. Payment Terms
5. Volume and Commitment
6. Risk Management and Contingencies

7. Opening Offer, Concessions, and Resistance Point

 Opening Offer: My initial offer will be a lower price per metric ton than the current
market rate, proposing a fixed price over the next 12 months with net-60 payment terms.
 Possible Concessions: If necessary, I will consider increasing the volume commitment or
agreeing to a multi-year contract in exchange for better pricing and payment terms. I may
also offer flexibility on payment terms (e.g., net-45 instead of net-60) if required.
 Resistance Point: My resistance point would be any pricing above what would
significantly impact the company’s production costs or if the supplier is unwilling to
guarantee delivery schedules. If these conditions are not met, walking away from the deal
and exploring alternative suppliers might be necessary.

8. BATNA (Best Alternative to Negotiated Agreement)

Our Best Alternative to a Negotiated Agreement (BATNA) would be to explore other suppliers
or potentially reduce our reliance on lithium and cobalt through material substitution or
recycling. While these options may not be as desirable, they provide leverage in the negotiation
by highlighting that we have alternatives if the terms from Global Mining Corp are
unsatisfactory.

9. Additional Considerations

 Risk Management: Political instability or labor strikes in South America, where Global
Mining Corp is based, could disrupt the supply chain. I will seek to include contingency
clauses in the contract to address these risks and ensure alternative sources are available
in case of disruptions.
 Market Fluctuations: The supplier may push for a price adjustment clause due to
market volatility. I will negotiate to minimize these adjustments and aim for a fixed-price
agreement whenever possible.

10. Roles During the Negotiation

During the negotiation, I will focus on securing favorable pricing, payment terms, and
sustainability practices. My group partner will lead the discussion on volume commitments,
delivery schedules, and risk management, ensuring that both the logistical and financial aspects
of the agreement are thoroughly negotiated.