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Chapter Eleven

Chapter Eleven. Distributive Negotiation and Price Negotiation. It’s a piece of cake!. That’s puzzling!. Distributive Negotiations. Win. Lose. Relationship: simple and secondary Issues: simple and tangible Reward system: win or lose Assumptions: only present interests. Strategy used.

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Chapter Eleven

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  1. Chapter Eleven Distributive Negotiation and Price Negotiation It’s a piece of cake! That’s puzzling!

  2. Distributive Negotiations Win Lose • Relationship: simple and secondary • Issues: simple and tangible • Reward system: win or lose • Assumptions: only present interests

  3. Strategy used To reduce other’s resistance to making of concession To reduce other’s estimation that you will concede To exploit other’s trust, low skill and inexperience To exploit informationasymmetry

  4. Price Negotiation and Cost Analysis • Two basic cost functions • variable costs: raw materials and labor • Fixed costs: supplier has to bear irrespective of whether it manufactures anything or not, such as rent, rates, insurance, wages

  5. Fixed Cost Elements • planning and production expenses • expenditures on plant and equipment, and such administrative costs as salaries, insurance, depreciation and interest on overdrafts • marketing and distribution costs • cost of running the marketing operation (including the sales force), provision for retailer support

  6. Equation of cost structure Variable cost + fixed costs = cost of product + profit margin = selling price Profit

  7. Negotiations on Price Price Zone Buyer’s negotiation zone Seller’s negotiation zone Bottom line First offer First offer 150 180 170 200 Zone of possible agreement Seller Buyer 10

  8. Case Study How did the buyer find out the price of the equipment was over valued? Point out those factors which make it possible for the buyer to make the cost analysis.

  9. Negotiation Simulation Used Car Seller Requirement for negotiation: Read buyer and seller’s part in the book respectively; Discuss with your partner your negotiation strategy, including your first offer, bottom line, and the zone of possible agreement Ralph’s Manual of used car prices

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