BUSI 455 Week 3 Negotiation 1: Planning Example

Negotiation 1 Planning Document: A Pastry Supply Agreement Between Hearth and Grain Bakery and Northgate Coffee

Situation

Hearth and Grain Bakery, our side, is a 12-employee wholesale bakery with spare capacity of about 50 dozen pastries a day. Northgate Coffee operates 14 cafes in the metro area and currently buys frozen pastries from a national supplier that bakes them off in each cafe. Northgate has invited us to propose a one-year agreement to supply fresh croissants, muffins and scones daily. Our cost to produce and deliver is about $15.50 a dozen.

Lewicki et al. (2015) describe planning as the step most negotiators neglect, and the step that most often separates good outcomes from poor ones. We work through their steps in order, from listing the issues and our interests, to fixing limits from our alternatives, to choosing targets and opening positions, to sizing up Northgate, and finally to strategy.

Issues, Targets and Limits

Our Interests and Alternative

Our main interests are to fill idle capacity profitably, to have predictable volume for staffing, and to build the bakery's name in the area. Our best alternative to a negotiated agreement is a pending offer from a regional grocery chain to buy 40 dozen a day at $21 a dozen. That alternative sets our price resistance point at $22: any deal below that, at similar volume, would be worse than the grocery offer once Northgate's early deliveries are counted. A strong alternative also strengthens our position; Lewicki et al. (2015) note that a negotiator with a good alternative can afford to hold firm.

Analysis of Northgate

Northgate's likely interests are product quality that matches its premium coffee, reliable early delivery so pastries are on display when cafes open at 6:30, a local story for its marketing, and predictable costs. Its alternative is to keep the frozen supplier, at an estimated $18 a dozen delivered, plus labor to bake in each cafe. If Northgate values early delivery and quality more than price, and we value price and volume more than delivery time, the two sides have room to trade rather than split every difference.

Thompson and Hastie (1990) found that negotiators commonly, and mistakenly, expect every gain for the other side to be a loss for themselves, a fixed-pie perception that leads them to miss trades that would help both. We will test this assumption with questions rather than assume Northgate wants the opposite of us on each issue.

Strategy

Our strategy is integrative, as Lewicki et al. (2015) describe it: identify each side's priorities and trade across issues. We expect to concede on delivery time, offering 6:15 a.m. delivery at modest cost to us, in exchange for a price near our target and a volume commitment of at least 45 dozen.

We will make the first offer. Galinsky and Mussweiler (2001) showed that whoever names a number first tends to drag the final price toward it, though the pull faded when the other side deliberately thought about the opener's fallback options or kept its own goal in view. Since Northgate knows the frozen price, we will open with the quality and freshness case before naming a figure. We will state the price as a range, $28 to $30. Ames and Mason (2015) found that range offers whose lower end matched the point offer the negotiator would otherwise have made led to better outcomes than point offers, without harming the relationship.

Our concessions will shrink in size, signaling that we are approaching our limit: from $28 to $26.50, then $25.75, then $25.25. De Dreu et al. (2000) found that negotiators with a cooperative motive who also held firm on their own goals reached the most integrative agreements, so we will stay friendly while keeping to our targets.

Constituents and Protocol

Lewicki et al. (2015) advise planning for the people a negotiator answers to and for the process itself, not only the issues. Our constituent is the bakery's owner, who has approved the limits in the table; any deal outside them, such as exclusivity at less than $26, would need her approval, and we will say so honestly rather than use her as an excuse to stall. On protocol, we will propose an agenda that takes all six issues together rather than one at a time, because settling price first would remove the trades the plan depends on. We will suggest that both pairs post a short statement of interests before any figures, and we will summarize each tentative agreement in writing in the thread so neither side misremembers it. Proverbs 21:5 rewards the steady planner over the one who rushes (English Standard Version Bible, 2001/2016), and a plan both partners have signed off on is that kind of steadiness.

Questions to Ask

• How many pastries does each cafe sell on a typical weekday, and how much is wasted?
• How important is display by opening time compared with price?
• What has frustrated you about your current supplier?
• Would you want new seasonal items, and how often?

Division of Roles

One of us will present the opening and lead on price; the other will take notes, track concessions against this plan and ask the interest questions. We will call a break before agreeing to anything below our targets on price or volume.

References

Ames, D. R., & Mason, M. F. (2015). Tandem anchoring: Informational and politeness effects of range offers in social exchange. Journal of Personality and Social Psychology, 108(2), 254-274. https://doi.org/10.1037/pspi0000016

De Dreu, C. K. W., Weingart, L. R., & Kwon, S. (2000). Influence of social motives on integrative negotiation: A meta-analytic review and test of two theories. Journal of Personality and Social Psychology, 78(5), 889-905. https://doi.org/10.1037/0022-3514.78.5.889

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Galinsky, A. D., & Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657-669. https://doi.org/10.1037/0022-3514.81.4.657

Lewicki, R. J., Barry, B., & Saunders, D. M. (2015). Negotiation: Readings, exercises, and cases (7th ed.). McGraw-Hill Education.

Thompson, L., & Hastie, R. (1990). Social perception in negotiation. Organizational Behavior and Human Decision Processes, 47(1), 98-123. https://doi.org/10.1016/0749-5978(90)90048-E