BUSI 455 Week 4 Negotiation 1: Negotiation and Results Example

Negotiation 1 Results and Reflection: What the Bakery Agreed, What It Learned

Summary of the Agreement

After three sessions over four days, Hearth and Grain Bakery and Northgate Coffee agreed to a one-year supply contract with a renewal option. The bakery will deliver fresh pastries to all 14 cafes daily, with a second, smaller midday delivery to the four busiest cafes.

How the Negotiation Unfolded

Opening and Anchor

As planned, we opened by describing the quality and freshness of our products and invited Northgate's buyers to a tasting before naming a price. We then offered a range of $28 to $30 a dozen. Northgate countered at $20, citing its frozen supplier. The bargaining range was therefore wide, and the first session ended with both sides restating positions.

The Stall Over Price

In the second session, we moved to $26.50 and Northgate to $22. At that point both sides were arguing about price alone, which Lewicki et al. (2015) describe as the distributive trap: when a negotiation narrows to one issue, every gain for one side is a loss for the other. We had also, by then, agreed to a 6:15 a.m. delivery, a concession we gave early to build goodwill.

The Turn: Asking About Waste

The negotiation turned when my partner asked one of our planned questions: how many pastries does each cafe throw away? Northgate's buyer answered that its busiest cafes ran out by 10 a.m. while the others discarded up to a fifth of their pastries. That answer revealed an option neither side had brought to the table: a smaller early delivery everywhere and a midday top-up at the four busiest cafes. The arrangement cut Northgate's waste, raised its sales at peak cafes and gave us higher total volume. With that option on the table, Northgate accepted $25.50 as part of a package that also set payment at net 30 and a one-year term.

Weingart et al. (1990) found that integrative tactics, especially exchanging information about priorities and making offers that combine several issues, were associated with higher joint outcomes. Our best moment came from exactly that: a question about interests and a package offer, rather than another price concession.

Reflection

Two things went well. Our first offer, made as a range and after the tasting, anchored the discussion higher than Northgate's frozen price, as Galinsky and Mussweiler (2001) would predict. And we kept the relationship friendly while holding near our targets.

One thing went poorly. We conceded on delivery time before learning how much Northgate valued it. Had we asked first, we could have traded the early delivery directly for price or volume instead of giving it away. Thompson and Hastie (1990) found that negotiators often misjudge the other side's priorities, and we did: we guessed that delivery time mattered little to Northgate, when its buyers later told us it ranked near the top of their list. We also assumed that a free concession would be repaid with goodwill on price, and it was not; Northgate simply banked it. Lewicki et al. (2015) warn that unreciprocated concessions teach the other side to expect more of them.

Curhan et al. (2006) showed that negotiators value more than the economic outcome: they also care about how they feel about themselves, the fairness of the process and the relationship. On those measures the negotiation also succeeded, and that matters for a one-year contract that both sides will have to manage day to day. Northgate's buyers thanked us for the waste idea, and both pairs agreed to contact each other first if problems arose during the year.

Value Claimed

The final price can also be judged against the bargaining range. Our resistance point was $22. Northgate's buyer said after the deal that its own limit had been about $26, given the labor its cafes spent baking frozen pastries. The zone of possible agreement on price therefore ran from $22 to $26, and at $25.50 we claimed most of it. We claimed it, however, only after the midday delivery made the package attractive to Northgate; without that option, the price would likely have settled closer to the middle.

Working as a Pair

Our division of roles held up. Because one partner tracked every offer against the plan, we noticed in the second session that we were drifting toward our resistance point on price and called a break, as the plan required. During the break we reread the planned questions, which is how the waste question came up. The weak point was that we had not agreed in advance which concessions either of us could make alone, which is how the delivery time slipped out early.

Lessons for Negotiation 2

• Ask about interests and priorities before making any concession, even a small one.
• Make every concession conditional: "If you can do X, we can do Y."
• Prepare at least one package offer before the first session, combining our priorities with what we expect the other side to value.

Each lesson answers a specific mistake or success from this negotiation. The first two address the early delivery concession; the third builds on the midday-delivery package, which created more value in one exchange than the whole first session of price arguments.

References

Curhan, J. R., Elfenbein, H. A., & Xu, H. (2006). What do people value when they negotiate? Mapping the domain of subjective value in negotiation. Journal of Personality and Social Psychology, 91(3), 493-512. https://doi.org/10.1037/0022-3514.91.3.493

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

Weingart, L. R., Thompson, L. L., Bazerman, M. H., & Carroll, J. S. (1990). Tactical behavior and negotiation outcomes. International Journal of Conflict Management, 1(1), 7-31. https://doi.org/10.1108/eb022670