Gtechnica and Accelmedia

In class today we practiced negotiation tactics. We were told that their was two companies; Gtechnica and Accelmedia. Gtechnica needed to sell 15,000 graphics cards and Accelmedia needed to buy between 10,000 and 18,000 graphics cards.

I was working for Gtechnica and I was told I needed to sell as many graphics cards as possible for no less than $16, because that was the net unit cost.

I sat down to negotiate with a representative from Accelmedia and when she asked how much I wanted to sell the cards for I said $37, because that was the price were selling them for elsewhere. She was a little taken back and said that $37 was way too much. She offered me $20 a piece. I could have taken that but I wanted a much better deal. I said how about 33 dollars a piece. She said she would take that deal, but she would only buy 10,000 units instead of the 15,000 I was supposed to sell. She said that for 29 dollars a piece she would buy 12,000 units. I was pleased with that deal but I wanted to sell the remaining 3,000. I then asked her if she would buy all 15,000 units if I lowered the price to $26. She took the offer and our negotiations were over.

After the activity was done we learned a couple new words. Reservation price is the price that I would not be willing to go below, in my case 16 dollars. The ZOPA(zone of potential agreement) was from $16 to $35. Accelmedia wasn't supposed to pay over $35 per unit. Our final negotiated agreement was basically in the middle of the ZOPA. BATNA means the best alternative to negotiated agreement. There was no BATNA in our example, but it means the option you have if you don't come to terms in negotiating.

If we were to do this activity again, I would set my reservation price really high, maybe $60, then just slowly come down from there to get the best price possible. This method is called anchoring. According to research it is one of the best ways to get the best deal when negotiating because it opens up the ZOPA and since most negotiations end up in the middle of the ZOPA, the final number would be much more in your favor.