Business Negotiation Management Assignment Sample

Table of Contents

Introduction 

Main Body

Conclusion

Reference List

Introduction

A formal discussion that is ought to bring a conclusion that is likely to provide benefits to all the parties involved be identified as the activity and practice of negotiation. In this report, a negotiation in between a manufacturer - Sydney Shirts and one of its retailers would be discussed.

Main Body

The job of the manufacturer of Sydney Shirts is to increase the profits of the business by increasing its popularity in the market. Manufacturing companies, uses various ways to expand their business, one of them is widening their distribution base by getting into association with various retailers and suppliers. Sydney Shirt is associated with five retailers, scattered geographically in the market area. Here, in this report the negotiation to increase sales would be discussed with retailer number 3 as provided in Table 1. The relationship between the manufacturer and this retailer is solid, as it is a statewide statewide department store, which can bring popularity the brand of manufacturer within the state, as it has 25 physical outlets. The construction of relationship is a strong factor while conducting Business-to-Business operations (Lubarski, 2018 p23). If Sydney Shirts want to become a market leader, it has to focus on healthy relationship building as a part of its communication and expansion strategy.

The yearly sales volume (units) of Retailer 3 is 135,000. This indicates that the credibility of retailer 3 is high and it promises long-term sustenance to the manufacturer. The manufacturer of Sydney Shirts wants to increase the minimum order quantity from 500 units to 600 units in order to raise their sales volume. The manufacturer wants this because it will reduce their distribution cost by 7 cents per unit. The retailer agrees with this, as it is a no profit and no loss zone for them. They will face either an increase of 2 cent per unit or no unit cost increase at all. This decision is beneficial for both the parties and the manufacturer shows credibility in considering the profit increase of the retailer.

Let us assume that the retailer is facing an increase in cost by 2 cent for the calculation of its maximum losses being incurred. Therefore, the loss accounted by the retailer is as follows.

Yearly Volume Sales multiplied by the increased cost per unit.

135,000 * 2 cents = $2700.00.

Retailer 3 faces a loss of 2700 dollars.

Sydney Shirts wants to decrease the profit margin of retailers but does not want to snatch their opportunity to earn profit. Therefore, they want the retailers to increase the sales of their product by providing those benefits. These benefits are negotiated in a systematic manner, which involves opportunities for both parties. In order to enter into one, the concepts of B2B shall be kept in mind. The core idea of the B2B is to make rational decisions; therefore, the manufacturer of Sydney Shirts wants to but the retailer margin by 3% to increase their net margin by the same amount on those units. In the negotiation, the retailer demands the manufacturer to produce a special line of knit shirts aligning with their brand’s label. This has the probability to attract new customers for Sydney Shirts.

The increase in customer base will bring long-term profits but initially it will increase the costs of manufacturing, as the production of a completely new line of product is being demanded. As estimated, the costs per unit would increase up to 50 cents, but agreeing to this will get Sydney Shirts a larger market exposure and the costs would be recovered eventually, as brand popularity can be leveraged time to time to generate profit. Therefore, the trust in between the retailer and manufacturer has to be maintained, to take this risk, as it is on retailer to apply sales techniques in order to initiate the process of selling of the manufactured products of Sydney Shirts to the customers. Therefore, the final decision come to with the agreement of 3.5% cut in the retail margin along with the agreement of manufacturers to produce a product line of knit shirts.

The manufacturers of Sydney Shirt have the motive to expand their business by reaching out to large number of people. They want their products to be appealing to their target groups. This appeal is created through the medium of advertising (Hornik, Ofir & Rachamim, 2017 p313). Therefore, Sydney Shirts wants the Retailer 3 to advertise its product twice in a month. In general, the B2B marketers apply innovation and technology to improve the quality of the product and the content that describes their product to the consumer base (Biemans & Griffin, 2018 p119).

The manufacturer wanted to apply this hence it negotiated with the retailer to let it control some part of the content. It was decided that both the parties should bore the advertising cost because it would be fair treatment to everyone’s interests. The final decision was this that cost of the advertising would be split into two halves, and the manufacturer will enjoy 25% control over the content as conveying and displaying the advertisement would fall in the responsibility of retailer. This is why they cannot let the manufacturer to enjoy more control than 25% on the content.

The next demand by the Sydney Shirts is that it wants the retailer to add more space for its products within their brick and mortar stores. They demand for more shelf space, as they think more display will catch the eyes of customer. The manufacturers wanted to increase their share of the retailer’s overall sales and cut the access of competition with others for that specific retailer. Another rationale is that it wanted to promote its new technique of displaying products - shelf trolley. This is useful device, which takes up its existence in the unused or wasted space of the store. It is easily movable and its appearance is eye catching. The cost of one trolley is 800 dollars and Sydney Shirts wants to place each in the 25 stores of Retailer 3.

As they are willing to invest in the trolley, they demanded the retailer to contribute some part in its price because if the promotion purpose trolley works out, then the retailer will also enjoy its benefits. The final decision was that the retailer will increase the shelf space by 8% instead of 10% as laid by the manufacturer previously. The B2B relevance to deliver superior service has led the retailer to agree for the 70 percent contribution of the trolley’s price and the manufacturer would do the rest 30 (Cortez & Johnston, 2017 p97).

As the retailer is supporting the manufacturing company on various grounds, it demands them to fill their orders of products in 7 days instead of usual 10 days. This is because, the retailer wants to make more profit as the costs incurred by it has increased in all the previous agreements. This demand will put pressure on the manufacturer company, as their distribution cost will increase 5 cent per unit every day. The Retailer 3 because, more resources would be required to boost up the distribution process in order to meet the demand lays this out. There is a twisted benefit for the manufacturer due to this, if their distribution speed is increased, that means that more amount of products is received by retailer 3. This in return will affect overall sales volume, increasing the profit rates and collection of revenue. The manufacturer will also enjoy low threat of substitution due to decreased stock out. Therefore, the final decision was the agreement on supply of order of products in 9 days instead of 7 as demanded by the retailer.

The manufacturer of Sydney Shirts wants to feel a strong sense of commitment from Retailer 3, through a formal agreement, which documents order sizes, predicts future demands, and interprets market trends. It wants the Retailer 3 to commit with them for entering into corporate relationship for the minimum number of peak selling season. As it is understood that B2B activities requires two-way efforts. From the report, it is quite evident that retailer 3 has been agreeing to the demands of the manufacturer as it hold the dominant power in their alliance. The commitment demanded by manufacturer has led the retailer to ask them to increase the yearly special price promotion from three to four times.

Sydney Shirts has experienced greater sales due to this increase in yearly promotion. Customers like to buy anything that is being offered to them at discounted price with good quality. Therefore, the increase in yearly promotions will benefit the customers, retailer and manufacturer as well (Kourentzes & Petropoulos, 2016 p149). However, the only drawback to this is that, if the promotional technique does not create any increase in sales then it will add 5 cents per unit to the costs of Sydney Shirts. After evaluating the positive and negative grounds, Sydney Shirt agreed with 4 yearly promotion instead of 3.

The retailer has demanded in the negotiation to increase the cash discount period to 15 days from the usual 10 days. If Sydney Shirts agrees to this it will have to bore the loss in its net margin by 5 cents on each Sydney Shirt, which is sold in the market. To minimize this decrease in net margin, which is 2.5% currently, the manufacturer company agrees to 12 days for cash discount period. This shows that the partnership of both the companies is strong as they are ready to bear the pain of various change applications from both the sides.

The physical outlet of Retailer 3 is supposed to celebrate their 25th anniversary, which calls for special arrangements like upgraded festive packaging. Therefore, the retailer demands the manufacturer to provide them with specially packaged orders of the 10% of volume that they usually deliver to them for three months. The manufacturer is supposed to bear all costs as it is meant for the celebrations of the retailer’s market success and sustenance. Sydney Shirts will have to bear 3 cents a unit for three months, if it has to pay for the special packaging entirely. Therefore, the final decision was that the manufacturer and retailer will split the packaging cost into fifty and the special packaging will be provided for three months straight. This indicates the support of B2B marketers to each other in the economy as it this aspect holds a significant amount of value in relationship building and good management of alliance (Cortez & Johnston, 2017 p97).

Conclusion

It can be concluded that Sydney Shirts and Retailer 3 have strong relationship as portrayed in the above negotiation. The aim of the manufacturer was to retain the effectiveness of its distribution system without bearing many costs. Therefore, it still entered into agreements where it has to trade off some financial benefits to increase its sales volume and consumer base.

Reference List

Biemans, W., & Griffin, A. (2018). Innovation practices of B2B manufacturers and service providers: Are they really different?. Industrial Marketing Management, 75, 112-124.

Cortez, R. M., & Johnston, W. J. (2017). The future of B2B marketing theory: A historical and prospective analysis. Industrial Marketing Management, 66, 90-102.

Hornik, J., Ofir, C., & Rachamim, M. (2017). Advertising appeals, moderators, and impact on persuasion: A quantitative assessment creates a hierarchy of appeals. Journal of Advertising Research, 57(3), 305-318.

Kourentzes, N., & Petropoulos, F. (2016). Forecasting with multivariate temporal aggregation: The case of promotional modelling. International Journal of Production Economics, 181, 145-153.

Lubarski, A. (2018, September). Modular Sales–Using Concepts of Modularity to Improve the Quotation Process for B2B Service Providers. In International Conference on Exploring Service Science (pp. 16-30). Springer, Cham.

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