Iberia’s Chief Financial Officer, Enrique Dupuy de Lome may be soft-spoken but his negotiation strategy is aggressive. He maintained the upper hand in negotiations with Leah and Bright, mainly using the ‘Anchoring’ sales negotiation technique. In this technique, Dupuy as the buyer shares his target buying price to anchor the bargaining range on the low side.
Dupuy is also known by Airbus’ Leah and Boeing’s Bright as setting tough price terms and requiring hard sales guarantees that lower Iberia’s buying risk. Dupoy does not relent or compromise on his target and both competitors were advised that the winning bid would be the one that hit his target.
At all times during the negotiations, Dupuy’s tactics were geared towards maintaining an advantage. He was very explicit in his intentions as a tactic to intimidate both competitors; suggesting to both Airbus and Boeing that he might eventually replace the A340s with Boeings at a cost to Airbus. Similarly he made it public that because of the price guarantees he negotiated with Airbus, Airbus did not have the upper hand in the current negotiations which resulted in Iberia having “a powerful bargaining tool on future prices.” Dupoy also responded to both Leah and Brights’ revised offers with a subtle threat that the competitor was leading in the negotiations- using first name bases to hint that he was leaning towards the competitor’s offer and threatened to scrap the negotiations and purchase used aircraft from Singapore Airlines at bargain prices.
Dupoy was very accommodating of each competitor, facilitating meetings and calls that were often inconvenient in order to keep both feeling that they were still ‘in the game’ and should continue to negotiate a better deal.
As part of negotiation tactics, Leahy, Airbus’ executive demonstrated a willingness to meet Iberia’s demands; going great lengths such as taking long distance, chartered flights to meet with Iberia- even before pitching his offer. These actions, as part of his quest to maintain dominance in the industry, communicated desperation to Iberia; strengthening Iberia’s dominance in the negotiations.
Leahy was willing to absorb financial risks in order to close a deal; giving Iberia sales guarantees that threatened Airbus’ position in future negotiations and the company’s bottom-line.
As part of his negotiation technique, Leahy pushed Iberia for a concession so that the deal would be in the best interest of both buyer and seller.
Bright, Boeing’s executive utilized similar negotiation tactics such as sales presentations as Leahy did, however while he was willing to make concessions, he was not willing to undersell the aircraft, positing that the buyer did not appreciate the value of the aircraft.
Ultimately, Bright’s strategy was to protect his product from being undervalued and to protect his company from risk; consequently he was not willing to meet Dupoy’s target since he believed it was not good for business.
Like Leahy, Bright made several attempts at having Dupoy concede on his price target during the negotiations, a tactic that failed.
Overall Marketing Strategies
In the case study, Airbus and Boeing employed a similar strategy to woo Iberia and finalize the sales transaction. It was evident that both bypassed promotional tactics such as advertising and focused on business-to-business marketing via meetings, sales pitches and deliberations
In their meetings, pitches and deliberations which often took place over telephone, both Airbus and Boeing presented Iberia with several value propositions (for example, Airbus promised a better return on Iberia’s investment because the A340 is less expensive and would provide savings on parts, maintenance and pilot training, while Boeing promised $8,000 more per flight and higher seating capacity.)
A key part of both companies’ marketing strategy was to demonstrate why their product and services more effectively met the buyer’s needs and so both embarked on outselling each other in terms of number of seats that could fit in each aircraft, return on investment and after sales support.
Another part of both companies’ strategy was to offer a better price for the guarantee of a sale.
The main divergence in strategy is on the value the sellers place on the product. Boeing focused on aligning the sales price with the true value of the product, making some concessions but holding firm; while Airbus was willing to undersell in order to make the sale.
Key Factors that Ultimately Sent the Order in Airbus’s Direction
Dupoy had stated that the winning offer would be the one that met Iberia’s price target.
Although Airbus had agreed to Iberia’s asset guarantees terms and had ‘sweetened the deal’ with a maintenance guarantee from engine maker Rolls-Royce PLC, it was not until Airbus conceded on “financial terms and economics” that they hit the target.
Recommendation to Bright for handling a New Inquiry from Iberia
It is likely that Bright will be even more skeptical about entering into negotiations with Iberia after the experience of going through “the wringer” and coming up on the losing end. However, owing to the state of the market and the fact that Iberia is one of the best airline customers, it is recommended that he demonstrate interest in selling to Iberia at first inquiry.
Since Iberia’s decision to purchase aircraft from Airbus was mainly based on Airbus’ ability to meet Iberia’s target, it is important that Bright determine from initial contact, whether or not Boeing can meet the actual target and if not, refrain from incurring expenses wooing a potential customer in a deal that will never be closed. If not, Bright should thank Iberia for the opportunity to negotiate, explain Boeing’s inability to meet the target and express a willingness to finalize a sale provided that Iberia is willing to concede on their target.
"18 Tactics Buyers Use in Sales Negotiations." Rain Group. Web. 19 Apr. 2015. <http://www.rainsalestraining.com/blog/infographic-18-tactics-buyers-use-in-sales-negotiations/infographic/>.
"Boeing and Airbus in Dogfight to Meet Stringent Terms of Iberia’s Executives." The Wall Street Journal Europe 10 Mar. 2003: A1. Print.
Requejo, William, and John L. Graham. Global Negotiation: The New Rules. New York: Palgrave Macmillan, 2008. Print.