Interests and Priorities 3
Reservation price and positions 4
According to the Business Dictionary, negotiation is defined as the bargaining (i.e., give and take) process that takes place between two or more parties (each having its own goals, requirements, and viewpoints) to find a common ground and reach an agreement by resolving an issue of mutual concern or settling a conflict (Business Dictionary, n.d.). In a class assignment, group-1 and group-4 participated in a negotiation for the sale of a Texoil service station. Group-1 was the Vice President (VP) of Operation representing Texoil in the negotiation while group-4 represented the independent service station owners. Independent service station owners were a couple of husband and wife trying to sell the property due to some family or personal reasons.
This paper provides an account of what happened during the negotiation. It will give information on the issues addressed by parties in the negotiation from both sides such as their interests, priorities and positions. It will state each party’s Best Alternative to a Negotiated Agreement (BATNA), reservation price and targets. BATNA is the concept that was developed by Roger Fisher and William Ury, and shows the preferred course of action by any person in the absence of a deal. Knowledge of BATNA means knowledge of what a person will do or what will occur if the person fail to reach the goal or agreement in the negotiation (Luecke, 2003). In an appendix, the paper will also provide the original negotiated planning document.
Interests and Priorities
Texoil was interested in the service station, that’s why Texoil wanted to purchase it. Interests of Texoil are listed among the top priorities of Texoil.
After finding the option to purchase the service station, Texoil was motivated to purchase it from the couple. Texoil wanted to take advantage of the growth potential, since the service station was in an up-and-coming area, the Port of Los Angeles. It faced little competition as compared to other service stations. Texoil serviced and operated it; therefore, Texoil did not want the couple to sell the station to some other party. Texoil was also aware that the purchase of the existing station from the couple would be cheaper at $500,000 as compared to building a new station at $675,000. However, there would be some renovation cost with the purchase.
The couple seems to have only two reasons to sell the station. The first reason was that they figured out the value of the service station and found that the value has increased due to growth prospects as it is located close to the Port of Los Angeles. In the negotiation, they stated that they had worked on the valuation of the business and it was the right time to sell it. The other reason was that the couple was tired of the daily operations related to the business and liked to sell it, so that they would take some vacations.
Reservation Price and Positions
Questions to consider in case of the reservation price
- What was your reservation price? What was your counterpart’s reservation price?
- Describe what went into determining what your reservation price was.
- Describe what went into determining what your counterpart’s reservation price was.
- How did you use the above mentioned information?
Reservation price is described as the most you’ll offer or least you’ll accept. It shows the price at which consumer is indifferent whether to consume the good or not at all (Reutterer & Breidert, 2007). In our case, the reservation price is the most group-1 will offer and the reservation price of the husband and wife on the other side of the table is the least they will accept to sell the station. Our reservation price was quite easy to determine.
A position is often defined in the contract that a party puts forward or is proposing to their counterpart (Kulkarni, 2009). Each party’s position may change during the negotiation (Lewicki, 1977). The VP of Operation’ s (Group-1) original position was to purchase the service station for $200,000 and then make a contract with the couple (Group-4) for a particular period of time. The couple’s original position was to sell the service station for $700,000 with no further involvement. After 12 years, they did not want to participate in the business anymore, and was more interested in taking vacations to travel around the world. The VP of Operation’s position changed to purchase for $450,000 with the expectation of paying duty worth $50,000 in 3 months. The couple’s position changed to 3 months’ transaction of duties worth $25,000 with the demanding price for the service station of $500,000.
Business Dictionary. (n.d.). Negotiation. Retrieved from http://www.businessdictionary.com/definition/negotiation.html#ixzz3IgEcutFb
Kulkarni. (2009). Negotiations & Selling: Excel Books.
Lewicki, S. K. S. A. B. (1977). Negotiation 5E: McGraw-Hill.
Luecke, R. (2003). Negotiation: Harvard Business School Press.
Reutterer, P. D. T., & Breidert, C. (2007). Estimation of Willingness-to-Pay: Theory, Measurement, Application: Deutscher UniversitSts-Verlag.