Delishco Case Study

Introduction:

Delishco, which is a big food producing company, ordered Bagger 500 bags over 5 to 8 years, after 18 months or after ordering150 bags they asked for termination of the contract. CEO of Bagger was my role in this negotiation process. I was authorized from the shareholders to begin the negotiation with Delishco Company. Bargaining can be both disruptive bargaining, win- lose or zero sum game, which is your gain means the other party lose, Integrative negotiation which is win- win situation. Our bargaining was zero sum gain. Due to the fact that the more one party gained is the other party lost.

The process:

This issue was very shocking to our company, because we gave them 25% discount to our lowest price that we offer to other customers. The discount was due to their ordered volume. We believed that Delishco knew that they are not going to buy us after couple of months, Moreover, we heard about the rumor that Delishco is going to acquire another company to make their own bags. So this information bias made us even angrier with Delishco.

We came to an idea that Delishco must compensate us with our lost profit on 350 bags, plus the amount that we invested on machinery to provide high volume of bags. We even became angrier when Delishco managers showed no regret on termination of the contract. So at this point we were sure that the termination of the contract was predictable for Delishco, and their reason was to ask for more discount.

The meeting with counselor

In the meeting with the counselor, our strategy was determined that we don't want to solve this issue in court because currently I am so busy with other projects and the cost of lawyer and court is very high. We calculated our reservation price, which is based on the minimum profit that we could gain. It is about 2.6 million and our aspiration price that was 6.4 which was the profit which we hoped to gain plus the machineries that we bought for this company. We decided to be realistic about the prices.

For the initial price, we decided to ask for the price first to set an anchor, but a reasonable price not a very high because I believe that it makes Delishco stubborn and they think we are not acting reasonable.

Estimation of the other party

In the meeting we tried to estimate based on descriptive decision-making and the fact to predict how they really make decision. For Delishco, we assumed that they probably don't want to compensate us, but we were quite sure, that they would accept to compensate us with a low price at the end but not a satisfactory price for us. The reason for their compensations that we predicted, is that it is even more important for Delishco not to go to court because they are a multinational big firm and it can be a degrading to their reputation.

However, we were not sure if we could win them in court. Based on the fact that they are a rich company so they can hire very well known lawyers and we don't have money for that and there is nothing in the contract about termination. But we thought probably we can threat them in the negotiation and we decided not to start in aggressive way, otherwise they are not going to coordinate with us. Because starting a negotiation in an aggressive way led to not coordinate well with each other.

Alternatives:

We defined our strategy that the agreed price is in our ZOPA we will accept it and if it's lower than our reservation price we would go to court. Because always agreement at a negotiation is not the best solution sometimes other alternatives are better choices (BATNA). We seem stronger when we have strong alternative. As other alternatives we thought that Delishco is a big company maybe they can offer us to their other sectors.

We decided to send them a letter to invite them for a meeting to talk about the current situation and how we can solve it together.

Critical moments in the meeting with Delishco:

Starting conversation about our lost

We start to modify the other party perception, we told them how much money we have lost through this project and it is very difficult for us to get over this situation. I even told them that we had more order and we declined it because of high volume offer from your company. We knew that bargaining power is the ability to fool the other party and bluff,(R)