MGT 445 Week 1 Negotiation Processes Example

Preparing to Negotiate a $14 Million Concrete Supply Contract: The Negotiation Process at Harbor Point Concrete

[Student Name]

University of Phoenix

MGT/445: Organizational Negotiations

Week 1 Assignment

[Instructor Name]

[Date]

Harbor Point Concrete and all deal terms are composites written for a model paper.

Harbor Point Concrete, a composite ready-mix company in Tampa, Florida, operates eight batch plants and a fleet of 140 mixer trucks and employs 420 people. A national general contractor is building a 12-story hospital tower in the region and has invited Harbor Point and one competitor to bid on supplying about 72,000 cubic yards of concrete over 22 months, worth about $14 million. Harbor Point's sales director will lead the negotiation. Most negotiations are decided before anyone sits down, by how well each side knows its own limits, its alternatives and what the other side really needs. This paper plans the negotiation process.

The Stages of Negotiation

Negotiation typically moves through preparation, relationship building, information exchange, bargaining, closing and implementation (Lewicki et al., 2020). Each stage has its own tasks, and skipping preparation is the most common and costly error.

Positions and Interests

Fisher et al. (2011) distinguished positions, what each side says it wants, from interests, the underlying needs behind the positions. The contractor's position will be a low price per cubic yard. Its interests include reliable delivery for large pours, consistent quality for structural concrete, payment terms that match its cash flow and a supplier that will not cause schedule delays costing thousands of dollars a day.

Harbor Point's Costs

Harbor Point's variable cost for the hospital's mix, including cement, aggregates, admixtures, delivery and plant labor, is about $158 per cubic yard. With an allocation for fixed costs and a reasonable margin, its normal price for a project of this size is about $205 per cubic yard.

Harbor Point's BATNA

If Harbor Point does not win the hospital contract, its best alternative is to sell the capacity to other projects. Tampa construction is busy, and the company estimates it could sell most of the volume to smaller projects at an average of about $198 per cubic yard, though with more scheduling complexity. This alternative sets its walk-away point.

Reservation Point and Target

Given its alternative, Harbor Point's reservation point, the lowest price it will accept, is about $188 per cubic yard, below the alternative's price because the hospital contract offers steady volume and lower selling costs. Its target is $203. Its opening offer will be $212, leaving room for concessions.

Estimating the Contractor's Position

The contractor's alternative is the rival supplier, whose last comparable bid was reported at about $196. The contractor also values Harbor Point's two plants near the site, which shorten delivery times. Its reservation point is likely around $205 to $208 for a supplier it trusts, and its target is probably below $195.

The Zone of Possible Agreement

If Harbor Point will accept $188 and the contractor will pay up to about $206, the zone of possible agreement runs from $188 to $206. The final price will depend on how each side uses information and concessions.

Making the First Offer

Galinsky and Mussweiler (2001) found in experiments that first offers act as anchors that pull final agreements toward them, and that the party receiving the offer can weaken the anchor by focusing on the other side's limits. Harbor Point will make the first offer at $212, justified with its delivery capacity, quality record and proximity to the site.

Exchanging Information

Thompson (1991) found that negotiators who asked about the other side's priorities reached better joint outcomes, yet many failed to ask. Harbor Point will ask about the pour schedule, quality requirements, payment process and the contractor's biggest worries before discussing price.

Planning Concessions

Concessions will become smaller as the price falls: from $212 to $208, then to $205 and finally $203, signaling that Harbor Point is nearing its limit. Each concession will be exchanged for something, such as faster payment or a commitment on total volume.

Relationship Building

The sales director will meet the contractor's project manager and superintendent before formal bargaining and offer a tour of the nearest plant. A good relationship reduces later disputes during 22 months of deliveries.

Strengthening the BATNA

A negotiator's power depends heavily on the alternative. Before the meeting, Harbor Point's sales team will firm up its alternative by collecting letters of intent from three mid-size projects that could absorb some of the capacity. A documented alternative makes it easier to hold firm near the target and to walk away calmly if the contractor insists on a price below $188. Without that work, the walk-away point would be a guess, and guesses tend to drift downward under pressure.

Who Is at the Table

Negotiation teams need clear roles. Harbor Point's sales director will lead and make offers, the quality manager will answer technical questions about mix designs and testing and the controller will be available by phone to confirm the effect of any change in payment terms. Agreeing beforehand that only the sales director makes concessions prevents the team from giving away value in side conversations. The contractor will likely send its procurement manager and project superintendent, whose interests differ: the first cares about price, the second about delivery.

Cement Price Risk

Cement makes up a large share of Harbor Point's cost and has risen sharply in recent years. Fixing a price for 22 months exposes the company to that risk. The plan proposes an escalation clause tied to a published cement price index, which protects Harbor Point while giving the contractor a transparent, predictable formula rather than a padded fixed price.

Ethics in the Process

Harbor Point will not misrepresent its costs or invent competing offers. Bluffing about facts can damage trust and, in some cases, create legal risk. It can decline to reveal its reservation point without lying about it.

Closing the Deal

Agreement will be confirmed in a written contract covering price, escalation for cement costs, delivery commitments, quality testing, payment terms and dispute resolution. Both sides will review the terms together to avoid misunderstandings.

Implementation

After signing, Harbor Point will assign a project coordinator, hold weekly meetings during major pours and track on-time delivery and test results. Implementation is where the value of the agreement is realized or lost.

Conclusion

Harbor Point's preparation defines its target of $203, a walk-away point of $188 and a best alternative of selling to other projects. Estimating the contractor's alternatives suggests a zone of agreement from $188 to $206. A well-justified first offer, information exchange, planned concessions and careful implementation give Harbor Point the best chance of a strong, durable agreement.

References

Fisher, R., Ury, W., & Patton, B. (2011). Getting to yes: Negotiating agreement without giving in (3rd ed.). Penguin Books.

Galinsky, A. D., & Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657-669. https://doi.org/10.1037/0022-3514.81.4.657

Lewicki, R. J., Barry, B., & Saunders, D. M. (2020). Negotiation (8th ed.). McGraw-Hill Education.

Thompson, L. (1991). Information exchange in negotiation. Journal of Experimental Social Psychology, 27(2), 161-179. https://doi.org/10.1016/0022-1031(91)90020-7