Reference no: EM132662400
Role Information for the Crawley Plant manager
Phillips and Crawley are two separate plants and profit centers owned by Universal Computer. As Manager of the Crawley Plant, you are charged with the responsibility of negotiating the price of the new A25 computer chips. You will meet with a representative of the Phillips Plant to negotiate the unit price for the A25 chip.
Your accountants have thoroughly assessed the material and labor costs associated with producing the A25 computer chip. They have determined that each chip costs you $7.00 to produce. Any negotiated price above $7.00 will produce a profit for you, while any negotiated price below that will produce a loss. There will be a 5% cost savings to you if Phillips agrees to purchase more than 50,000 chips in the next 12 months.
You have recently learned that another computer manufacturer has published specifications for a computer using a computer chip similar to the A25. They have contacted you and are willing to purchase between 50,000 and 100,000 chips at a price of $8.00 per chip, and indicated that the price is "not negotiable". Your maximum capacity for producing the A25 chip over the next year is 100,000 units and you have none currently in stock. If everything works the way that it is supposed to, you can produce up to 50,000 A25 chips within a month by delaying the production of other products. In the spirit of your Universal Computer's policy, you would prefer to sell to Phillips if an agreement can be reached, but you may sell outside the company if necessary.
In this negotiation, your objective is to sell the A25 chips at the highest possible price so that you can maximize your profits. You may not sell more than 100,000 chips, and you can only negotiate a one-year contract.
1. What is your BATNA? What does this mean?
2. What is your reservation value? What does this value signify?
3. What is your target point? What does this point represent?
4. What would your opening offer be? Why would you want to make the first offer?
5. If you were to actually negotiate in this situation, how would you judge whether you were successful or not?