CASE 3.1 A SCANDINAVIAN SCARE
1. Why did Conquip send an RFQ with a 10 percent price-reduction requirement rather than calling de Winter in for negotiation? Is there any downside to having run the negotiation this way?
Conquip was trying to give a time pressure to FD. This can be seen when Conquip sent the RFP (Request for Quote) to FD regarding the product, LEIF filter, which still not even widely adopted by Conquip. This particular pressure functions as an external constraint to FD. Conceptually, the constraint removes what could be the most attractive of options for FD to continue to negotiate in an effort to improve the terms of the agreement. Lacking this ...view middle of the document...
B. why was this offer not credible to de Winter?
De winter realised that this RFQ was just came as a frame to FD. Framing is a mechanism through which people evaluate and make sense out of situations that lead them to pursue or avoid later actions. And in this particular case, Conquip tried to give a solution and defining it in terms that was meaningful and based on FD’s interests. However, de Winter may had understood completely what Conquip was doing by realising that they were being framed. Understanding the framing dynamics helps de Winter to consciously controlling the framing process.
3. If FD could have reduced prices by the 10 percent requested by Conquip and still have a positive and reasonable margin, why negotiate? Why not just reduce the price to save the business?
Because FD and FILTECH’s highest priorities were to maintain positive margins and a long-term sales relationship. But knowing Conquip was trying to use FD for their own advantage, FD could not bare the lost nor given any false hope. This could be concluded when a lot of other important information was not given by Conquip such as their interest on the scope of sales (number of products).
On the other hand, knowing that FD came in with a poor BATNA, de Winter did not want to make concessions too easily and look weak. A negotiator should accept the proposed agreement if it is better than his BATNA, or otherwise consider withdrawing from the negotiations to pursue his other alternative. However,...