Negotiation Strategies PaperBiopharm-Seltek In the Biopharm-Seltek negotiation, we equally controlled the negotiation as we didn’t put the pressure on each other side. That was mainly because the Zone of Possible Agreements are quite large. Also, we tried to use Interest-Based Approach. we start the negotiation by asking the other interest first, so that we can know the truly need and come up with the solution that maximize the resources we have on the table. We tended to use the procedural types of interest; How the other side think issues should be addressed. We asked and answers the question frankly. For example, the Biopharm beginning the negotiation by asking the most three concerns that Seltek have in mind. The most critical factor that affected this negotiation outcome in this case was the person who do the anchoring first. Biophram started the negotiation by proposing $11M, and we negotiate from that point. In general, we should make a first offer only when you have sufficient information about your own and the other party’s aspirations and walk away points. We want to make it strong, then allow for moderation late. In this negotiation, as the Zone of Possible Agreement is quite large (Exhibit1), when the Biophram made the first offer, Seltek seetms to be interested in that number immediately. Another one important factor is that we didn’t let our emotion interfere the negotiation. We relied much on the information and do rational negotiating.
Because this is the first negotiation exercise, we did learn a lot from the case. The main factors this context highlight are the bargaining power of both the seller and buyer. Biophram want to buy a new specific kind of plant as soon as possible to gain the benefit of being a first mover for a new product. On the other hand, Seltek’s plant that Biophram is kind of interested in it is not in that good location. All in all, this case give us the opportunity to do negotiation whereas we have quite equal bargaining power and Biophram do have some other good alternatives on hands. We both satisfied with the outcome since it is in the Zone of Possible Agreement. However, I would say that Biophram got more benefit from the sliding the pie than Seltek ( the final price of $11M is more closed to Seltek Reservation price of $7M) as Biophram is the one who anchored with the first offer. After that, Seltek tended to have the offered number in their head and we negotiated from that point, with gave us the result closed to the first offer. Biophram negotiator was a little more aggressive in the negotiation than Seltek’s. This could be the case that Seltkek did not expect the Zone of Possible Agreement would be this large. That is to say, They thought Biophram had lower reservation price than it actually was ($25K).
In the Biopharm-Seltek negotiation, both parties had equal control over the negotiation process, as neither side applied pressure on the other. This was possible because the Zone of Possible Agreements (ZOPA) was quite large, meaning there was ample room for compromise. To approach the negotiation, an Interest-Based Approach was employed. This involved starting the negotiation by asking the other party about their interests, in order to gain a better understanding of their true needs and find a solution that maximizes the available resources. The focus was on procedural types of interests, which pertained to how the other side believed issues should be addressed. Both parties were open and honest in their communication, with Biopharm initiating the negotiation by asking Seltek about their top three concerns.
The most crucial factor that influenced the outcome of this negotiation was the anchoring effect. Biopharm took the initiative by proposing an initial offer of $11 million, which then became the starting point for further negotiation. It is generally recommended to make a first offer only when sufficient information about both parties’ aspirations and walk-away points is available. The aim is to make a strong offer initially and allow for moderation later. In this case, due to the large ZOPA, when Biopharm made the first offer, Seltek immediately showed interest in that number. Another important aspect of the negotiation was the ability to remain rational and not let emotions interfere. Both parties relied heavily on information and maintained a rational approach throughout.
This negotiation exercise provided valuable insights, particularly in terms of the bargaining power of the buyer and seller. Biopharm was eager to purchase a specific type of plant quickly, in order to gain the advantage of being an early adopter for a new product. On the other hand, Seltek’s plant, which Biopharm was interested in, was not located in an ideal position. Overall, this case presented an opportunity for negotiation where both parties had relatively equal bargaining power, and Biopharm had alternative options available. The outcome was satisfactory for both parties, as it fell within the ZOPA. However, it can be said that Biopharm benefited more from the negotiation, as the final price of $11 million was closer to their reservation price compared to Seltek’s reservation price of $7 million. This can be attributed to Biopharm anchoring with the first offer, which influenced subsequent negotiations. Additionally, the Biopharm negotiator displayed a slightly more aggressive approach compared to Seltek’s negotiator, possibly because Seltek did not anticipate such a large ZOPA and assumed Biopharm had a lower reservation price ($25,000) than it actually was.
The anchoring effect played a crucial role in influencing the outcome of this negotiation. Biopharm took the initiative by proposing an initial offer of $11 million, which became the starting point for further negotiation. The anchoring effect refers to the tendency of individuals to rely heavily on the initial piece of information presented to them when making subsequent decisions. In this case, the initial offer of $11 million served as an anchor, influencing the subsequent negotiations.
Making a first offer is generally recommended when there is sufficient information about both parties’ aspirations and walk-away points. The aim is to make a strong offer initially and allow for moderation later. In this negotiation, the large zone of possible agreement (ZOPA) allowed for flexibility in the negotiation process. When Biopharm made the first offer, Seltek immediately showed interest in that number, indicating that the anchoring effect had influenced their perception of the value of the plant.
Another important aspect of the negotiation was the ability of both parties to remain rational and not let emotions interfere. Both Biopharm and Seltek relied heavily on information and maintained a rational approach throughout the negotiation. This rational approach helped ensure that the negotiation process was based on objective factors rather than emotional reactions.
This negotiation exercise provided valuable insights into the bargaining power of the buyer and seller. Biopharm was eager to purchase a specific type of plant quickly, giving them the advantage of being an early adopter for a new product. On the other hand, Seltek’s plant, which Biopharm was interested in, was not located in an ideal position. These factors contributed to a relatively equal bargaining power between the two parties.
It is worth noting that Biopharm had alternative options available, which further strengthened their bargaining power. The outcome of the negotiation fell within the ZOPA, resulting in a satisfactory agreement for both parties. However, it can be observed that Biopharm benefited more from the negotiation, as the final price of $11 million was closer to their reservation price compared to Seltek’s reservation price of $7 million. This can be attributed to Biopharm’s anchoring with the first offer, which influenced subsequent negotiations.
Additionally, the Biopharm negotiator displayed a slightly more aggressive approach compared to Seltek’s negotiator. This may have been influenced by Seltek’s underestimation of the ZOPA and their assumption that Biopharm had a lower reservation price ($25,000) than it actually was. These dynamics further highlight the importance of understanding the bargaining power and motivations of both parties in a negotiation.
Overall, this negotiation case provides valuable insights into the anchoring effect, the importance of rationality in negotiations, and the dynamics of bargaining power. By understanding these factors, negotiators can enhance their negotiation strategies and achieve more favorable outcomes.