Nogotiation Blog

Insights on Business and Sales Negotiation

Join us for insights on how to negotiate a winning balance, where where both sides understand and appreciate the value they receive. As a result, you are more likely to forge a long-lasting relationship that yields more and better opportunities in the future. This idea underpins K&R Negotiations’ Win Wisely™ approach and underlines the importance of using leverage wisely.

Cerebrus Capital Management & United Rentals Inc.

What do you do if you think you agreed to pay too much?  Let's turn to the financial pages for an example.  But before we begin - we don't have any inside knowledge about this deal, and we don't know which side is telling the truth.  It just makes for an enlightening negotiation topic. In many recent financial articles, it has been reported that Cerebrus Capital Management wants to either renegotiate the terms (including price), or back out of their agreement to buy out United Rentals Inc. (URI).  Cerebrus was willing to pay a $100 million "breakup fee" specified in the agreement.  Good money, but the buyout price was $4 billion.  What happened?  URI is suing Cerebrus for specific performance on the contract (which essentially means forcing them to do what they contracted to do). In…

How Expensive is a Public Embarrassment?

Suppose you are a toy manufacturer located in China.  The news is full of stories of contaminated toys.  Plenty of unfounded rumors are tagging along.  One of your key customers is re-negotiating a contract that is important to you, and price (as always) is an issue.  Your customer raises the quality concerns.  The customer talks about the massive financial risks of a public outcry, involving the "health of our most helpless citizens, the children" (as the press would say).  Your relationship has always been good.  None of these problems have been yours.  In the end, the customer asks for a lower price, "to provide additional protection".  You know that you have the ability to cut the price - there is enough margin in this particular transaction.  What now? This is an example of…

Toray Industries (Japan) and Boeing

How do you act when you are the incumbent?  In a Bloomberg.com article, Boeing is reported to be in talks with Japan's Toray Industries regarding a possible 40% increase in Boeing's orders for carbon fiber reinforced materials.  The materials are used in building the Boeing 787 airplane, and are Toray's most profitable line of business.  This is how the discussions might go... Boeing: "With our order size increase, you should realize the economies of scale and have reduced manufacturing costs.  This should result in a lower unit price for us." Toray: "Our materials are the finest available for your use.  A single-source solution will reduce your build complexity, help your time to market, and accelerate your revenue for this new airplane." Toray's incumbency with Boeing is a powerful,…

Cognos

If better negotiating is about being better able to express your value, how good are people at expressing value?  Buyers pay for value, which is not to be confused with price.  If you heard, "this is a $40,000 car, but I will sell it to you for $32,000", what would you think?  You would most likely think it was a $32,000 (or less) car.  Since IBM just made its largest-ever acquisition, Cognos, we thought we'd look at how Cognos expresses their value.  One of their solution overview pages includes this language: 1. "Enables more effective rewards for your workforce, enhancing satisfaction and commitment. 2. Increases customer retention; win more new customers; improve productivity; and raise profits." There is a distinct difference between these two examples.  Number 2 follows a recognizable…

An RFP at Hyperactive Technologies

Is a Request For Proposal (RFP) a valuable offer to buy, or an attempt by the buyer to commoditize your offering?  An October New York Times article about artificial intelligence software for restaurant order flow management contained an interesting comment: "Just last week, [founder Joseph] Gagnon [said] the company received its first 'request for a proposal', an overture from a possible buyer of its products. 'That we got an RFP tells me I made it', he exults." How does a negotiator feel about it?  Mr. Gagnon is counting his chicken orders too soon.  In many commercial transactions, an RFP is a method of commoditizing buyers, so that all appear to provide the same function / feature / benefit / solution, and price is the only differentiator.  Unless Mr. Gagnon shaped the RFP specifically…

Joe Torre and the Yankees

When is an offer not an offer? Joe Torre, an extremely successful (and the highest-paid) baseball manager, failed to bring the Yankees to the Divisional Playoffs in the final year of his contract.  Yankees management made him a non-negotiable offer for next year of $5 million, with "earnable bonuses" of up to $3 million more.  Joe turned it down.  It is unlikely that this offer was expected to be acceptable.  Joe, coming off a 12-year run, shouldn't need the money. So what motivates him? As in many businesses, status, recognition and the appearance of success are key factors in the negotiation process.  If you want to close a deal, you should understand what the other side needs to get to be able to agree to that deal. The Yankees' management team knows Joe well.  They could accurately…

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Creating Value-Based Leverage

In this short video, learn why negotiation is really the art of finding agreement.

Mladen Kresic introduces the concept of value-based negotiations leverage and why it is a powerful tool for moving conversations to an agreement.

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