Scenario:

Buyer:

RSW Corporationprovides integrated information technology (IT) solutions to business, government,education, and healthcare customers in the United States, the United Kingdom, and Canada. It operatesthrough three segments: Corporate, Small Business, and retail. The company sells hardware andsoftware products from OEM (original equipment manufacturers) from all over the world. Thecompany consolidates different products to serve the needs of its corporate customers.RSWCorporation was founded in 1997 and is based in California, USA. In 2019, the company reported sales ofUS$18bn.

It maintains relationships with thousands of suppliers that range from large multinationals such as HP,IBM,Apple andMicrosofttosmallmanufacturersofniche technologies manyofwhom areinAsia.

Supplier:

Software AG is a small, private OEM organization based in London, UK.It develops and manufacturesprovides technology applied to the machine learning r the end-to-end software and cloud technologysolutions. It assists companies to design and implement technology for robotics and ArtificialIntelligence (AI) solutions.The company has annualsalesofUS$300MM

The company serves various industries, including education, finance, healthcare, and non-profits, as wellas state and local governments.It recently sign supplier agreements with CDW's top competitors: TechData andIngramMicro.

Goods:

The KMR is a component used in the development of AI and robotics. It is used by a growing number ofmanufacturers in North America and Europe.Being a component of multiple computing systems RSWwill integrate it into systems for AI recognition used in call centers and other technology centers to aswellasequipment forself-drivingvehicles. The components are produced in Shenzhen, Guangdong,Chinaandtransported toNorthAmerica bysea shipping.

Given the growing demand for these technologies RSW is quite interested in negotiating a good dealwith Software AG, but it is under tremendous cost pressure in order to compete in the market.Fastand efficient delivery is also fundamental as RSW does not want to carry inventory for too long.Theirpreference istobuy in smallbatchestocontrol itsworkingcapital.

Currentsituation

Both companies have exchanging emails and phone calls, but they cannot seem to reach an agreementas of yet.RSW's Head of Purchasing is quite upset and has demanded the team to deliver a win.If noagreementisreached, thereis a risk thatthesuppliermaygotothecompetition.

SuppliersProposedterms	Buyer'srequiredterms -
Priceperunit:USD1,250	Priceper unit:USD1,200
Quantity:5000	Quantity:5000
Paymentterms: 30daysafterBillofLading	Paymentterms:90 daysafterBillofLading
MethodofPayment:LetterofCredit	Methodof Payment:OpenAccount
Shipping:Oceanfreight	Shipping:Oceanfreight

Destination:Toronto,Canada	Destination:Toronto,Canada
Placeofdelivery:FOBShenzhen,China	Placeofdelivery:CIFVancouver
Timeofdelivery:	Timeofdelivery:20daysafterBofL
Documentation: Commercialinvoice bill of lading packinglist third party qualitycertificate	Documentation: commercialinvoice bill of lading packinglist third party qualitycertificate

There are various key points of disagreement between buyer and seller.Both partners need to reachanagreementsoonor therecanbenegativeconsequences.

Purchasing Team :

Your boss, the Head of Purchasing department has provided you with very little range of maneuver. Pricing is evidently the most significant point of contention. He has authorized a maximum range of negotiation of +/- 8% in the total cost of the transaction. Any more than that and the transaction will not be profitable for the company.

Based on the company's logistics team, the difference between the ports of destiny as proposed by the seller and that requested by the buyer, can represent ~$40 per unit. So, it is a material number to consider.

You received information from your Treasury team that financing cost (another point of contention) is approximately 3% per year for your company these days.

The CFO is also involved and has offered the team a generous bonus of 1% over the savings amount, that is the difference between the price offered by the seller and the amount they can close at. This is to be divided by the members of the team in equal parts and payable at the same time as when the goods will be paid to the vendor. On top, they will receive 0.1% for every additional 30 days on top of the proposed 90 days offered to the vendor, up to a maximum of 0.30%.

This is an aggressive strategy to be used for the first time in the company's history, but the CFO is confident it will help achieve the goal.

The company wants to get a good deal, but it must be sustainable in the long run as this is a new and hopefully a long relationship with the vendor. Failing to achieve a satisfactory result may have a negative effect in your career within the organization.

You know that although the vendor has a growing market and a bright future, working with your company can have a significant impact as your dominance of the North American market is quite significant. They need you. But you have been aware that the CEO is a maverick, with a big ego so he can disrupt the negotiation altogether.

Think of all your alternatives and get your numbers clearly.

Sales Teams :

Your sales team has been pursuing this account for months and it represents a great opportunity for the company and for your sales bonus.

However, the Head of Sales is quite a difficult leader and believes that the company does need show strength against potential buyers, or they will abuse the relationship as it happened to them in their earlier years. He is convinced that the products are strong enough to competein the market without having to deal with a bully distributor.However, the current prospect represents a big portion of next year's sales volumes, and you cannot afford to lose the client.

You need to find a solution that works for all. On the one hand your leader is not supporting you and he has the ability to fire you. On the other, the company's future and your bonus are at stake.

Pricing is the most significant point of contention. He has authorized a maximum range of negotiation of +/- 8% in the total cost of the transaction. Any more than that and the transaction will not be profitable for the company and you may likely loss your jobs.

Note : All answers should be according to pre negotiation

1.What will be a least case scenario for RSW in this negotiation?