Expert Answer :X50 Negotiation Confidential Role Information

Solved by a verified expert :X50 NegotiationConfidential Role Information forAccelmedia (Buyer)You are the director of components sourcing for Accelmedia, a California-based developer and manufacturer of computer hardware components add or extend the ability of personal computers to handle sophisticated graphics. Accelmedia is a relative newcomer to this market, and has been growing at a rapid pace because of the sudden popularity of its products. About a year ago, Accelmedia launched its latest low-end graphics accelerator, the X50 and began producing and shipping them to personal computer manufacturers (for installation in person computers sold to buyers who want the PC to come with an accelerator card) and retail computer chains (for direct sale to consumers as a plug-in PC accessory).Graphics accelerators are video adapter cards that one can plug into a PC (in an available expansion slot on the PC’s motherboard) designed to boost a computer’s performance on multimedia tasks such as games or scientific applications that are graphic intensive. These accelerator cards typically include their own memory and their own specialized processor to handle the intensive mathematical operations involving graphics applications. An accelerator card enhances PC performance by freeing up a computer’s main processor and memory for other operations, while the graphics card handles the computational load associated with graphics. The demand for graphics accelerator cards by the general consumer market has grown significantly in the last few years as home and small business PC users have increasingly sought more and better processing power to handle the snazzy graphics that software developers have been adding to productivity applications as well as games.The problem you face now, and the reason for this upcoming negotiation is that your supply of processors being installed in newly manufactured X50 accelerators has temporarily dried up. When you began production, you contracted with a Colorado firm called MaxPro to purchase suitable processors. This arrangement worked well until a couple months ago, when MaxPro notified you that they are exercising an option in the contract to suspend delivery of the processors for one year because of problems with their production facility. This leaves you searching for a new, interim supplier of processors for the X50.As luck would have it, one of your Accelmedia colleagues attended a trade show a couple of weeks ago and ran into an executive with a Massachusetts-based electronic components maker called Gtech. Gtech recently began producing a new processor for graphics accelerators-a model known as the GT7- that would work as a substitute for the MaxPro component you had been using. Even better, your colleague told you that the Gtech representative indicated that they currently have some idle capacity producing GT7s and could be in a position to start delivering processors to a new buyer immediately.A few days later, you were contacted directly by Gtech’s VP of sales who confirm that they are in a position to supply a large number of GT7 processors on short notice if a purchase deal can be reached quickly. The two of you agreed to schedule a meeting to negotiate the possible purchase of GT7 processors from Gtech.Your goal in the upcoming negotiation is to pay the lowest possible price per unit for the GT7 processors that you buy from Gtech. The MaxPro processor that you’ve been using (and which is technically comparable to the GT7) has been supplied for $21 per unit. Perhaps you can do better (lower) than that in the purchase of the GT7s considering that the GT7 is a new and therefore less “market tested” component. On the other hand, the MaxPro price was negotiated in the context of a longer-term relationship between the two firms, which is not the case here with Gtech.In any case, your firm needs this interim supplier processors very badly in order to avoid interrupting the production of X50 accelerators. Although there are no processor makers other than Gtech that appear ready to offer a supply of this magnitude on such short notice. As a result, Gtech looks like your best option, even though you may have to pay more for this interim supply then for the processors you have been buying. According to the numbers worked up by your marketing analysts, projected profits from the X50 will not be seriously affected as long as you can keep the purchase price for the GT7s under about $30 per unit. In fact, because of the damage to Accelmedia’s reputation that could occur if production of your accelerator is interrupted, your boss thinks you really ought to consider any deal that gives you the GT7s for less than $35 per unit. She has made clear, however, that this is a worst case outcome and that you will be judged by how much better than this you can do.Another issue is the volume of the contract: the number processors you would like to have is as high as 18,000, but you will take what you can get as long as it is at least 10,000. Your existing contract with MaxPro will bring a full resumption of supply in about nine months, and even optimistic demand forecast for your accelerator do not indicate a need to expand production beyond what has already been planned for in the foreseeable future. Thus, the negotiation you are about to conduct is really a one-shot opportunity to do business with Gtech.As you wait for the meeting with Gtech’s representative, you are thinking through the approach you will take.Does it matter who puts out the first number? Do you want to be the person making the first offer, or the person hearing the first offer? Why? Under what circumstances might your answer be different?Define, in the context of negotiation, the term “anchoring.”What was your BATNA?How should you start the negotiation as the buyer?what negotiation approach should you make?what numbers are acceptable in respect to the buyer?