Preparation Plan - Texoil Representative PDF

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Summary

Class taught by Dr. Nazli Bhatia...

Description

NEGOTIATION PLAN TEMPLATE

Name: Taarini Gupta

Example

Issue 1

Issue 2

Self

Other

Position

Position

Priority Interests

Priority Interests

Purchasing Price

Selling Price

1

1

Issue 5

Urgency of selling after 12 years, immediate need for money

Staff and Management

We will need skilled management and 2 staff as it is an owner-operator run station

Adding the Mini Mart 3

Issue 4

Strict instructions have been given to not pay more than 500k.

Staff and Management 2

Issue 3

Role: Texoil Representative

They will have to fire their employees if they aren’t hired by Texoil

Operation Timing

Will result in larger long-term profits, 3 but will cost an additional 100k

They keep the station operational for 16 hours a day and 6 days a week however, Texoil would want a 24 hourrun station.

Cost of new Equipment

Payment Terms

4

4

Necessary to add in order to meet all the environmental regulations.

Could possibly an issue for the owners as they seem eager to sell their only source of income and have gone through the trouble of advertising it enough to speed the entire process.

Operation Timing 5

Texoil would want to keep the station running for 24 hours 7 days a week

Issue 6

BATNA

Building my own station which would cost $675,000 (additional costs might need to be factored in)

$450,000- Texoil is a large company and having been independent contractors with us at an earlier stage they are aware that they could get a higher price from us than most others. The assumption here is that whatever they are being offered is probably lesser than the maximum amount, a large company like Texoil would be willing to pay.

Reservation Price

$500,000 – Texoil has authorized us to pay no more than this amount

$250,000- It’s an approximation based on the annual income of the owners plus the cost of the land and any other overhead charges they might

NEGOTIATION PLAN TEMPLATE

Name: Taarini Gupta

Role: Texoil Representative

face during the sale Target

$250,000 – To keep the zone of bargaining wide $650,000-The seller might be aware regarding enough and to make sure the purchasing price the general cost of building a new station in the doesn’t exceed the RP. area having built one themselves, also it is public knowledge that there are only two other similar stations in the port area thus, reducing competition and providing them with leverage to demand this price.

Sources of power

The station owners are selling their property after They have advertised the sale of the station 12 years of ownership thus, showing that they through local newspapers as well as the national have an immediate need for the money by gettingprofessional journal of service station owners so rid of their property. Owners could possibly keep they might have multiple offers. There are no their job as management if Texoil hires them as other stations for sale. part of the deal.

Vulnerabilities

Immediate need for money due to family reasons. T Apart from this particular service station there are no other stations up for sale in the area and They are negotiating for possibly their most important building my own station would be too expensive. asset as it is probably their only source of income.

Strategy / Opening move / Other information (your strategy should include your first offer and plans of action given potential moves by the counterparty):

NEGOTIATION PLAN TEMPLATE

Name: Taarini Gupta

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Role: Texoil Representative

Opening move would be to ask the other party why they are here and what are some of the reasons for wanting to sell their station. Trying to understand what are some of the other possible reasons aside from the family reasons stated in the general information section, that the owners are willing to forego their station of so many years that is possibly their only source of income. One should try to get a sense of whether they are looking to keep their own jobs as well as the jobs for their staff once the sale is over. Making the first offer of $150,000 in order to anchor the other party at a reasonable price and creating a wide enough bargaining zone in order to try and reach the target price and also not end up paying anything more than the reservation price. The owners will try and sell themselves as ‘unique land owners’ of the station knowing that they are one of three service stations that are owner-operated and ideally located for the business Texoil has however, one can try and leverage the BATNA because even if Texoil was to buy land and build their service station which might be costly, the long-run payoff would equalize the money spent. The 24-hour operational station is capable of generating high profits so if Texoil is not able to purchase the station for anything less than $500,000 then adding the extra $100,000 for the mini mart plus the overhead charges for renewing the pumps etc, they would anyway end up spending anywhere between $600,000-$700,000. There is already a pre-existing relationship between the station owners and Texoil as they have been under contract with Texoil for 12 years hence, in order to honor that relationship there should be a fair outcome for both sides....