Negotiation: Purmo And Sanistål

Introduction

The mini-case is about a negotiation between a manufacturer of radiators and a wholesaler. The two companies involved in the negotiation are Purmo (manufacturer) and Sanistål (wholesaler).

These two companies have many negotiations throughout the year, but the negotiation this mini-case will focus on is about getting a contract for a new old peoples home in Herning. Sanistål is the one with the direct contact with the building contractor and therefore they are the ones who need to convince the contractor to choose them for the project. In this kind of industrial industry price is a very important parameter, when the contractor chooses the different materials for the buildings. Even if the quality of the product is very high,

As mentioned earlier both Purmo and Sanistål need to cooperate in regards to winning the contract. Because they both need each other it can be hard to see who has the biggest power in the negotiation. A good tool to analyse the power is to look at the BATNA for both parties. The reason for that is because it shows the next best alternative, which can put pressure on the other party. The BATNA for Purmo is very simple; not making a deal. The reason for that is, that they have contracts with very few wholesalers, which affects them in a way, that they can´t just go to another wholesaler from one day to another if they can´t agree with Sanistål. By having contracts with very few wholesalers Purmo can use that in a negotiation in the way that they can talk about the loyalty they show to very few on the market. It’s a good argument to use in a negotiation, but it does not really give you a power over the other party. When looking at Sanistål’s BATNA, there are differences compared to the position Purmo is in. Sanistål has a contract with Purmo and that contract gives them a relationship with Purmo that results in better prices when they buy more and how long they have been doing business together. But even though they have the contract with Purmo, Sanistål can easily go

It’s an interesting theory to discuss and analyse from because there is more than one party involved in order to find an agreement. The interesting aspect in this example with Purmo and Sanistål is, that there is more than one kind of multiparty negotiation. First it starts off being two independent team negotiations where both Purmo and Sanistål plan their approach for the upcoming negotiation on one side of the table. As mentioned earlier they already have a contract, which gives them some standard prices to negotiate from. In the team negotiation for Purmo, they decide, that they can reduce the already existing price with maximum 10%, which makes the reservation price for Purmo 10% discount. Sanistål´s team negotiation is more focussing on, that they get a competitive price, so they can win the contract for the old peoples home. After both parties have had their team negotiations separate from each other, they now need to sit together to find a common agreement. Now many would think, that the multiparty negotiation would change from being a team negotiation to being an intergroup negotiation, because it’s now two individual formed groups sitting together, but I will argue that’s not