MT340 Unit 5 Negotiation Preparation Plan Example

Open at $79,000, Aim for $83,000, Walk Away at $88,000: An MT340 Unit 5 Negotiation Preparation for a QA Contract

[Student Name]

Purdue University Global

MT340: Conflict Management and Team Dynamics

Unit 5 Negotiation Preparation

[Instructor Name]

[Date]

The studio, vendors and figures are composite; the method and research cited are real.

The Situation

The studio needs eight testers for six weeks, or 1,920 tester-hours, to run compatibility and regression testing before the game goes to platform certification. The incumbent vendor, which tested the studio's last game, has quoted $92,000. The relationship has been good: its testers know the studio's tools, and its reports were clear. The question is what to pay.

Best Alternative and Walk-Away

Fisher et al. (2011) tell negotiators to work out, before they sit down, what they will do if no deal is reached, because that fallback marks the point past which agreeing is worse than leaving. The studio's alternative is a second vendor that has quoted $78,000 but cannot start for two weeks. The publisher contract charges $5,000 for each week of late delivery to certification. Starting two weeks late would therefore cost $78,000 plus $10,000 in penalties, or $88,000, before counting the cost of training a new team on the studio's tools. The studio's walk-away with the incumbent is $88,000. Paying more than that would be worse than switching.

The Vendor's Likely Floor

The vendor's reservation price, the lowest it would accept, is not known. It can be estimated. A loaded cost of about $36 an hour for a contract tester, covering wages, benefits, management and tools, gives $69,120 for 1,920 hours. A margin of about 12 percent, typical for testing vendors of this size, brings the floor to about $77,400. This is an estimate, built on two assumptions the studio cannot verify, and the plan treats it as such.

The zone of possible agreement lies between the vendor's estimated floor, about $77,400, and the studio's walk-away, $88,000.

Interests

Fisher et al. (2011) separate what each side says it wants from the reasons it wants it. The studio's position is a lower price. Its interests are more specific: testers who already know its tools, reliable coverage in the final two weeks when bugs cluster, clear daily reports and a predictable cost the producer can commit to the publisher.

The vendor's position is $92,000. Its likely interests are steady work for its testers between larger contracts, predictable scheduling so it can plan staff, payment on time and the chance to bid for the studio's planned expansion pass next year.

Options That Trade Across Interests

Options trade something cheap for one side that is valuable to the other.

The first option is guaranteed Monday builds. The vendor's testers lose time when builds arrive late. If the studio guarantees a testable build every Monday morning, the vendor can plan its week, which is worth something to it and costs the studio only discipline.

The second option is a right of first offer on the expansion pass. The vendor values future work; the studio was going to need testing for the expansion anyway. A right of first offer, not a commitment, costs the studio little.

The third option is payment within fifteen days rather than thirty. Small vendors value cash flow, and the studio can afford early payment.

The fourth option is a fixed number of overtime hours at the standard rate in the final two weeks, rather than overtime at a premium. This protects the studio's most important interest, coverage when bugs cluster.

Objective Criteria

Fisher et al. (2011) recommend basing agreement on objective criteria. The studio will refer to the second vendor's quote and to the per-hour rate the incumbent charged on the last game, $41, which applied to 1,920 hours would give $78,720.

The Opening Offer

Galinsky and Mussweiler (2001) found that first offers act as anchors and that the party who makes the first offer often obtains a better outcome. The studio will open at $79,000, close to the last game's rate, with the Monday build guarantee and fifteen-day payment included. That figure is above the vendor's estimated floor, so it is not insulting, and it anchors the conversation near the low end of the zone.

The studio does not need to win the price; it needs to know the price at which switching becomes the better deal.

The Relationship

The studio wants to keep working with this vendor on the expansion pass and future games. Lewicki et al. (2020) note that in negotiations with an ongoing relationship, how the deal is reached matters as much as the price, because a counterpart who feels squeezed will remember it. The plan therefore avoids bluffing about the second vendor, states the studio's real deadline and shares the penalty arithmetic openly if asked.

Concession Plan

From $79,000, the studio will concede in decreasing steps, to $81,500 and then $83,000, each tied to something the vendor gives: guaranteed overtime terms, then a named test lead. The target is $83,000. Above $86,000, the studio will pause to reconsider the second vendor. At $88,000 it walks away.

Summary Sheet

Opening: $79,000 with Monday builds and fifteen-day payment. Target: $83,000 with fixed overtime and a named test lead. Walk-away: $88,000. Best alternative: second vendor at $78,000 plus $10,000 in penalties. Vendor's estimated floor: about $77,400. Trade items: Monday builds, right of first offer on the expansion pass, early payment, fixed overtime.

References

Fisher, R., Ury, W., & Patton, B. (2011). Getting to yes: Negotiating agreement without giving in (3rd ed.). Penguin.

Galinsky, A. D., & Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657-669. https://doi.org/10.1037/0022-3514.81.4.657

Lewicki, R. J., Barry, B., & Saunders, D. M. (2020). Negotiation (8th ed.). McGraw-Hill Education.