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Information obtained from the case

Nominal price

Payment schedule
Service provision
Delivery date
Service provision
Level two service
Level three service
Level four service
Payment schedule
Front-loaded
Level payments
Back-loaded

Analysis Done
Nominal Price - As put up during the earlier round of
negotiation, the purchase price was $5,000,000. We had
prepared to try and bring that down to $3,500,000 as normal
bargaining.
Schedule of Payments - Initially it was decided to have back
loaded payments. We went with an intention of earning better
discounts by making them front loaded payments or level
payments
Service - Standard service was agreed upon. But as this is
specialized machinery, we would require complete service
coverage, which was a level 4-service level. We needed to
negotiate the service price

$5,000,000

Back-loaded installments
Standard
Six months from date of contr

$900,000 better than standard


1,300,000 better than standar
1,650,000 better than standar

91 percent of nominal price


86 percent of nominal price
82 percent of nominal price

Delivery Date - Our requirement was for immediate delivery.


This should not be much of a problem according to us as Riggs
was capable of delivering the machinery as soon as possible is
what we assumed. Although due to relocation of labor resources
we may have had to give some up charge regarding immediate
delivery but we wanted to offset this by changing the schedule
of payments

Strategies developed & used

We went for the level payments as the present value of these


payments came to approximately $5.5 million which we thought
was a fair deal for the machinery.We went for the level
payments as the present value of these payments came to
approximately $5.5 million which we thought was a fair deal for
the machinery.We began the negotiation by starting the pricing
for the level 4 service. Initial range of the service pricing was
varying between $1.2 million and $2 million. After much
persuasion and understanding each others issues, we finally
agreed upon a pricing of $1.5 million for the level 4 service
Against our expectations, the delivery schedule was not much
of a hurdle as the counter party was ready to deliver
immediately and did not ask for any extra charge
Next came the point of discussion over the front loaded, level
and back loaded payments. We decided we will do front end
transaction
The counter party was not ready to negotiate over the pricing
concerning the shift from back loaded to front loaded payments. We
came down to the complete package price of $5.5 million including
the machinery as well as the service level 4 with Front payments

We went for the front loaded payments at 83% of nominal


value as the present value of these payments came to
approximately $4.565 million which we thought was a Cheap
deal for the machinery.

k-loaded installments

months from date of contract signing.

0,000 better than standard


00,000 better than standard
50,000 better than standard

ercent of nominal price


ercent of nominal price
ercent of nominal price

FINAL DEAL
Nominal price

5,500,000.00

Payment schedule

Front-loaded installments at 83% of


nominal price

Service provision
Delivery date

Level four service


ASAP