Negotiations: processes, strategies, and outcomes

Negotiations

The Bollingers: Negotiating with Wal-Mart as a Supplier

Wal-Mart is considered one of the most demanding customers of its suppliers globally, routinely asking for significant cost reductions of its sourced products in addition to special concessions to retain their business. Suppliers who don't manage negotiations with Wal-Mart have found themselves in the situation of having the majority of their production allocated to mass merchandisers at prices near their break-even point. Negotiating with Wal-Mart requires a thoroughly defined strategy to make sure the products being sold can retain their profitability over the long-term.

Bollinger's Strategy for Wal-Mart: Sell Experience and Value

The fact that Mr. Bollinger is a VP of Hasbro and understands distribution channels and their implications for Wal-Mart sets an immediate and valuable precedent in defining a mutually beneficial strategy with the mass merchandiser. It is critical as part of any negotiation to offer value as opposed to just price (McGinnis, et.al.) & (Sostrom, et.al). The value to Wal-Mart of working with the Bollingers is the faster learning curve of getting them up to speed as a supplier. The time savings and previous knowledge is a competitive advantage for the Bollingers relative to other potentially competing suppliers. Second, the Bollingers must focus on how to their product can create information of value for Wal-Mart. Considering the potential for up-sell and cross-sell of their products with Hallmark Greetings for example could lead to a greater level of potential profits for the retailer than if the WallPockett is sold just on its own. This will help the Bollingers to get to a common goal or shared objective, increase the motivation of Wal-mart to work with them and underscore the Bollinger's commitment to work with Wal-Mart to make the relationship a mutually beneficial one. These aspects of the negotiation strategy are well defined by McGinnis (et. al) and need to foundational to their strategies in approaching Wal-Mart. The Bollingers must also have exceptionally well defined gross margin levels and knowledge of their break-even points including strategies for sourcing materials at the high and low ends of their sales forecasts. They need to know their product levels, product roadmap for the future, and have in short a pro forma Profit & Loss Statement before defining a negotiation strategy with Wal-Mart.

Negotiating with Wal-Mart

In defining their strategy to negotiate with Wal-Mart, the Bollingers must first define their unique value and differentiation both as suppliers of a unique product, but also as providers of useful insights into this area of Wal-Mart's business. As Mr. Bollinger has extensive experience in this area, the expertise he has in structuring retailing strategies needs to be brought to the forward of the negotiating strategy. Test marketing the Wallpackett as a bundled product with other Wal-Mart products to increase the retailers' gross margins needs to be included as part of the negotiating strategy for example. This however is a value added strategy (McGinnis) needs to be presented after the Bollingers first define a high, medium and low-volume level of sales they can accept profitably from Wal-Mart in order to make the negotiations financially viable (Sostrom). The Bollingers need to further take each aspect of their three scenarios and define what the minimum levels are they can accept (McGinnis). From these three levels of business the Bollingers next need to define each of their roles in the negotiation process, aligning the presentation to each of their specific strengths (Mitchell). Mr. Bollinger is an expert in distribution, pricing and promotion due to his role at Hasbro and Mrs. Bollinger can speak with authority on the creative aspects of the WallPackett including the future product plans and potential of Disney character licensing given her background with them. With each of them concentrating on their areas of strength and knowing between them the high, medium and low levels of sales they can accept, the couple can more effectively manage their negotiation with Wal-Mart.

Half-Hour Session Recommendations

In the half-hour presentation to Wal-Mart buyers, the Bollingers must establish credibility quickly and differentiation of their product, the WallPockett. Mr. Bollingers' experience in the retail industry needs to be quickly summarized, as Mrs. Bollingers' expertise in creative design and merchandising with Disney. This immediately establishes credibility. Next, the product strategy needs to be introduced and the potential the WallPockett offers for bundling and gross margin enhancement for Wal-Mart needs to next be defined. Throughout the presentation of these strategies there needs to be a strong focus on the part of the Bollingers to creating a common cultural link with Wal-Mart (Saphiere). Both of their backgrounds will assist in making this link stronger than outsiders to the retailing industry would have. The goal of this 30 minute presentation is to establish credibility through introductions quickly, get to the point of getting Wal-Mart purchasing managers to see how the WallPockett could significantly contribute revenue to their company. The Bollingers need to put enough creative ideas out quickly in the meetings to allow the Wal-Mart executives to identify with and get a sense of what the WallPockett could be used for in the context of a merchandising platform for other products. Once this has been achieved, the Bollingers need to negotiate for the highest sales possible given their P&L planning and sourcing constraints. The follow-on products and their designs must also be addressed with realistic timeframes by Mrs. Bollinger. Ultimately having the high, medium and low sales levels give the Bollingers the latitude necessary to negotiate on the shared value created.