The Cinnamon Cunnundrum



This time, I played Mahek Masala Products, a spices trader in India. I had just bought from my supplier 1,000kg of premium quality cinnamon at RS 290 per kg, which amounts to Rs 360 per kg with the additional costs. I had to sell it in three-weeks time before the cinnamon went bad. I had two companies who were interested in buying it from me:

→ Marex Pharma: they needed it to make baby-food. Offer: they would buy 700kg for Rs 390 per kg. They would also receive a 10% subsidy from the government, so in reality each kg of cinnamon would cost them Rs 351.

→ Offshoot Intermediaries Limited: they wanted the cinnamon for drug production, but they are also present in the baby-food market. They hadn’t given me an offer yet, but their payment terms were supposed to be better than Marex’s. They would also buy the entire stock of cinnamon (1,000kg). However, I though they would not be eligible for the government’s subsidy due to their rocky relationship.

This role play was much more interesting because it wasn’t just about the price. I think my negotiating skills improved since last time because this negotiation had more rounds, I asked more questions, and we both left feeling good about it.

I avoided talking about the price right away; instead I asked her about her payment conditions, which were necessary for me to decide it was a good deal. I also cleared the terms: I asked her if she was really willing to buy the entire stock, to which she replied “only if you make me a good price offer; if not I will be happy to only buy 70% of your stock and the rest from your competitor”. This allowed me to know that she was willing to do the same as Marex. Of course, I was interested in selling all 1,000kg.

In the end we agreed on Rs 550 per kg of cinnamon. My partner would pay me in full all at once, and she would buy my entire stock.

I made the first offer: Rs 800 per kg. Right off the bat I knew this would be too much, but I didn’t know how high she could go, so it was a good thing to start this high. Of course, this time the initial offer was given to me by the exercise, unlike last time, which makes it easier.

She made a counter-offer: Rs 500 per kg for entire stock. This delighted me because it was way better than my BATNA (selling to Marex 700kg at Rs 390). Still I decided to push her and see how much I could get: I told her her competitor offered me to pay more (but I omitted the fact he would only buy 70% of my stock). It worked, she was willing to add an extra Rs 50.

After we reached a deal, we shared information. We discovered our ZOPA was between Rs 390 and Rs 600. When comparing, I got way less than my initial offer (-250), and she had to pay just a bit more than her original counter-offer (+150). It made me feel a bit bad she was so close to her reservation price, but then she told me the government would give her a 25% subsidy, therefore the price really paid would go down to Rs 412,4 per kg. I felt a lot better knowing this.

In conclusion, I am satisfied about this deal. We both left the deal feeling we got what we wanted. I was able to figure out my BATNA pretty easily, and it turns out it wasn’t that bad. The difficulty was the time constraint, but that was never once discussed. We also asked more questions and we stopped to re-think our position. I also didn’t settle for just the amount I needed, I tried to get more.

The only thing I wish we had done differently is to prolong the negotiation, ask more questions, try to create other type of value (like a long term supply contract). I think we were done negotiating after 10 minutes. But this is explained by the fact I don’t like to drag things on: I had gotten what I wanted (that is, more than what Marex offered) and my partner was also satisfied.

I think it is difficult for me to apply the tactics we saw in the video during a negotiation. I still don’t ask enough questions and I assume people are being honest with me (even if that is not the case). I even try to subtly lie or hide information, but I feel terrible about it. I also initially thought asking Rs 800 was too much compared to Marex’s offer.


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