ACTIVITY

Case Study D

Learner assessment guide and evidence

This assessment requires you to prepare for negotiations based on the case-study scenario.

You are required to do the following.

 Read the case study and answer the questions.

 All responses should be

You are the purchasing manager for a hotel complex. The hotel has a number of outlets.

 An upmarket bistro seating 200 and open Tuesday to Sunday (Friday and Saturday nights
average 300 covers, Sunday lunch and dinner usually average 150 to 200 covers).
 A public sports bar for up to 250 patrons.
 An informal lounge bar with seating for 60.
 A two-lane drive-through bottle shop.
 A gaming room with 70 poker machines.
 A small coffee shop seating 20, attached to the gaming room.

All stock required for the outlets must be requisitioned through your department. You’re responsible for
dealing with suppliers, placing orders, receiving deliveries, storing and distributing stock, contacting
maintenance and repair specialists as required, and managing the cleaning contractor.

You have the authority to negotiate contracts with suppliers to the value of $150,000 per annum on your
own. Above this amount, the assistant manager must negotiate with the general manager to obtain final
approval for all contracts.

The hotel’s owners have received approval to extend a section of the bistro into an outdoor garden dining
area which will seat an extra 100 guests. They’re demolishing a wall and replacing it with large glass
panels and doors. The outdoor area requires appropriate furniture, umbrellas, awnings, and additional
cutlery, crockery, glassware and service equipment.

They’re building a small bar in one corner of the garden area for use during busy periods or to service the
area if it’s booked for a private function. They’re covering one-third of the area closest to the doorways
leading from the internal bistro area with a permanent roof. For the cooler months, they’re considering
either attaching outdoor gas heaters to the roof area or purchasing freestanding heaters.
The renovations will take three months. An opening date has been set for the first Thursday in December.
Promotion of the new area commences in one month. Customers can make bookings six weeks prior to
opening. It has been forecasted that the new seating area will lead to a 40 per cent increase in business
in the bistro over the summer months.

You’ve been given the job of sourcing all furniture, large and small equipment, and food and beverage
service equipment required for the new dining area. You may decide to use current suppliers or locate
new sources. Price and the ability to supply the products and services within required timeframes will be
important considerations. Any contracts for equipment must include delivery and installation deadlines.

The bistro in its current format has been open for seven years. The food and beverage manager has
indicated that the current service equipment (especially the crockery) is showing stains and signs of long-
term use. Management will consider investing in new crockery and possibly cutlery for the whole bistro if
the price is within budgeted range. Otherwise, amounts required to increase current supplies will be
purchased. However, it must match or be similar to the current service equipment.

Choose two of the following areas, products or services to focus on for the purpose of your negotiations.

 Service equipment: glassware, cutlery, crockery, etc.

 Furniture: tables, chairs, service stations
 Large or small bar equipment for the external bar
 Décor: umbrellas, shade awnings, table centrepieces, decorative pots, water features or other
decorative items
 Outdoor heating systems
 Linen
 Garden supplies and/or ongoing maintenance

Q1: What two areas have you chosen to use as the basis for your negotiations?
 Furniture: tables, chairs, service stations
 Large or small bar equipment for the external bar

Q2: What information must you research before you make initial enquiries with potential suppliers?

Choosing the right supplier involves much more than scanning a series of price lists. Your choice
will depend on a wide range of factors such as value for money, quality, reliability and service. How
you weigh up the importance of these different factors will be based on your business' priorities and
strategy.

Q3: Once you’ve contacted suppliers to negotiate with, research the people and the organisation.
Describe the results of your research and the cultural factors you’ll need to consider during
negotiations with the two different suppliers.
 Supplier 1 Price is important, but it shouldn't be the only reason you choose a supplier. Lower
prices may reflect poorer quality goods and services which, in the long run, may not be the most
cost effective option. Be confident that your supplier can make a sufficient margin at the price
quoted for the business to be commercially viable.
 Supplier 2 The quality of your supplies needs to be consistent - your customers associate poor
quality with you, not your suppliers.

Q4: List and prioritise your objectives, negotiable and non-negotiable requirements and BATNA (best
alternative to a negotiated agreement).
Supplier 1
The right suppliers provide the most
suitable goods or services at the most
suitable prices and in the right time
frames for your specific business needs.
Objectives
of negotiation
Supplier 2
Key factors for choosing suppliers are
outlined below. Once you have a list of
potential suppliers, ask them for written
quotations and, where appropriate, a
sample of the items you need. You can
then compare their services to see which
suppliers are the best fit for your business.

Negotiable
requirements It might be a better idea to use a carefully
selected group of suppliers as insurance
against any problems occurring.
Look for experienced suppliers who have
been in business a long time. Stability is
important, especially if you are entering
into a long-term contract with a supplier or
they are the only supplier of a particular
item you need for your business.
 An item can be considered non-negotiable
if one party involved in a transaction is not
willing to make any changes to a condition
that has been set in place.
Non-negotiable
requirements
Securities and products that are
considered non-negotiable cannot be
transferred from one party to the next and
thus are typically illiquid.

Create a list of actions to take if the Select the alternative that sounds the
negotiation fails. best.
BATNA

Q5: What concessions (if any) are you prepared to make during negotiations to achieve your
objectives?
 Negotiations with Supplier 1
It's always worth making sure your supplier has sufficiently strong cash flow to deliver what you
want, when you need it. A credit check will help reassure you that they won't go out of business when
you need them most.

 Negotiations with Supplier 2

You want your suppliers to acknowledge how important your business is to them, so they make
every effort to provide the best service possible. And you're more likely to create this response by
showing your supplier how important they are to your business.

Q6: Decide what roles team members will play during the negotiations.
 Negotiations with Supplier 1
Spend time on research
Choosing the right suppliers is essential for your business. Don't try to save time by buying from the
first supplier you find that may be suitable.

 Negotiations with Supplier 2

Credit check potential suppliers
It's always worth making sure your supplier has sufficiently strong cash flow to deliver what
you want, when you need it. A credit check will also help reassure you that they won't go out
of business when you need them most.
Q7: List the internal and external issues that could affect this business negotiation as well as any
challenges you foresee occurring during the negotiation process. Describe how you would deal
with each one.

Supplier 1 Supplier 2

Capabilities: Goal: To identify internal Resources: Profitability, sales,

strategic strengths, weaknesses, product quality brand associations,
problems, constraints and existing overall brand, relative cost of
uncertainties this new product, employee capability,
Internal issues
product portfolio analysis

Market analysis: Overall size, projected
growth, profitability, entry barriers, cost
External structure, distribution system, trends, key
issues success factors
Environmental analysis:
Technological, governmental,
economic, cultural, demographic,
scenarios, information-need areas
Goal: To identify external
opportunities, threats, trends, and
strategic uncertainties

Planning ahead helps you anticipate your Good stock control and effective supplier
financing needs and arrange suitable management tend to become increasingly
funding. For many growing businesses, a important as businesses grow.
key decision is whether to bring in
outside investors to provide the equity
needed to underpin further expansion.
Challenges

Q8: Who will you communicate the results of negotiations to?

• Service or maintenance requirements (external contractors for maintenance of large equipment
or computer systems)

Q9: In Role Play E you are required to role-play negotiations with the two suppliers you have
researched.
 Write a meeting agenda for the negotiations in the space provided.
 Agenda for Supplier 1 negotiations
It might be a better idea to use a carefully selected group of suppliers as insurance
against any problems occurring.
  Agenda for Supplier 2 negotiations
Look for experienced suppliers who have been in business a long time. Stability is
important, especially if you are entering into a long-term contract with a supplier or they
are the only supplier of a particular item you need for your business.

Role Play E
You are required to do the following.

 Role-plays are to be conducted in an actual or simulated workplace environment.

 All participants must be briefed on their roles and the desired outcomes of the role-play prior to
commencing the activity.
 Role-plays can be recorded for further analysis and discussion with the consent of all participants.
 Case Study D must be completed prior to undertaking this assessment task.
 Complete the two role-plays.

Role-play 1

 The following resources are required to complete the role-play.

 Learner’s agenda from Case Study D, Question 9 – It might be a better idea to use a carefully
selected group of suppliers as insurance against any problems occurring.

Learner instructions

 During the role-play, you are required to demonstrate the following skills and knowledge.
 Establish relationships and open negotiations within organisational protocols using effective
communication skills and techniques.

Negotiation is also like chess in that each move should be designed to set up not only your next
move, but several moves down the line. Generally, your moves should get progressively smaller, and you
can expect the same from the other party.

 Build trust and respect in business relationships through use of effective communication skills and
techniques.

 Be prepared! Take business cards with you to distribute to people you meet.
 Quality, not quantity! Rather than trying to talk to everyone in an evening, spend some
quality time with a few selected people.
 Be assertive! Introduce yourself and colleagues to others.

 Conduct negotiations in a professional manner to maximise benefits of both parties.

Professionalism in business establishes respect for authority figures, clients and co-workers.
Maintaining a professional demeanor limits gossip and inappropriate personal conversations that
could be considered disrespectful. Keeping a professional attitude with clients who behave
inappropriately demonstrates the level of respect an employee has for the customer and the
business partnership.
  Incorporate feedback and input from colleagues into negotiations where appropriate.

As you expand your feedback strategy, consider adding quantifiable metrics and mini-surveys to
the production process. Quantifying your feedback allows you to set goals for improvement, track
problems with client satisfaction early on and prevent clients from falling through the cracks.

 Demonstrate the communication skills necessary to conduct and close negotiations that may be of
significant commercial value.

The other party starts asking questions relating to minor details which are not factors in the
negotiation (forms of payment, delivery dates, etc.).

 Incorporate knowledge of principles of negotiation.

The agreement you’re entering into is in line with your business’s principles, values, image and
reputation.

 Demonstrate understanding of stages in the negotiation process.

• Provide an opportunity for the negotiators to discuss alternative strategies or concessions

• Gives everyone a chance to consult with their superiors or business partners

 Conduct the role-play.

Role-play 2

 The following resources are required to complete the role-play.

 Learner’s agenda from Assessment D, Question 9 – Look for experienced suppliers who have been
in business a long time. Stability is important, especially if you are entering into a long-term
contract with a supplier or they are the only supplier of a particular item you need for your
business.
 Role play instructions from your assessor.

Learner instructions

 During the role-play, you are required to demonstrate the following skills and knowledge.
 Establish relationships and open negotiations within organisational protocols using effective
communication skills and techniques.

Most negotiators have a price target or goal in mind before they start. It should be based on realistic
expectations considering all the constraints that will undoubtedly surface. These may include budget
limits, direction from management, pressure to make sales goals, and a myriad of other external
forces.

 Build trust and respect in business relationships through use of effective communication skills and
techniques.

 Update your database! Make sure the contact details of people you just met are safely kept.
 Keep in touch! Continue to build and nurture relationships by maintaining regular contact.

 Conduct negotiations in a professional manner to maximise benefits of both parties.

 Maintain Accountability
Companies that interact directly with clients are obligated to provide the best services possible and
present their company in the best possible light.

 Professionalism counts when providing written information to clients.

Establish Boundaries

Professionalism in the work place establishes boundaries between what is considered appropriate
office behavior and what is not. While most managers support an enjoyable and vibrant work
environment, limits must be put in place to avoid conflicts and misunderstandings.

 Incorporate feedback and input from colleagues into negotiations where appropriate.

Organizations that are struggling to make a switch in their management protocols or that want to
improve their delivery processes can utilize client feedback, as well.

 Demonstrate the communication skills necessary to conduct and close negotiations that may be of
significant commercial value.

As your business grows, you may need to bring in outsiders to help. You'll want to delegate
responsibility for particular areas to different specialists, or appoint a non-executive director or two
to strengthen your board. As you start tackling a new opportunity, someone who has experience of
that activity can be vital.

 Incorporate knowledge of principles of negotiation.

Documentation, policies and procedures also become increasingly important. The informality that
might work with one or two employees and a handful of customers simply isn't practical in a
growing business. You need proper contracts, clear terms and conditions, effective employment
procedures and so on.

 Demonstrate understanding of stages in the negotiation process.

Finally, when closing negotiations, you might explore the possibility of a

contingent contract—in essence, a bet on which party’s vision of the future will
come true.

 Conduct the role-play.

Assessor checklist
To be completed by the assessor.

Case Study F
Learner assessment guide and evidence

This assessment requires you to develop contracts based on the negotiations you role-played in Role
Play E.
You are required to do the following.

 Refer to the research you conducted in Case Study D and the negotiations you conducted in
Assessment E.
 Document and submit a written contract for two suppliers/contractors.
 Respond to all questions.

Task 1

 Refer to the research you conducted in Case Study D and the negotiations you conducted in Role
Play E.
 Prepare two written contracts – one for each supplier/contractor.
 Use sample templates provided or create your own, for Contract 1 and Contract 2.
 Ensure the contract includes the key elements, components and inclusions to ensure it is legally
binding.
 Ensure you follow legal requirements that impact agreements in your sector, including consumer
protection where applicable.
 Decide whether you need any specialist advice to help you develop the contract. If you do, seek
advice as required.
 Submit the two completed contracts to your assessor.

Task 2

 Respond to all questions.

Q1: According to organisational procedures provided in the case study D, who would you get to
approve the contracts?
Service or maintenance requirements (external contractors for maintenance of large equipment or
computer systems)

Q2: What information would you seek, review and act upon to maintain a sound business relationship
with both suppliers.
Regularly revisiting and updating your business plan can help remind you of the changing market
conditions and the need to respond to them. See the page in this guide on planning ahead.
An up-to-date plan helps you identify what action you need to take to change your business and the way
it operates, for example:
 Changing to suppliers who can grow with you and meet your new priorities. As your business
grows, consistent quality and reliability may be more important than simply getting the cheapest
offer.
 Renegotiating contracts to take account of increased volume.
 Training and developing employees. Your own role will also evolve as the business grows. See
the page in this guide on skills and attitudes.
 Making sure that you keep up to date with new technologies.
Q3: Describe how you would comply with agreed terms in the contracts.
For many successful entrepreneurs, learning to listen to - and take - advice is one of the hardest
challenges they face. But it may also be essential if you are going to make the most of your
opportunities. Some entrepreneurs, recognising their own limitations, even appoint someone else
to act as managing director or chairman.

Q4: What KPIs would you take into account to check whether both parties are keeping up their ends of
the bargain?
To be useful, KPIs need to be monitored and reported on; if they change in real-time, they should
be monitored in real-time. Dashboards are the perfect tool for your KPI reports as they can be used
to visually depict the performance of an enterprise, a specific department, or a key business
operation.

Q5: In what circumstances might you need to adjust an agreement?

If you plan to use estate gifts as a tax strategy in your estate planning, transferring of assets, or the
use of family limited partnership, is a common tactic. Having an objective valuation report that
adheres to IRS regulations helps your estate gifts withstand scrutiny.

Q6: If you had to adjust an agreement, who would you need to consult and share information with?
All businesses produce and rely on large volumes of information - financial records, interactions
with customers and other business contacts, employee details, regulatory requirements and so on.
It's too much to keep track of - let alone use effectively - without the right systems.

Q7: Describe how you plan to maintain regular contact with the suppliers.
Choosing the right supplier involves much more than scanning a series of price lists. Your choice will
depend on a wide range of factors such as value for money, quality, reliability and service.
This guide illustrates a step-by-step approach you can follow that should help you make the right choices.
It will help you decide what you need in a supplier, identify potential suppliers and choose your supplier.
 Thinking strategically when selecting suppliers
 What you should look for in a supplier
 Identifying potential suppliers
 Drawing up a shortlist of suppliers
 Choosing a supplier
 Getting the right supplier for your business