Multiparity Negotiation

Submitted by: Neeraj Jain

Subject:NS                                                                                                                                        Contact 5:                                                                                                  Assignment No.: 2

Read page 1-4, Sarah Talley & Frey Farms Produce: Negotiating with Wal-Mart and answer the following questions regarding ‘Negotiating 4th of July Watermelon prices:

Frey Farms Overview:

• Family-owned suppliers of fresh fruits & vegetables.
• Frey Farms supplied to local & regional customers in 1980 through independent grocers.
• “Homegrown freshness” emphasis; direct delivery ensures freshness.
• In 1997, Sarah approached Wal-Mart with aim of converting Division One stores into “supercenters”.

Wal-Mart Overview:

• Wal-Mart Stores – one stop convineant destination for consumer needs.
• Wal-Mart strictly follows “EDLP”.
• Wal-Mart is a market leader in the multi-chain retail business.
• Largest retailer, the biggest private employer & second largest public corporation in the world.
• Walton Family owns 50% of Wal-Mart.
• Wal-Mart has 11000 stores in 27 countries under 55 different names.

1. How do you describe their current negotiation situation?

• The negotiations have hit the deadlock.
• Wal-Mart needs a price lower than that can be offered by Frey Farms & therefore this situation.
• Wal-Mart needs “EDLP” which due to the current unfavorable situation is not possible for Frey Farms.
• Frey Farms is a small company with limited resources & narrow product range & therefore relative power lies with Wal-Mart.
• Frey Farms has two options: 1. Agree to Wal-Mart’s low price & manage to equate supply with demand. 2. Sell produce to other regional stores, alternative super centers.

1. How did they land there?

• Due to bad weather conditions & pest diseases, Frey Farms was unable to produce enough watermelons to cater Wal-Mart’s needs.
• 4th of July priority; demand>supply.
• Unable to meet Wal-Mart’s low price.
• Procuring from western markets to supply to regional markets would result in increased transportation needs.

3. What advice would you offer Sarah Talley?