Negotiation Case Analysis for SMEs

negotiation

Negotiation Case Analysis for SMEs

Negotiation is a new thing to learn for me and it’s important for my business or even for my life. On every level of business, we face different challenges in terms of business relationships with related parties. The Small and Medium Enterprise (SMEs) deal with any background and character the small vendor, medium-level marketing agency, etc. Therefore, we need to identify our purpose on the negotiation and the impact of the result for our business in the short or long-term. Here is my analysis of individual negotiation based on my small business activity.

Read : Decision-Making Case for SMEs

Brief Background

Dontfitjustbe is a new fashion brand that focuses on daily wear while spreading mental health awareness. Two months ago, dontfitjustbe launched the first collection as the minimum viable product to test the market. The brand was founded by me, Septi Saraswati. My capital budget is limited to only to IDR 5 million for the production process (exclude material cost). I start looking for a convection vendor to sewing the pattern design that I draw by myself. My fashion product needs a screen printing process because to put the words about mental health on the t-shirt.

I had met several vendors and got the offer for a service fee. For the first vendor, convection vendor, they offer sewing service for IDR 30.000/pcs, include with ironing services. It’s beyond my estimation budget, so I try to ask if I just take a sewing service only, then the vendor offers me IDR 25.000/pcs without ironing service. The second vendor is a screen printing vendor, they offer me IDR 45.000/pcs and delivery services IDR 200.000. After doing the calculation with 80 pcs product estimation, I found that the cost of one t-shirt is high. Here are the vendor offering summary :

Things to be negotiated and Objectives

The total offering cost over my budget estimation (IDR 5 Milion), I try to approach all vendors to get lower-cost offering. The screen printing vendor can not give me another offer because my production quantity is below 100 pieces. Next, I start to discuss with the convection vendor and tell them the fee that he’s offering is above my budget. Tell them that maybe I would choose the sewing service only, did not take the ironing services. 

The negotiation approach and process

Before I decided to choose the vendor for the production process, I researched a lot of vendors. Compare the picture of the final product of their services, their response when we start to contact them, and the review from the other customers on the internet. In the end, I choose to keep the two vendors that I state above, the sewing vendor and the screen printing vendor because their rating on the internet was good. For my first impression with these two vendors, I learned two different characters.

The sewing vendor is more welcome about the reason for me to use their service. When I said that I just start the business, he was so excited and tell that he was helping a lot of customers to produce the best product at an affordable cost. This sewing vendor place is near my home, I can visit his workshop often. The screen vendor has a different character, the friendly reply to my WhatsApp chat, they send me a price list. When I ask about the discount, they said that the price change if I make production above 100 pieces. Their character is more severe, and there is no more follow up with my approach.

Choose the right one

I learned that the sewing vendor a more helpful one and continue to approach the sewing vendor then start the negotiation. Imply to the sewing vendor that the sewing cost is not affordable for me. The sewing vendor then offers me to help in the screen printing process, he will find the vendor relation to did it. He will responsible for the production process to start from the discussion and make a sample product, sewing process, screen printing, and ironing. In the end, I just received the final product and ready to sell to the customer.

 I start to ask about the cost of screen printing if I choose to hand over all this production process to him. He offers me the screen printing cost IDR 45.000/ pieces. The total cost still over my production budget, I start to negotiate with the sewing vendor. I will take the ironing service if they can lower their screen printing offering cost. I also tell the vendor that maybe I would take another vendor to do the screen printing and only take the sewing service only from them.

The sewing vendor asks me to send the design that will be print on the t-shirt, and promise to give future information about the screen printing cost on several days. Finally, the sewing vendor called me to came to his workshop and gives me a new price, IDR 57.000/pieces for all services (sewing, ironing, and screen printing). Here is the summary for two option after I make negotiation with two vendors:

Negotiation

Negotiation result

I choose option 2 (one vendor to all production processes) because the total cost is below my budget estimation after the negotiation. The consideration is the sewing vendor more open to me and wants to make this cooperation for the long term. Therefore the sewing vendor business will have good profitability as long as my business gets the better profit and continue to grow. Even though the production process will be taking longer than if I choose two different vendors for the production process. It is still the best option because I can control the production process and the vendor itself who always make a discussion for every production process.

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MBA-Entrepreneurship Student Coffee addict, Analyst, try to be human Reach me at saraswatisepti@gmail.com Lets share our stories

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