Negotiations for Trade

1. Negotiations for Trade Buying and selling at the best price

2. Introduction • Price considerations are the key to a company’s survival. • Price considerations will affect relationships with buyers. • Price considerations may establish a product image.

3. Pricing strategies • To establish relationships with other companies • To penetrate markets • To be used as a tool in competition

4. Price considerations • Seller will want top prices • Buyer will want bottom prices • Negotiations will be about setting the price between these limits Seller’s target Seller’s costs of production Market prices Buyer’starget

5. Other pricing considerations Pricing may also be used as a means to gain other objectives such as establishing long term intercompany relations, market penetration, or a decision to compete on a basis other than pricing.

6. Sequence and Preparation • Once there is agreement in principle to do business together, negotiations will follow. • Know the costs of production • Know the market • Know the operations of the other party at the negotiating table

7. What should be negotiated • Delivery terms • Payment options • Warranties and inspections • Risk factors • Ancillary elements which may be used in lieu of monetary payments

8. Conclusion • Prices will be set at the lower end by the seller’s costs of production. • Prices will be set at the upper end by market considerations. • Pricing negotiations must be based on knowledge of both the costs of production and the market prices.