Negotiation Homework- Capital Mortgage Insurance

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Capital Mortgage Insurance Corporation (CMI) is a wholly owned subsidiary of Northwest Equipment Corporation (NEC). NEC expects Frank Randall, company president; to build CMI into a larger more diversified financial service company. To do this Randall wants to acquire Corporate Transfer Services (CTS) a small relocation services company, as part of a plan for diversification. Informal discussions took place with the principal stockholders of CTS four months ago. Currently, formal negotiation strategy plans are in the works and a purchase offer is in the development stage. If successful, the acquisition of CTS will be a first for CMI and will help Randall realize his goals for CMI diversification. I believe this is a distributive bargaining situation and for an agreement to occur, both parties must believe that the settlement is a win-win/ for the best interests of both parties. CMI must determine its asking price, the initial price set by the seller. It is recommended that both parties in a negotiation should establish their starting, target, and resistance points before beginning a negotiation. The spreads between the resistance points or the bargaining range, settlement range, or zone of potential agreement, are very important. This is where actual bargaining takes place. When the buyer's resistance point is above the seller's, he or she is minimally willing to pay more than he or she she is minimally willing to sell for; there is a positive bargaining range. The target point is a CMI’s optimal goal, or the point at which he would like to conclude negotiations. The optimal goal is also referred to as resistance. The resistance point is CMI’s bottom line, or the point beyond which a person will not go. This should not be known to CTS and should be kept secret. The resistance point is a high price for the buyer and a low price for the seller. When

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