McIlroy Endorsement Contract Negotiation Report - MBA506 Analysis

This report presents a detailed analysis of a negotiation scenario involving Rory McIlroy's endorsement contract with DeGrandis Sporting Goods. It identifies key negotiation concepts such as BATNA (Best Alternative to a Negotiated Agreement), reservation value, and ZOPA (Zone of Possible Agreement) from both parties' perspectives. The report outlines the negotiation strategies employed, including making the first offer and leveraging potential revenue increases, and describes the final agreed-upon terms of the contract, which includes a three-month period, a base fee, and additional incentives tied to production revenue. The agent's email to Rory McIlroy summarizes the negotiation process and highlights the benefits achieved compared to alternative offers. The document also refers to other negotiation concepts and models from various authors to support the negotiation strategies.

Negotiation
Name of the Student
Name of the University
Author Note

NEGOTIATION
Stage 1:
Answer 1:
Batna, the best alternative to a negotiated agreement has an increased effect in the
negotiation process and the power that one party possesses (Pinkley et all 2017) BATNA as a
concept was introduced by Fisher, Ury and Patton in the early 1990s implies the other available
options to negotiating the current agreement, these may or may not be ones lase resort. The
presence of BATNA is what determines the kind of No that one can use in a negotiation
(Sebenius 2017).
In the present case Rory McIllroy’s Batna has a deal with Fitness Plus for a contract fee
of $800,000 after the projected 15% hike. If the contract with DeGrandis fails to be negotiated in
favorable terms Rory can always resort to the contract with Fitness Plus. Even if the projected
15% hike in contract fee is not achieved there is still an offer for $695,650, so in no instance can
a contract be entered with DeGrandis Sporting Goods for lower than this value.
Reservation value is the lowest point of transaction for a party in a negotiation (Jeong
2016), Rory’s reservation value is $800,000 as the contract obtained by Fitness plus is of
$695,650 but they are certain of obtaining a contract over 15% of this value. A further Facebook
post confirms that they expect 15% hike from their offer price. Any offer made lesser than this
sum of $800,000 would be disadvantageous for him. This therefore sets the reservation point for
Rory in the negotiation.
Answer 2:
Based on the interactions and email conversations with Phan Nguyen Ho, the agent of
DeGrandis Sporting Good it can be deciphered that they benefit from a contract signed for a
period longer than 3 months and for a value that is around $700,000 or lesser. This demonstrates
the aspirational level of the company (Barry and Freidman 2006)
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NEGOTIATION
BATNA being the other alternatives available to the Sporting Company can be contract with
another sports star in this case Tiger Woods for an endorsement.
Reservation value for the sellers as per Prado and Martinelli is the point that determines when
the offeror is willing to walk-away. The value quoted by DeGrandis on their website is
$1,058,820. A Facebook post by them additionally states that they can get Tiger Woods with a
15% reduction on his contract fee. This value cannot be conclusively determined.
Answer 3:
ZOPA is the range within which a negotiate can take place. It lies between the
reservation point of both the parties. The ideal ZOPA is a mid-point between these values as it
ensures equal advantage for both. The further away one is from their reservation point the more
valuable the deal is. Any point that does not fall in the ZOPA will be rejected outright (Patel and
Rubin 2016)
In this instance the ZOPA is between $800,000 to $1,058,820 when Elite adapts a goal-
based approach as propounded by Kirk, Oettingen and Gollwitzer. However, it is not easy to
know for sure the reservation point of the other party.
The zone of possible agreement does not exist in negotiations about the period of the
contract. It is determined that at 3 months both the parties are neutral however more than 3
months is advantageous only for Elite and Rory the reverse is true for DeGrandis. There is
therefore no scope for a negotiation on this point unless either party is induced by some other
more lucrative offer.
Strategy:
To have a successful negotiation process negotiation strategy triumphs negotiation skill
(Kennedy 2017). This must be developed keeping in mind the complexity of the scenario and
the related variables and outcomes and their impact. The impact of time and its impact on
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NEGOTIATION
negotiation strategy and process cannot be undermined and the same should be used to get
maximum benefits (Carnavale 2019)
To get a greater value from the negotiation is by initiating and making the first offer. As
the website reveals that an endorsement with Rory McIlroy is desirable a proactive approach to
make the first offer will anchor the offer and set the tone for the negotiation (Loschelder et all
2016.).
To push for a two-month endorsement contract by giving the other side certain
advantages that they might approve. Support the same with sharing of projected revenue,
include the margin of extra production revenue as a variable for incremental value in the fees.
What this implies is production revenue being a variable factor can be broken up into ranges like
$1.5 -2 million $2-2.5 million and $2.5-3 million and each range can have either a percentage or
a fixed fee to be paid by DeGrandis when and if such production revenue increment is achieved.
To get some additional fringe benefits like free merchandise and accessory from
DeGrandis Sporting Good.
As the aim of this contract is to create value and reach a consensus between the parties
ideally a collaborative approach (Coburn 2015) would benefit all, to achieve this it is essential to
firstly build trust with the other side (Brett and Thompson 2016), to ensure that revealing your
reservation point does not affect you detrimentally. Once it can be conclusively established that
the aim of both the parties is mutual benefit winning for both the negotiation would proceed
smoothly.
If, however the other side adopts an aggressive approach, it must be remembered that the
reservation point of the other side is as high as $1,058,820 from an understanding of their
website.
Stage 3:
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NEGOTIATION
[Your Name]
Email: [Your email address]
[Date]
By email: [Client email address]
Rory McIlroy
Chief Executive Officer
[Client Organisation Name]
Dear Rory,
RE: NEGOTIATION FOR RORY MCILROY ENDORSEMENT CONTRACT
Thank you for your instructions.
I wish to confirm that the terms of the contract are as follows –
• The contract is for a period of three months
• The contract fee is $850,000
• There is an additional $30,000 when the production revenue
• Increases by $1.8 million whoever a dip below this level would attract a deduction of this
amount.
• On finalizing the contract, 20% of the contract fee was deposited on 16.02.2019 and the
rest would be received after the completion of one month on 16.03.2019.
The negotiation with DeGrandis Sporting Goods took place from 13.02.2019-16.02.2019
when an agreement was reached that is beneficial for all the parties involved. DeGrandis is a
leading supplier of sports and fitness equipment across the globe covering almost varied forms
of sports and all their necessary equipment. They are endorsed by professional athletes and
leading sports figures like Serena Williams, David Beckham and Rafael Nadal. Each have a
contract fee lower than the amount that our agency has contracted for you.
We pushed hard to ensure that the best deal was achieved, keeping in mind all your interest
and preferences. When the negotiations started a meagre amount of $700,000 was offered for a
period of five months. We ensured that the period of contract under no circumstances is over
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NEGOTIATION
three months, keeping in mind the importance of your image and future prospects. After
prolonged negotiations over email and personal conferences the final contract was agreed upon.
The other contract that was available to us was by Fitness Plus who had offered
$695,650 which we were certain would go up to at least $800,000 after effective negotiation.
The contract with DeGrandis has been settled on better terms hence it offers a higher
contract fee with the provision for extra fees in the event that production revenue increase by
more than $1.8 million. We are honored to have cracked this deal within such a limited time and
hope that you are happy with our work.
Yours sincerely,
[Your name]
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Barry, B. and Freidman, R. (2006). Bargainer Characteristics in Distributive and
Integrative Negotiation
Brett, J. and Thompson, L., 2016. Negotiation. Organizational Behavior and Human
Decision Processes, 136, pp.68-79..
Carnevale, P.J., 2019. Strategic Time in Negotiation. Current opinion in psychology.
Coburn, C., 2015. Negotiation conflict styles.
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Fisher, R., Ury, W., and Patton, B. (1991). Getting to yes: Negotiating agreement without
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Jeong, H.W., 2016. International negotiation: process and strategies. Cambridge University
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Sebenius, J.K., 2017. BATNA s in Negotiation: Common Errors and Three Kinds of “No”.
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Yaoyuenyong, C.H.A.R.N.K.U.R.T., Hadikusumo, B.H.W., Ogunlana, S.O. and Siengthai,
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