MBA506 Negotiation Report: Analysis of Celebrity Endorsement Contract

This report details a negotiation scenario involving DeGrandis Sporting Goods and a celebrity's agent, Adam Murphy, for a tennis racket endorsement contract. The assignment focuses on key negotiation concepts such as the Best Alternative To a Negotiated Agreement (BATNA) and the Zone of Possible Agreement (ZOPA). The report outlines the BATNAs for both parties, considering alternative endorsement opportunities and contract fees. The negotiation process, including email exchanges, is documented, highlighting the initial proposals, counteroffers, and the final agreement reached. The report analyzes the financial implications of different contract terms, such as the duration of the endorsement and its impact on sales revenue. The final agreement is a 3-month endorsement period for a contract fee of $580,000. The report also includes a formal letter summarizing the negotiation outcome and references to relevant negotiation literature.

Running head: NEGOTIATION
NEGOTIATION
Name of the Student:
Name of the University:
Author Note:

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STAGE 1:
1. Best Alternative To Negotiable Agreement, hereinafter referred to as the BATNA is a
term that has been introduced by William Ury and Roger Fisher in their bestseller named
‘Getting to Yes: Negotiating Without Giving In’ in 1981 (Greenberg 2019). BATNAs are
important in a negotiation process as no wise decision can be reached unless a clear
knowledge of the alternatives that are available is known (Sebenius 2017). The
negotiating power is increased when there is an increase in the BATNA (Marsden and
Siedel 2017). When other options are not available, then the other parties can increase
their demands and the concerned party will be left with no other options other than
accepting it (Brett and Thompson 2016). On the other hand, when good options are
available one can bargain and negotiate with the other parties. Hence it is important to
improve the BATNA whenever it is available (Crump 2015). In the present scenario, the
BATNA that can be availed by my client are as follows:
 The present contract fee pertaining to advertisement campaign for Serena Williams as
an alternative sports star is 705880 dollars.
 This fee can be reduced by a margin of 15 % discount due to which the price will be
equal to 599,998 dollars.
 Hence the reservation value will be around 599,998 dollars and this will be the
minimum price below which the contract fee cannot be negotiated.
2. Best Alternative To Negotiable Agreement or the BATNA is an important part in a
negotiation process as no wise decision can be reached unless a clear knowledge of the
alternatives are known (Mackenzie, Vincent and Zeleznikow 2015). When options are
not available, then the other parties can increase their demands and the concerned party

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will have to accept it (Lechner and Wüthrich 2016). Moreover, when good options are
available one can bargain and negotiate with the other parties (Schaerer et al. 2019). In
the present situation the Best Alternative To Negotiable Agreement, hereinafter referred
to as the BATNA that is available to the other party are as follows:
 The other party can sign a contract with Maria Sharapova for the purpose of reserving the
tennis racket.
 The other party can make investment in other company as they are not in any hurry or
rush in this regard.
The reservation value pertaining to the other party is 811,762 dollars. This is
because according to the other party represented by Adam Murphy, their endorsement
with Maria Sharapova for a month is about 660,000$ as the contract fee. Moreover
Adam, the other party is ready to get 620000 dollars for a period of 2 months of
endorsement.
3. The Zone of Possible Agreement is denoted by ZOPA (Allen 2015). ZOPA refers to a
range in within which bargaining can be done by two or more parties so that a common
point is reached (Jung and Krebs 2019). Usually ZOPA will exist only when there lies
some overlapping of the expectations of the parties negotiating in reference to an
agreement (Roese and Meyer 2017). It usually denotes the blue sky range where deals
can be made in such a way so that all the parties in the negotiation will find it acceptable
(Lewis et al. 2018). As per the current scenario, the ZOPA will be approximately about
600098 dollars which is near to the value reservation of my client (Patel and Rubin
2016). Hence the best strategy that can be applied here is that we are unable to negotiate
below 599,998 dollars as we are also having many other expenses that are required to be

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taken into account also. We will be negotiating on the term of the advertising contract
(Houpt, Gilkey and Ehringhaus 2015). If the contract is entered for a period of less than 3
months, there will be loss in the sales revenue of the tennis rackets. In case the campaign
is for 1 month, then a loss of about 500,000 dollars will be suffered by the company
whereas a loss of 250,000 dollars if the endorsement is done for 250,000 dollars. In case
it has been entered for 3 months, there will be no loss or profit for the company. Only
when the contract is entered for 4 months, profit of 250,000 dollars can be earned in
addition. Moreover if the contract is held for 5 months, 500,000 $ can be incurred by the
company. Thus, we can negotiate up to 540000 dollars as the fee of contract and such
endorsement will be made for a period of 4 months (Eichstädt, Hotait and Dahlen 2016).
Stage 3:
To
Adam,
Elite Sports Star.
Dear Adam,
SUB: NEGOTIATION FOR CONTRACT FOR ENDORSEMENT
I want to inform you that our company DeGrandis Sporting Goods is ready to work with
you by joining hands so that our tennis racket can be endorsed.
As estimated by you that our client will be generating about 2 million dollars in the sale
of tennis racket by endorsing Maria Sharapova and for this you have proposed endorsement for a
period of one month against the fee of contract of 660000 dollars. However, this is will be

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exceeding out limit so we can negotiate up to 540000 dollars as the fee of contract provided such
endorsement will be made for a period of 4 months. I will be negotiating on the term of the
advertising contract. If the contract is entered for a period of less than 3 months, there will be
loss in the sales revenue of the tennis rackets. Only when the contract is entered for 4 months,
profit of 250,000 dollars can be earned in addition. Thus it will be profitable, if the contract is
entered for a period of 3 months.
However, as you said that our client will be generating 4 times that has been proposed by
us, we would like to inform you that other expenses are also there that will definitely curtail the
income of the company. Hence as stated by you, endorsing for 2 months against 620000 dollars
will not be fruitful for us. So we are ready to pay for 580,000 dollars provided the contract is
entered for a period of 3 months.
Moreover we would like to discuss with you the other terms of the negotiation. The
tenure of the negotiation will be for 3 months as said before. However the tenure can be extended
if the deal turns out to be profitable for us. If the sale amount is found to greater than that
expected, then we can give you a discount of 1 million dollar provided your company does not
enter endorsement with any other company for a period of 1 year. We expect that the terms of
the contract are well explained and without any ambiguity. However we are waiting for your
approval of acceptance. Until we get any approval letter from your side showing your
acceptance, the contract will not come into effect. For any other information, feel free to contact
us through this email id. Awaiting for your positive reply.
Regards
Esther.

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(Agent, DeGrandis Sporting Goods)

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Allen, D., 2015. The sharing economy. Institute of Public Affairs Review: A Quarterly Review of
Politics and Public Affairs, The, 67(3), p.24.
Brett, J. and Thompson, L., 2016. Negotiation. Organizational Behavior and Human Decision
Processes, 136, pp.68-79.
Crump, L., 2015. Analyzing complex negotiations. Negotiation Journal, 31(2), pp.131-153.
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and Consequences in Negotiations. In International Conference on Group Decision and
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Mackenzie, G., Vincent, A. and Zeleznikow, J., 2015. Negotiating about charges and pleas:
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