BlueLight Negotiation

LED Division Manager, Griggs Technology

You are the LED Division Manager at Griggs Technology, a semiconductor manufacturer. Your
division produces LED lights—lightweight, durable, energy-efficient lights. Griggs recently
developed a new kind of LED light using an advanced sapphire substrate that is 40% brighter
than any prior LED light on the market. You are calling it a “BlueLight LED.”

The BlueLight LED is a powerful and bright light. The standard version is 1000 lumens, made
up of five bulbs ($4 each, 200 lumens per bulb) mounted in an aluminum housing ($4). Add in
assembly costs ($6), and the total production cost of this version is $30. The BlueLight LED is a
premium product, and you are aiming to sell each standard BlueLight LED for $40 to make a
good profit on it.

You are highly motivated to sell BlueLight LEDs, while they are the hot new technology. You
have been selling BlueLight LEDs mostly in batches of 1,000 to 10,000. Your success in getting
buyers to pay $40 each has been mixed. You met with representatives of one firm yesterday who
offered to pay $32, and you are still deciding on how to respond. Part of your hesitation is that
you believe strongly in the product and are convinced that once buyers start using it they will
appreciate it as much as you do.

You are also motivated to sell the BlueLight LEDs at a high profit because you want to use those
profits to reward your research and development team. Your vision is that one day, one of your
researchers will walk into your office and say something like “twenty of us just came back from
mountain biking with a great idea for our next big product” and you will have been the one who
bought them the bikes and gave them the flexible schedule that allowed them to have that blue
sky breakthrough. You don't know a lot about bikes, but members of the R&D group mentioned
several options and consistently mention the need to have good disc brakes. Your initial research
based on their input indicates that $66,000 would be enough to buy 20 high-quality bikes. You
have saved $55,000 already. You are very eager to secure the remaining amount and get those
bicycles for your team.

Accordingly, you were very happy when the Chief Product Manager from Healey Inc., contacted
you about buying BlueLight LEDs. The Healey manager told you: “our customers want cutting
edge technology, and we think BlueLight LEDs could really be something special.” You could
not have agreed more! You arranged a time to talk.

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