1. ELECTRONIC NEGOTIATIONS “A STRATEGIC PERSPECTIVE” W. FRANK DELL II, CMC DELLMART & COMPANY November, 2002

2. DELLMART & COMPANY 2 Your Salvation Electronic Negotiations Collaborative Planning Forecasting & Replenishment Broker Or Direct

3. DELLMART & COMPANY 3 Auction Theory Why Private Label?  Is a commodity  No perceived difference –Quality –Performance –Service –Support  Retailer price mentality Before After

4. DELLMART & COMPANY 4 Internet Power  Knowledge Is Power  Electronic Commerce is the future –EDI’s expensive –Internet inexpensive  Eliminates middlemen –Exchanges? –Data Synchronization? –Item Registry?  Reduce transaction cost –Purchase Order $125 –Error correction $150 to $300 –Time is money, but change also costs money

5. DELLMART & COMPANY 5 Exchange Factors The GoodThe BadThe Ugly Market visibilityPhony savingsLow bid does not win Level playing field Post bid negotiations No quantity guarantee EfficientUnqualified bidders One time savingsNo quality credit No product difference

6. DELLMART & COMPANY 6 Costing Sales- Broker Com. / Pay Terms - Cost of Goods- Label allowance = Gross Margin - Management - Sales- Order Processing - Marketing- Accruals - Distribution- Freight - Accounting- Acct. Rec. & Deductions = Operating Profit

7. DELLMART & COMPANY 7 Strategy Questions  Are you truly a commodity?  Are your points of difference real? –Product quality –Product performance –Service & support

8. DELLMART & COMPANY 8 Strategy Alternatives  Ignore  Help your competition into bankruptcy  Compete to WIN Become the low cost supplier Cut the bull  Develop & Market unique products

9. DELLMART & COMPANY 9 Operations Plan 1.Be honest with yourself 2.Define your policy 3.Know your costs 4.Allocate staff & support 5.Maximize competitive intelligence 6.Define & execute bid tactics

10. DELLMART & COMPANY 10 Broker’s Role  Who are they working for?  Do they represent competing manufacturers?  Are they a middleman?

11. DELLMART & COMPANY 11 Closing Thoughts  Electronic Negotiations will not control the world  Limit the competition  Create a Selling Cooperative  Leverage “Balance of Power”