Golf Fore Value: Robert Johnston

This case and its related case (UVA-QA-0731) examine both sides of a two-party negotiation, in which students are asked to find the net value of the deal. These cases fit well in negotiations courses and are suitable for both undergraduate and MBA students. This case is from the perspective of Robert Johnston, owner of Golf Fore Value. Johnston eagerly awaited David Deluna's return to the golf shop with the clubs he was willing to trade for a new putter. Johnston already had a buyer for one of clubs that Deluna indicated could be included in the trade. Johnston had known Deluna for a number of years and was impressed by the young golfer's skills and the respect with which he treated his clubs. As a result, Johnston was confident that he would be able to acquire used clubs with considerable resale value. In conducting the trade, Johnston wanted to maximize the profit potential of the used clubs he took in trade, being sure that it exceeded his profit on the Cameron putter. Excerpt UVA-QA-0732 Rev. Nov. 17, 2009 GOLF FORE VALUE: ROBERT JOHNSTON The weather was getting warmer, and golfers everywhere were eager to get back out on the course. After a long winter, Robert Johnston, the owner and manager of Golf Fore Value, was looking forward to the increased customer traffic and sales volumes that might be just around the corner. Johnston needed a good start to the summer to offset the worse-than-usual financial effects of the winter. Golf Fore Value bought, sold, and traded golf merchandise and equipment. Club trading was, for a number of reasons, a key dimension of his business. It was a valuable source of supply because his customers were reliable and generally traded quality equipment. It provided a means to maintain personal relationships with his existing customer base, but it also brought new customers into the store when they wanted to gradually upgrade the contents of their golf bags. Finally, it was one of the more profitable areas of his business. He was able to resell the used clubs at a price 20% to 40% above the value he gave to customers in the trade. Late in the afternoon, Johnston was approached by long-time customer David Deluna about purchasing a Scotty Cameron putter. After testing the feel of the putter, Deluna told Johnston he would return the next day with three golf clubs as potential trades. Johnston was intrigued by the possible deal because Deluna was a great young golfer who always had the highest-quality equipment to trade. Deluna described the clubs and their condition. Because he had had a number of prior transactions with Deluna, Johnston knew that he could trust Deluna's descriptions. After Deluna left the store, there was a lull in business, so Johnston sat down to research the clubs. . . .