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Negotiations: The Conundrum of Collaboration
Introduction
As a business process, negotiations allow parties to discuss their differences and similarities in an attempt to reach an acceptable solution. This practice defines the inherent ability of sides that negotiate to find mutual benefits instead of completing transactions that do not lead to win-win scenarios. When parties build improved relations, they also start thinking about long-term solutions instead of their short-term alternatives aimed at avoiding certain conflicts or monetary losses (Steele & Beasor, 2017). Therefore, every participant in the negotiation process has to realize that two sides of the argument have to be covered in the case where parties are willing to participate in a constructive dialog. The following case reviews represent the results of simulations where two groups of stakeholders attempted to reach several agreements while fostering goodwill and responsibility. The exercise was exceptionally beneficial because it provided us with insights into how a negotiator could remain confident and aim for the most cost-effective decisions.
Cobalt Systems and SilverLight Electronics
The case of Cobalt Systems and SilverLight Electronics demonstrates the discrepancies in business practices, strategy, and policy between the two countries. Cobalt Systems is a multinational corporation with a highly centralized organization (Tinsley, 2001). The companys culture is people-oriented, and employees are trained to better fit the corporate culture (Tinsley, 2001). Silverlight Electronics is a company based in Korea which sells high-tech products within and outside the national borders (Tinsley, 2001). The company is part of the SilverLight Chaebol a family of companies that are connected through tight personal bonds and cross-ownership (Tinsley, 2001). The company is seen as national pride and retains strong governmental ties (Tinsley, 2001). The two companies tried to collaborate before the attempt to open a joint venture as Cobalt Systems tried to enhance its position in the Korean market through an alliance with SilverLight (Tinsley, 2001). However, negotiations broke off with the claims about overwhelming cultural differences.
Our role, in this case, is to represent SilverLight Electronics which wants to collaborate with an American company for the development of the R&D department. The company is searching for a joint venture with a U.S. computer company that is likely to have the necessary technology, a flexible structure, and does not have a superior attitude (Tinsley, 2001). However, initial negotiations illustrated several issues with regards to equity ownership, top Management team, financial accounting practices, access to technology, access to U.S. and Korean markets, and joint venture name. Several propositions are given to us to decide the most beneficial approach to conclude the negotiations. This case has shown me that all options in negotiations should be exhausted. Moreover, a complete grasp of the companies situation allows the proposition of better terms which would be essential for my future practices.
Coffee Contract
In this case, we assumed the role of Sandy Grant, Director of Food & Beverage for the Hotel in Ithaca. The case is focused on one-to-one negotiations with Anderson coffee on the supply of coffee. Previous supplier LaRoche is satisfying in terms of product quality and price, but last year the company tried to increase price in response to bad crop in Columbia (Simons & Tripp, n.d.). This attempt led to a certain degree of dissatisfaction with the company (Simons & Tripp, n.d.). At the same time, Anderson coffee delivers a higher quality product (Simons & Tripp, n.d.). During a training session for hotel managers, a blind test to determine product superiority majority of employees preferred Anderson coffee (Simons & Tripp, n.d.). However, negotiations experience an issue of pricing as Andersons bid is excessively high for the company at $7.94/lb for regular coffee.
Nonetheless, due to the personal connections with tourist attractions called Colonial Williamsburg, it is known that the price is open to discussion. Colonial Williamsburg organized the supplies for $5.95/lb, but there is a low chance to achieve a similar result (Simons & Tripp, n.d.). Nevertheless, it does not offer the same level of exposure as current and future hotel managers. Our role, in this case, is to ensure the best possible price for cost-effectiveness. The walkaway point for the deal is $7.4/lb, but our goal is to maximize cost-effectiveness for personal benefit and possible promotion. Therefore, we should aim at a price somewhere between $5.95 and $7.4/lb.
Energetics Meets Generex
This case simulates a single transaction between individual representatives of two distinguished energy-producing companies. The negotiations involve the potential sale of Wind, a sector of Energetics company focused on renewable energy (Proffitt & Paulson, 2020). There is a large positive bargaining zone, which increases the likelihood of a positive settlement. Energetics Corp is a large, diversified energy company with $100 billion in annual sales and 20,000 employees (Proffitt & Paulson, 2020). However, because of a series of unfortunate and unforeseen events, the company was forced to declare bankruptcy but continues to function (Proffitt & Paulson, 2020). The firm is trying to restructure its organization and focus on core businesses. Therefore, thoroughly researching the best approach to tackle the cash flow demands of bankruptcy, Energetics Wind Corporation was chosen for sale (Proffitt & Paulson, 2020). The prospective buyer for the company is Generex Corporation, a large, diversified business with $126 billion in annual sales and 310,000 employees.
Our role is to complete the deal with the best possible price, in cash transfer, within three months. These three aspects are the most important issues for the company. Our sources of power that could help to establish favorable terms are positive return on investment from wind power, cutting-edge manufacturing, turbines improved with the latest technology, and upgraded transmission equipment. The company has a portfolio of wind farms in ideal geographic locations with sustained wind velocities to power the most advanced turbines (Proffitt & Paulson, 2020). This case could be approached by delivering a strategy with a high benchmark for selling price to create a threshold for negotiation with subsequent utilization of power sources to reach a desirable conclusion. The information which is likely to be disclosed is the Winds positive return on investment. This will demonstrate confidence in the product and reassure the buyer of the deals attractiveness.
The BioPharm-Seltek Negotiation
The case of BioPharm-Seltek involves the selling of plants belonging to the Seltek company. Seltek is a pharmaceutical company with annual sales of $150 million (Greenhalgh, 1993). The company was able to produce a single successful compound Petrocheck, which is sold to oil companies to aid with the cleaning of oil spills (Greenhalgh, 1993). Petrocheck has the potential to be used in sewage treatment plants to biodegrade petroleum-based products within the sewers (Greenhalgh, 1993). The current business potential of the product in the oil industry is valued at $5-7 million, while the potential for sewage treatment is difficult to appraise but expected to be lucrative (Greenhalgh, 1993). The potential buyer for the plant and patent for Petrocheck is BioPharma $700 million American pharmaceutical company (Greenhalgh, 1993). It is unknown for what purposes the company plans to utilize the plant. Seltek predicts two possible needs of BioPharm transformation of the plant for general manufacturing or production of biotech.
The role given to us is CFO of Seltek company, and the primary goal is the earliest possible selling of the plant and patent for Petrocheck. The company requires money for investments in new projects. The expectant price for the plant is 7 million dollars, and the company wishes to avoid severance liability of 1 million dollars (Greenhalgh, 1993). Therefore, the company would like to sell the plant to BioPharm as a turnkey operation. This negotiation could be considered transactional negotiation because Seltek is planning to sell its plant and associated patent without any prolonged relationship and formation of bonds. However, the issue lies in the unknown intentions of the BioPharm company and the risks associated with it because the success of negotiation for Seltek would be reached if BioPharm aims to launch a biotech product line.
Zephyr
Zephyr Inc. is a company established in Chicago that specializes in leasing services (Unzueta et al., 2020). Zephyrs customers are corporate executives, athletes, celebrities, and other elite clients who look for leasing of housing and vehicles (Unzueta et al., 2020). The company was expanding throughout the cities in the Midwest region but planned to intrude the market on the East and West coasts (Unzueta et al., 2020). Currently, the company is interested in the allocation of resources to the luxury car leasing sector due to its high profitability. As a result, Zephyr plans to sell several company-owned houses to generate the money necessary for the project the purchase of a car service company for luxury leasing. The potential car service company which meets the criteria of Zephyr was found in Palo Alto, called Federicos Car Service. Federico owns 15 luxury cars which include 2 Bentleys and Rolls Royce.
The role given to us as Zephyrs Vice President of Business Development is to purchase the company at a lucrative price. Federicos Car Service has a small batch of luxury cars, but the client list offered by the company owner is an attractive point for the deal (Unzueta et al., 2020). The current situation of the market demonstrates intense competition. Hence the client list with distinguished high-profile CEOs and athletes would be a great contribution to the establishment of a new leasing branch. The research conducted by Zephyr revealed that $1.5 million are necessary for expansion, and the company could negotiate the price up to $1.15 million as they plan to use the remaining $350 000 to enlarge the car fleet (Unzueta et al., 2020). The company would need to anticipate high price demands from Federicos company for their building, fleet, and client list. Moreover, the later item might be subjected to different price negotiations. However, Zephyr might exploit the small fleet size as a pushing point during the negotiations.
New Recruit
In this case, we were given the role of recruiter, and the best alternative to a negotiated agreement could be considered acceptance of the alternative recruit. It would be necessary if the hiring of the recruit at a beneficial payoff schedule will not be feasible. The companys preferred target is to reach a total of 13 200 points in the payoff schedule (Neale, 1997). The company interest would revolve around such terms as to salary, job assignment, insurance coverage, starting date, and location. Salary and job assignment are essential points as the inability to achieve desired results will lead to negative points. Other terms are not as important but still significant as they contribute a considerable number of points.
For salary, any increase above $100 000 will result in negative points along with any job assignment other than Division A (Neale, 1997). Insurance coverage in Plan E would provide the most points, while Plan A is set at a neutral point of 0 (Neale, 1997). The most beneficial starting date is August 1, as any earlier date will decrease the number of points applied to the payoff schedule (Neale, 1997). The least significant term is the location. The allocation of the recruit to San Francisco is preferred, but others are acceptable as well, even though New York would result in zero points.
The crucial complication which might emerge during the negotiations will surround salary. The range available is $100 000 to $120 000, the key point would be to agree on a salary that would not hinder the negotiation of other areas. Job assignment and bonus should be discussed together with the salary because the first would have a large impact on the payoff schedule points. Simultaneously, the second term would act as leverage to reach a desirable outcome in terms of salary.
Conclusion
Each of the cases presented above represents a short lesson for future negotiators that have to look at this information as the fundamental knowledge that affects business relationships. Irrespective of what kind of objectives the team tried to achieve, we had to remain collected and focused on win-win scenarios to get what we wanted. The idea that negotiation skills are essential is reinforced throughout the six cases, as we tried to make decisions based on the other partys interests while also pursuing our objectives. Even though the simulations did not go perfectly, the experience that we gained could be perceived as the most important outcome. The team felt the confidence growing with every other negotiation, allowing us to allocate roles and share knowledge to succeed.
References
Greenhalgh, L. (1993). Biopharm-Seltek. Northwestern University.
Neale, M. A. (1997). New recruit. Northwestern University.
Proffitt, T. W., & Paulson, G. D. (2020). SimCase simulation: Energetix meets Generex. hbsp.harvard.edu.
Simons, T., & Tripp, T. Coffee contract. iDecisionGames.com.
Steele, P. T., & Beasor, T. (2017). Business negotiation: A practical workbook. Routledge.
Tinsley, C. (2001). Cobalt Systems and SilverLight Electronics [PDF] (pp. 1-8). Dispute Resolution Research Center.
Unzueta, M., Wang, C., & Weiss, N. (2020). SimCase simulation: Zephyr. hbsp.harvard.edu.
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