Negotiation Theory Applied to Business Negotiations

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Interview Questions

How long have you been in this business and what market area do you cover?
What are the challenges that you face which can be solved through a joint operation with our business?
What are your expectations going into the contract with our business?
How do you feel the profits from this joint operation should be shared between the two businesses and what is the justification for the same?
Are you willing to lower your expectations and reduce the share amount that your business is entitled to?
Are you willing to increase the amount that you will invest in the joint venture?
What challenges do you envisage in this joint partnership?
How best do you think such challenges can be overcome to achieve the intended level of success?
What steps should be taken when it becomes necessary to end the joint venture?

Summary

The interview conducted was between two companies that needed to enter into a joint venture. The lead negotiator for Company A was its Vice President in charge of international expansion. Company A is a large multinational corporation that is keen on making an entry into the local market in the United States. Company B is a local firm that is keen on expanding its operation locally. Company A sent a negotiator to help reach an agreement with Company B to facilitate rapid expansion in the local market. In this negotiation, several factors had to be considered to ensure that the two firms could operate jointly in the American market.

The first challenge that emerged from the interview was that the two firms had different brands. After lengthy deliberation, it was agreed that the brand of the local firm will be retained because it was already popular. Another challenge that required a complex negotiation was the contribution that each firm would make and the ownership of the new company that would be formed thereafter. Although Company A will invest more resources than Company B, both firms will have equitable shares of the new firm in the United States. The management of Company A was willing to lower their expectation.

The negotiator also agreed that the profit made from the new business will be shared equally until such a time that the two entities will revise the current agreement. However, Company B will be more involved in operations within the United States because it already has a functioning system and structure in the country. It also has a better understanding of the local market because it has been operating in the country for a long period. Company A, through the negotiator, agreed that it will be willing to increase its investment into the joint venture when necessary.

The negotiation team agreed that numerous challenges may emerge and the best way to overcome them is to define the role of different stakeholders. It was agreed that specific individuals within the two firms would be assigned specific responsibilities to ensure that operational activities are undertaken successfully. The negotiating team also agreed on reporting channels that had to be used to ensure that the top management units of the two companies are fully aware of the activities and responsible for the progress. The negotiation process was a success because both parties felt that the agreement was a win-win situation for the companies involved.

Finally, the two parties had to agree on how to dissolve the joint venture in case it became necessary to do so. The parties involved presented three possible ways of dissolving the venture. The first possibility was for Company A to buy out Company B and reward its shareholders. In that case, shareholders of Company B will cease to own shares of the new firm. The second option was for Company B to be absorbed as part of Company A. Shares of Company A will be restructured to ensure that shareholders of Company B own its shares in a proportion equivalent in value to what they owned in Company B. The third option was for Company B to buy out company A. In this scenario, Company A will be compensated for the full value of the shares that they own in the joint venture. After the payment, Company B will assume full ownership of the new company.

Critical Analysis of Negotiation Theory Applied to Real Business Negotiations

The art of negotiation is critical in ensuring that a firm achieves success in the market. According to Lapidus (2020), negotiation theory has gained relevance as a tool that one needs to be a successful manager. Its principles are critical when one is engaging suppliers, customers, regulators, government officials, employees, and any other stakeholder. Harvard Law School (2020) reports that Negotiation theory finds that a cooperative approach is the surest path to understanding the other party and discovering new sources of value. The goal of finding success in a negotiation is to find common interests. Parties involved in a negotiation should not have rigid positions that they expect other parties to respect. Instead, they should be flexible and committed to finding common ground that will be beneficial to all parties involved.

In the interview that was conducted based on the questions below and the report above, two companies needed to have a joint venture to expand their market share and increase their profitability. The negotiator reported that going into the negotiating table, the two parties had conflicting interests but common goals. Both wanted to have a large share of the new enterprise without being forced to pay more for the venture. Such conflicts of interest are common when two firms enter into a negotiating table. It requires unique skills and commitment to ensure that such conflicts do not negate the ability to reach an agreement.

The negotiator explained that they focused on common values and interests. This was in line with one of the most critical principles of negotiation, which states that one should focus on interests instead of positions (Lapidus, 2020). The parties involved in the negotiation focused on how the joint venture would enable them to expand their market share and overcome stiff competition in the market. Focusing on the common interest also helped the parties to avoid taking hardline positions.

Another major principle of negotiation is the need to avoid a competitive mindset. When a negotiator has a competitive mindset, their goal will be to have a win-loss outcome (Bromwich & Harrison, 2019). In such a case, it may not be possible to reach an agreement if none of the parties involved is willing to lose. When a party realizes that they were cheated when signing the deal, they can deliberately sabotage the operations of the new venture. They will lack the motivation to work towards ensuring that the venture is a success. It explains why Company A and Company B agreed to make concessions just to ensure that everyone was satisfied.

Effective communication is another major element of successful negotiation progress. Caputo (2019) explains that parties involved in a negotiation should remain transparent and avoid the temptation of concealing their true intentions. They should ensure that the other party is aware of the goals that need to be realized and how both parties would benefit. When Company A approached Company B, both parties laid out the challenges they currently face and how the joint venture would help them overcome them. Effective communication is critical in creating trust among the parties involved in such an undertaking.

The commitment of both parties is another essential element in a negotiation process. Parties involved in a negotiation should demonstrate their commitment to undertaking specific roles needed to ensure that the process is a success (Ghauri, Ott, & Rammal, 2020). In the report provided above, the two companies committed to taking specific responsibilities. Both companies agreed to make a financial investment in the new business. However, Company A committed to making a greater financial investment of 60% compared with Company B, which needed to invest 40%. On the other hand, Company B was expected to have a higher number of employees working on the joint venture because it had a better understanding of the local market.

References

Bromwich, R., & Harrison, T. (2019). Negotiation and conflict resolution in criminal practice: A handbook. Canadian Scholars.

Caputo, A. (2019). Strategic corporate negotiations: A framework for win-win agreements. Palgrave Macmillan.

Ghauri, N., Ott, F., & Rammal, G. (2020). International business negotiations: Theory and practice. Edward Elgar Publishing.

Harvard Law School. (2020). What is Negotiation Theory? Web.

Lapidus, A. (2020). Second language cultural negotiation and visual literacy: Comics in class. Lexington Books.

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Negotiation Theory Applied to Business Negotiations

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