AUTONOMOUS GROUP LEARNING

AUTONOMOUS GROUP LEARNING Boland1 Dr. Bob Boland

AGL 20 NEGOTIATION GUIDE

ASSIGNMENT 6.0 ‑ LECTURE - DARCANGUIES INTERNATIONAL (DI) 6.1 STORY OF THE CASE • In 2012, DI in Germany is a major -international manufacturer and distributor of computer equipment, with five divisions and 40,000 employees if six countries of the European Union. • Sancosis the new Vice-President for Budget and Finance is negotiating the annual 1013 budget, with orders from the CEO, Giles to each department to keep cost increases below 5%. And increase productivity and profitability. • Xavier the VP for Human Resources, has been asked by an Executive Committee of top company managers to implement a reorganization strategy to competitiveness. After long negotiations within the HR department, Xavier submitted a budget with increase of 10%. which exceeds Sancos limits. • Negotiation between Arnold and Boyd over this budget.

6.2 LEARNING OBJECTIVES • To provide critical feedback on the negotiator’s style and skills. • To practice unpacking and integrating the underlying interests of the two sides. • To practice integrating constituent interest into the bargaining process. • To practice integrating the concept of fairness into a negotiation.

6.3 DEBRIEFING • Focus the discussion on the process used to reach their outcomes, rather than on the outcomes themselves, with the following questions. • 1. How did it go? What worked well and why? Difficulties encountered? What to differently next time? • 2. What were your party interests? Other side interests? How did you learn about these interests? How did the knowledge/ignorance of these interests effect the negotiation? What would you have done differently? • 3. How did each of your party’s interests affect the process? What benefits did you feel? What hindrances? What to do differently? • 4. Did the issue of fairness come up? How did it impact on the negotiation? How could it be handled differently? • 5. Other key issues? What to do differently?

6.4 LEARNING POINTS • To quickly establish trust with a cooperative strategy. • To accept the other party’s interests, objectives and limitations • To recognize value differences. • To define conflict areas. • To instinctively do a creative search for seven alternatives for every key issue. • To give high priority to fairness for long term relationships.

6.4 LEARNING POINTS • To identify the constraints on each party for future working in the company with the tough CEO • To use KSA in negotiation and achieve more than BATNA • To value personal reputation and status as critical factors in implementing negotiated agreements. • To practice integrating a constituent interest into the bargaining process. • To practice integrating the concept of fairness in negotiation. • To practice integrating constituent interest into the bargaining process. • To resolve the issue with joint action to the Executive Committee.

6.2 LEARNING PATTERNS • Cooperation • Alternatives • Trust

6.3 INSTRUCTIONS • Re-assemble in CSG • Study the guide and discuss in CSG. • Record significant points in your notebook • Reassemble in MG when the bell rings

ASSIGNMENT 9.2 - LECTURE - RICHMOND (20 MINUTES) • 9.1 STORY OF THE CASE • Richmond House in London is for sale. The buyers are two London Business School • MBA candidates who will both graduate in June, and need to vacate their current apartment by March. After months of hunting, the buyers have fallen in love with Richmond House which has a gymnasium and a pool. • Buyers and sellers are all gymnastic enthusiasts. .

9.1 STORY OF THE CASE (cont.) • The buyers’ maximum purchase price is $425,000, although they would like to save as much as possible for future investing. The London MBA sellers, two accountants, have recently moved to work permanently in New York. • They need to know in one week if they will have $270,000 to pay off their mortgage (UKP 120m) and to secure what promises to be a lucrative investment ($150m) - any extra cash would certainly be welcome. • The sellers received an early cash bid of UKP 320mwhich is over a recent estimate of • the value of the house). They wanted more and never replied. Is the offer still open? • The sellers have come from New York for to make a deal!

9.2 LEARNING OBJECTIVES • To provide the participants with early critical feedback on negotiation style and process. • To use of objective criteria in negotiation. • To practice the skills for negotiating as a team.

9. 3 DEBRIEFING • Focus the discussion on the process used to reach their outcomes, rather than on the outcomes themselves, with the following questions. • 1. How did it go? What worked well and why? Difficulties encountered? What to differently next time? • 2. Did you use objective criteria during the planning and negotiation itself? How did they affect the negotiation? What to do differently next time? • 3. What do think were the deeper interests of the other side? Could you identify those interests? How did you use that information? How did that change the negotiation? What to do differently next time?

9. 3 DEBRIEFING • 4. What non-verbal communication did you notice from the other side or your partner? Reactions from non-verbal communication? How interpreted? What to do differently next time? • 5. Any miscommunication during the negotiation? What effect did it have? How could you clear it up? What to do differently next time? • 6. How did you feel as you worked as a team? How well did you prepare? What personal style differences influenced: relationships, strategy, or tactics? What would you do differently next time? • 7. Other key issues? What to do differently?

9.4 LEARNING POINTS • To provide early critical feedback on negotiation style and process. • To use both objective and emotional criteria in negotiation. • To practice the skills for negotiating as a team. • To explore the ability to identify and integrate other side interests in the negotiation and agreement.. • To (if videotaped) step outside and observe oneself, as you explore how the other side is feeling, and the effect of your behavior on the other side.

9.4 LEARNING POINTS • To be aware of non-verbal communication and mis-communication • To assess the impact of both nonverbal communication and miscommunication. • To instinctively make a creative search for seven alternatives for every key issue. • To give priority to fairness and long term relationships. • To identify the constraints of each party. • To develop KSA in negotiation to achieve more than BATNA

9.4 LEARNING POINTS • To value personal reputation and status as critical factors in all negotiations. • To avoid difficult negotiations when the stakes seem large. • To value many objective criteria that are neither fully consistent nor determinative. • Not to haggle, but to use a variety of bargaining tactics can be used. • Explore tactics which are effective under what circumstances, and why. • Many important concerns and legitimate criteria in the case are • intangible and/or difficult to measure, unless turned into numbers.

9.4 LEARNING POINTS • Focus closely on what specific events cause parties to change their offers, and what brings them to the point of closing the deal. • Discuss deadlines, their effects and how to create them. • Compare techniques, attitudes and tactics that may produce more competition and/or animosity? • How does amicability correlate with optimal results?

9.4 LEARNING POINTS • BATNA? How does a party’s perception of its BATNA affect conduct in the negotiation? How should it? • How can BATNAs be improved? • When is it ethical to try to change the other side’s BATNA for the worse? When not? What are the ways of doing that? • How might the parties have prepared better?

9.4 LEARNING POINTS • Even a simple negotiation process involves: anchoring; BATNA; bluffing; closure; commitment; fairness; information exchange; interests, dovetailing; quantifying; joint gains; legitimacy; misrepresentation; objective criteria; offers, reservation price; and systems of negotiation etc etc. • All to provide early critical feedback on negotiation style and process.

9.5 LEARNING PATTERNS • Successful Negotiation … • K • S • A • … to identify key values …

ASSIGNMENT 5.0 - LECTURE - LICENSING CASE (20 MINUTES) • 5.1 Story of the case • This negotiation case provides face-to-face negotiations involving licensing issues, between a French Company in Lyon and a Rumanian Company in Budapest. • While the goal of the exercise is to reach an agreement, the option of non-agreement may be an acceptable outcome. • Negotiators must put in sufficient time and effort to fairly explore the issues and make maximum efforts toward reaching a potential agreement, with trust.

5.1 Story of the case • Sam is a large quality paint manufacturer in France and has given French licences. • Possible licensing deal between Sam in France and Indrei in Budapest, Rumania, who wants to expand to other areas. • Sam may want to limit Indrei and even set up a plant in Rumania. • In Rumania the average royalty rate for paint products varies from 3% to 6%. • Will Sam do a deal with Indrei?

5.2 DEBRIEFING FEEDBACK This is a role play of verbal and body language with so much to learn. Focus the discussion on both the process and the outcomes, with the following questions. Did you get the alternatives?

5.2 DEBRIEFING FEEDBACK • What is the likelihood of agreement? Is agreement possible in this case? • Option based generating strategy possible? Alternatives exist but may not be acceptable to SC: • 1. Spread the work over two budgets. • 2. Reschedule the work so that the most important parts get done • first. • 3. Use off-budget resources; for example, have the GE train the • staff. • 4. Pay the consultant in kind: perhaps he or she needs training • space for other clients and GE computers can be used.

5.2 DEBRIEFING FEEDBACK • 5. See if there would be economies of scale if some of GE’s • business friends or clients would hire the consultant • for their computer work. • 6. Tie this contract into a longer service arrangement. • 7. Use GE as a view beta-site, so the consultant can bring other • potential clients to see a working system. • 8. Assign the rights of any software that is developed to the • consultant, who is in a better position to promote it in any • market. Give GE a rebate for such sales. • 10. Find external resources: Is the original vendor now responsible • for seeing this system work successfully after so many years?

5.2 DEBRIEFING FEEDBACK • How did it go? What worked well and why? Licence achieved? Difficulties encountered? What to differently next time? • Licencing issues: • Provide for a dispute mechanism in French or Rumanian courts? • Compare the deal with a dominant licensor who simply offers the licensee a • form contract take it or leave-it attitude like McDonalds or Toyota, • Need to draft a brief License Agreement, better than BATNA. • Need to be familiar with licensing as a means of transferring technology with • standard clauses and patent protection. What must the licensor do? • Need to plan for future patent improvements, know-how and feedback as • standard provisions to be included in the agreement. • Concept of royalties must be calculated in payment (currency) terms. Does • the licensor or licensee bear foreign exchange risk? • Arbitration and law clauses for the international nature of the negotiation

5.2 DEBRIEFING FEEDBACK • How did the strategy work out? What to do differently next time? • Strategic issues: • Respective merits of using a collaborative "win-win' • strategy as opposed to the distributive "winner-take-all" • strategy? • How will the approach used, affect success in the • negotiation and future relationship between the parties? • Good working relationship is essential for some years to come?

5.2 DEBRIEFING FEEDBACK • How did each party’s interests affect the process? What benefits did you feel? What hindrances? What to do differently? • Relationship issues: • Is one party dominant or are they both novices? • What does each side really need to know about the other, in • a personal and a business sense? • What is the reputation of the other party • What strategies and tactics are likely to be used? • What are the real objectives • What anticipated and unanticipated issues might come up

5.2 DEBRIEFING FEEDBACK • 4. Did the issue of cultural fairness come up? How did it impact on the negotiation? How to do differently next time? • Culture issues: • Is an international case so different from a negotiation between two • French or Rumanians? • What are the cultural barriers to communication? • Do the parties really value risk, time, and need for written contracts in the same way? • With preconceived cultural expectations, will the individuals actually • function to expectations, or will their behaviour be different?

5.2 DEBRIEFING FEEDBACK • 5. Other key issues? What to do differently? This is a role play of verbal and body language with so much to learn • Agreement issues: • What were the special problems you failed to deal with in the preparation process? • If an agreement is reached, how to implement it? • With the cultural differences, are there ways to make those processes as • smooth as possible? • If not an improvement over the BATNA, how to improve it? If not discard it • and pursue BATNA?

5.3 LEARNING POINTS • Create many alternatives to resolve the problems of both sides using: time, activity, location, scheduling, priorities etc. • Know about the legal complexities of Rumania. • Assess the risk of corruption and loss of patents. • Check on the specific actions of the licensee, and decide who will own improvements in reality?

5.3 LEARNING POINTS • Assess whether in Rumania the licensing outcome will depends more • on trust (which takes so much time to establish) than legal issues. • Decide who will bear foreign exchange risk? • Arrange for dispute resolution with an agreed arbitrator able to implement his decisions. • Do not overrate a poor outcome of possible litigation in France or Rumania • Recognize that lack of experience in international licensing creates high risk. • Accept the idea that when no agreement achieved … then BATNA is best.

5.3 LEARNING POINTS • Recognize that some proposals seem to serve one party's interest at the expense of the other. • Understand the importance of alternatives in the negotiating process. • Measure potential agreement against all the possible alternatives. • Use BATNA to formulate strategy, evaluate options, and approach a • final agreement. • Measure potential agreement against BATNA to ensure that there really is an improvement. RESULT – Deal made … with risk … but for mutual benefit!!

5.4 LEARNING PATTERNS • Culture and the NINE KEY efficient and effective negotiation skills: • Communication Persuasion Influence • Planning Strategy Tactics • Process Systems Teamwork

9.0 SUISSE COMPUTERS LECTURE ON THE CASE • 9.1 STORY OF THE CASE • Negotiation over a consulting contract, between SC (Suisse Computers Company) and MSC – Multi-System Consultants. • In 2006 SC purchased a complex computer system to service all operating departments, with key information available to all. The hardware and basic software were excellent but the computer system was ineffective. • Departments of SC required specialized software. So SC top management decided to break up the system; and allow each department to manage its own information. • MSC is a computer systems consulting company with an excellent reputation for custom computer programming, manuals and training. A month ago MSC was asked by the senior SC management to plan and estimate the cost of computer reprogramming, manuals, and training, to get SC’s computer system to work well again.

9.1 STORY OF THE CASE • However, a serious problem now threatens the contract. MSC submitted a low bid of $480m (normally $600m) for this work -- a price much lower than MSC charges for normal charge for similar work, justifiable with the desire to work with one of best companies in the world. • However SC only want to pay a maximum of $240m.

9.2 DEBRIEFING ISSUES • What is the likelihood of agreement? Is agreement possible in this case? • Option based generating strategy possible?

9.2 LEARNING OBJECTIVES • To provide a final challenge using all the KSA acquired in the program. • To show how negotiation can resolve so many common business disputes and build trust for future relationships

9.3 DEBRIEFING ISSUES • Alternatives exist but may not be acceptable to SC: • 1. Spread the work over two budgets. • 2. Reschedule the work so that the most important parts get done • first. • 3. Use off-budget resources; for example, have the GE train the • staff. • 4. Pay the consultant in kind: perhaps he or she needs training • space for other clients and GE computers can be used. • 5. See if there would be economies of scale if some of GE’s • business friends or clients would hire the consultant for their • computer work.

9.3 DEBRIEFING ISSUES • Alternatives exist but may not be acceptable to SC: • 6. Tie this contract into a longer service arrangement. • 7. Use GE as a view beta-site, so the consultant can bring other potential clients to see a working system. • 8. Assign the rights of any software that is developed to the consultant, who is in a better position to promote it in any market. Give GE a rebate for such sales. • 9. Find external resources: Is the original vendor now responsible for seeing this system work successfully after so many years?

9.4 LEARNING POINTS • Breaking impasses, creating options, identifying interests, transforming problems from zero-sum to non-zero-sum, mutual gains, linkage to other • possible deals, building a long-term relationship. • Need to re-scope the task, think long term, seek outside resources, invent • creative options, build workable packages. • Closing the gap involves the risk of playing the wrong game, need for joint • problem solving, mutual commitment, disclosure of real needs and trade on • different priorities. • Importance of the creative options of negotiation with the $480m to • $240m difference. • BATNA indicates the time to walk away.

9.4 LEARNING POINTS • Would some alternatives serve only one party’s interest? • Would CSC finance GE by delaying payment? • Would GE really recommend CSC to others and give CSC further GE contracts? • What is the opportunity cost of GE using its own employees to do training? • Do GE staff have other personal agendas and not wish to help? • How to create a mutual gains approach? • Continued counter offer bargaining. It is too early for trust to exist? • Is a $480m to $240m solution really possible? Yes!!

9.5 LEARNING PATTERNS • ALWAYS SEVEN ALTERNATIVES • IN EVERY IMPOSSIBLE … • … NEGOTIATION … PROBLEM … • … KSA WILL FIND THEM …

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AUTONOMOUS GROUP LEARNING