The Negotiation Strategy

The Negotiation Strategy
English (U.S.)

Dear Sir, We have a course called Cross Cultural negotiation & Management. This course basically develops the skills of how to negotiate and deal with business`s issues (it does not has to be business) in terms of culture across the world. Each week we have a negotiation practise in a particular topic with another group. For example, negotiation about buying a car (we could be the seller or the buyer), a debate between the government and the community (we could be the government representative or the community) and so on…Every week, each group has secret information about the weekly negotiation ( it will be attached ). We are students who tend to get high marks in this course so please take everything seriously. The following is a required of the negotiation task and what we want you to do exactly. Required:

A- Please read the attachments carefully which is the secrets information. B- Writing Group’s negotiation strategy (our strategy in this negotiation) we going to follow it and it will be given to the professor before the negotiation (as a helpful document we will attach…………….

 

 

The Company aims to close down 30 mines as continued negotiations are underway to close the remaining 10 mines. This will imply the company may lose some points in the bid for the joint venture. If other favourable terms are reached after the deal then the company will be more willing to close down the 10 remaining mines to expand its territory. Besides, the company will train 150 Engineers in the safe mining technology. The Engineer trainees will be working for the company as they are being trained for some small allowances until they complete their training. The trained Engineers will then continue being part of the work force reducing the cost of taking outsiders who are then deployed to other companies. This has the implication that we lose no point on the evaluation.

In addition, the company will only finance 10 million AUD towards the upgrading of the existing railway track. The company can gamble to lose the some points putting in mind that the cost of investment is at stake here. The funding can not be done at once but rather it may be done in two phases in a span of two years since the starting cost is usually unbearable for the first few months or years. Finally, the profits will be shared on a fifty-fifty basis but with the conditions that Datong Mining will accept to consider the type of risks Fernet Brios has encountered. Datong mining should agree Fernet Brios to deduct from the profits the cost related to the risks before the final net profits are shared. The company aims to score 75 points from the negotiations.

The Negotiation Plan

The company views that by closing down the 30 mines and laying off 2000 workers is a fair deal to help reduce the labour cost and boost on its profitability. It is with the company’s opinion that the 150 Engineers who will receive scholarship in training will be picked out of the 2000 remaining workforce. These Engineers will be immediately incorporated as part of the work force in the joint company after the training maintaining the 2000 workforce retained earlier on. The company hopes by financing the building of the railway track with 10 million AUD the government will reduce the percentage of tax the company will pay out of the profits realized. Fernet Brios Company expects the Datong mining company will use its close relations to the government to make a better and quick agreement for the licensing and access to the mining.

It is also a concern that with the fifty-fifty share profit and the conditions attached to it will be the standing point of the Datong mining company. With the share of profits it is expected of Datong to use its influence to reduce the level of risks and the cost of investment because the risks will determine the profit they will obtain. The agenda of the company provides the following;

Strategy for the closure of small mines

Fernet Brios aims to close down 30 mines and immediately put up a large scale surface mine to increase production from 0.5 to 5 million tonnes per year in the first one year and further to 10 million tonnes per year in the consecutive years. The amount being injected into the project is a sum total of 56.9 Billion AUD to finance the initial stages of the project. Further investment will be made as the project will pick up to its maturity. The large surface mine is expected to be fully operational after six months of construction which will meet the rising demand for coal electricity production. The wish of the company is to have 1000 employees on board but for the interests of the citizens, the company thought it prudent to layoff 2000 employees and retain the rest 2000. The employees will be subject to monthly salaries and health insurance to cater for their medical services.

The joint venture plans to import some raw materials while the rest will be acquired locally to promote the local industries. The closure of the current small mines is scheduled to take place immediately the deal is done and the access rights have been approved by the relevant authority. The closure of the 30 mines is expected be done in two phases within 6 months after the approval. The first phase will see to the pulling down of 15 mines and commencement of the construction process. It is to the wish of the company that the government will approve the access rights within a reasonable time to avoid delay of the production process. The Joint venture has a full capacity of resources and manpower to perfect the project with minimal delay. The Joint venture remains optimistic towards the success of the project and acceptance of the proposal for the betterment of the host government’s welfare.

Commitment to scholarships for training in mining safety

The joint venture remains committed to offering scholarships for training in mining safety to 150 Engineers. This will be done on yearly basis to give scholarship to any potential young Chinese working with the company. Every year the company expects to give scholarships to two young promising Chinese staff working in the company in the University of New Castle. The scholarships will be open within the work force where the company will provide both work and training to them to equip them with the necessary skills in Mining safety. The Joint venture aims at balancing both the female and male trainees to enhance gender balance. Besides giving scholarships the labour force that remains will still receive special training to attain skills necessary in handling of coal and the electricity manufactured. The company believes in giving quality products which are timely and suites the needs of the people. It is for this reason that all the employees will receive basic training and skills necessary to perfect the work performance.

Moreover, the coal production and electricity produced is meant for both local market and foreign market. The joint venture aims to go international in the distribution of the products therefore it will require to produce products that meet the international standards. It is only qualified and skilled personnel who are in a position to handle the quality aspect. Therefore, training can not be denied to the work force as the company commits to implement it once the approval is complete. There are no intentions whatsoever to import expatriates to handle the job but the company believes the local residents will leave up to its standards through the training and the scholarships offered.

Railway track upgrade

An estimated AUD 10 million will be set a side towards the renovation and upgrading of the existing railway track. This amount will be withdrawn from the initial investment of 56.9 Billion AUD set a side to finance the project. Since the production is expected to increase with the setting up of the large surface mine, investing in the railway is part of company’s priorities to have an efficient transport system for coal. As the production levels increase, the company expects to export most of the coal to the international markets. Coal being heavy and more durable mineral the appropriate means of transportation will be rail transport. Considering the status of rail transport, it is to the concern of the joint to improve the railway transport to facilitate easy transit of the coal to international via the rail.

The company proposal to invest in China has already done a cost-benefit analysis and determined that the project is viable and manageable. The rail will run from the Northern China to connect with the Pacific Ocean where it can be shipped to different foreign markets. The production level as mentioned earlier, will increase from 0.5 million to 10 million tonnes per year will call for special wagons for ferrying coal there by becoming the prerogative of the company to build a sustainable railway transport to meet its target objectives.

The company expects favourable government consideration in approving the proposed project to enhance a stronger railway network in the host country. This can be achieved if the Chinese government with the help of their experts and the joint ventures’ management can review the cost benefits of the proposal presented to them for the joint venture. The joint venture therefore calls for the Government to carefully access the proposal presented to them for effective analysis and approval.

Splitting of profits

The joint venture has the intention of sharing the profits on a fifty- fifty basis. Nevertheless, the final split of profits is subject to the financing arrangement between the parties involved and the risk exposures subjected to. Datong Mining Company has a less exposure to risks being the home Company and enjoying the Government support. Fernet Brios being the foreign Company is exposed to various risks (Gennard 2008) inclusive of foreign exchange risks, debt financing, political risk and the economic risk. These risks affect the profitability of the whole venture. After all the expenses are catered for and the net profit determined, it will not be prudent to share all the profits remaining on a fifty-fifty terms.

The two alliances must agree to share the profits on reasonable terms. The sharing of profit will be done in such away that the cost of risks involved will be taken care of to permit the sharing of the existing profit margin. All the risks must be shared as well as the returns from the venture. A good proportion of the profit shared will be repatriated back to the country of origin to help in developing the University. Part of the profit will be reinvested back into the host country for infrastructure development and education process. The company expects the host government to offer them favourable terms in matters concerning tax remittance. The Joint venture is positive that if approved it may go into negotiating deals with the Government on how the tax remittance can be conducted and what procedure to follow in paying the taxes. The Company therefore is offering the stakeholders a take or leave ultimatum (Das, Kumar 2007)

The company is sending a team of two gentlemen and two gentle ladies from the Finance department, accounting department, marketing department and operation department for the negotiation deal. The four have experience in their area of jurisdiction to review cost and benefit analysis of the whole project. The team will be expected to send a full detailed report to the board of Directors ready for approval. A deal is expected to be reached by the end of today at 1440 hours. The team has the relevant documents to be signed by both parties when the deal will be sealed. The contract forms must be filled and signed in triplicates where one copy should remain with Datong mining Company, another copy to be handed to the host government’s relevant authority and the last copy to be taken back by the team for verification.
CONTRACT OF BUSINESS MERGER BETWEEN FERNET BRIOS AND DATONG MINING COMPANY

I Mr/Mrs/Dr/Prof—————————————————–on behalf of Datong Mining Co. agree to the terms offered by Fernet Brios Mining Co. for

v Closure of 30 mining companies and setting up of a large scale mining company

v Commitment to Scholarships of 150 Chinese staff for training in mining safety

v Upgrading the railway track to a total amount AUD 10 million

v Division of profit on a fifty-fifty basis subject to risks and the cost of investment injected in the project.

To form a joint venture towards exploitation of coal minerals in the Republic of China for a sum total of 56.9Billion AUD. This is with approval of Government Agency under the ministry of industries and mineral exploitation. The terms and conditions apply subject to fulfilment of the contract negotiated on the table.

 

SIGNITORIES

Management Fernet Brios Ltd Management Datong Mining

Mr/Mrs. ———————————– Mrs/Mrs—————————–

Sign —————————————— Sign ———————————-

 

Reference

John Gennard (2008), Negotiations at multinational company level, Employee Relation

Journal Vol. 30 No. 2 PP. 100-103, Glasgow UK, Emerald Group Publishing Limited

T.K. Das, Rajesh Kumar (2007), Inter-partner Negotiations in Alliances: A Strategic

Framework, Emerald Group Publishing Limited

 

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