Negotiation Models General feedback

Master in Decision Making And Innovation

 

 

Hi Gaians!

It has been a pleasure to follow up your development of the “TEXOIL Negotiation Case”.

I would like to thank the commitment many students who have participated and applied the concepts you have learned through the initial units of the Master. 

The objective of this activity was for the students to take part in a negotiation where they should be integrate or create value to refine their negotiation skills. They should apply a set of strategies that can be used to deal with difficult negotiation behaviors and hard-bargaining tactics.

So they have taken part of a two-party, quantified transactional negotiation with integrative potential, where we have distributed the students in groups of 4 trying to cover the two roles that appear in the case:

Role 1– The Owners The representative of the Service Station who would like to sell the business.

Role 2– The Buyers, The representative of TEXOIL, a large oil and gas company would like to buy the Service Station.

After creating 18 groups we have a total of 9 negotiations to be perform and recorded in accordance to what each group has planned.

Most of the groups decided to follow a win-win strategy, although at the end we may have different results in figures.

In order to show each group the information, specially the confidential data each role had, I have used of the Groups sections of Gaia. However it was to each member to decide the different tools and apps you would be using during the strategy implementation.

Most common tools you have used were:  Gaia web, WhatsApp, Hangouts, Skype, PowerPoints, Drive and Adobe reader.

So according to the schedule the negotiations took place during the second week of the module (from the 3rd to the 9th of April): You have carried out the Negotiations previously arranged with your assigned counterpart. Each negotiation has been recorded so we could assess the performance of each group representative and value the preliminary work in terms of strategy planning and implementation.

Going into the case figures:

 

TEXOIL’s BATNA is $675,000 to build a new station, but its bottom line is $500,000 to buy. The difference between the BATNA and the Bottom line here is due to the fact that upgrading the old station with tanks and a mini-mart will cost TEXOIL’s money.

If you’re the owner, your reservation price is the minimum you will accept – any lower and you would walk away.

However, it is important not to get confuse because in the case of the Station Owner, the BATNA is 400 and the Reservation price  $553 but there is a subjective element to be consider that is not in the total trip expenses estimation. The job offer when you come back from the trip!

In all the negotiations you have put in practice what is called integrative bargaining, in which case your BATNA was not attached to a single number, but an offer including multiple elements.

 

TEXOIL Rep. Station Owner
BATNA $675,000

(Build one)

$400,000

(BP offer)

Reservation Price $500,000

Why not $675K?

Minimart = $100K

Upgrades = $??

$553,000 ($488,000 after taxes)

Boat loan: $230,000

Boat ready: $68,000

Food, health, clothing: $75,000

Boat repairs: $40,000

Savings after return: $75,000

Interests Good price

Good managers

Station Ownership

Time off (2 years)

Spouse’s health

Sail around the world

Savings / future income

Health insurance, food, etc.

All the groups have also submitted a pdf document including a summary where most of these points should be included and analyzed. It was the reflection of the whole negotiation processes plus the link of the Negotiation video recording.

From all documents I would like to highlight the fact that most of the groups have worked hard to meet the different phases and activity requirements and that the documents presented have been well structured and easy to read.

All our negotiators have reached a final deal, so eventually you have all been able to apply what you have learned about negotiation strategy, however not all the results were the same and I would like you to gain in consciousness about it.

The most striking learning point of the exercise is the fact there is no overlapping bargaining range unless the two parties use their information creatively and literally create one. Thus, this has been an excellent exercise because you have all shown concern about integrating or creating value. Otherwise there was not much room for closing deals.

Although most of the negotiations had a positive outcome, in some cases we have missed some conclusions with more critical analysis of what didn’t go so well, if you were sufficiently prepared or that groups stated in a clear way the points where main interests have been reached or on the contrary identify the dead ends were they have to yield or walked away. In few words, what you would do differently next time.

It has have been hard trying to distinguish which agreements were better than others but I have tried to make distinctions in terms of the steps you have made for a solid value creation rather than for the final prices you have agreed. I have also paid special attention to the way each representative have handle the difficulties found in the spot and how well the group material have helped sort out that obstacles.

In general better agreements in terms of value claiming are ones where Texoil pays less than $500,000 cash and it gives the job and other items, versus Texoil pays all the cash, plus the job, plus benefits.

Occasionally, a Texoil representative who has yielded to the pressure of the Station Owner during the negotiation, would pay more than $500,000 cash. (This is like hypothetically signing both the purchase and his or her resignation with Texoil Company, since as an agent you don’t have the authority to go beyond the budget limits the company has established (no matter how poorly you think your analysts ran the numbers you were given).

Moreover, it is the same wrong position when a station owner would not make enough defense of all the plus Texoil may be getting with that station, not mentioning the location, facilities, extra piece of land, or the loyal pool of customers that may turns Texoil purchase in a good deal. There are cases where the Station owner gives up a year of the sabbatical. This is a compromise that is not necessary.

For both parties, it would have been important to agree on specific details regarding the job offer. There were cases where paycheck or working hours where not seriously discussed, and being what has determined the final figures of the cash transaction this type of tongue-in-cheek commitment is not recommend.

But considering the challenge you all have faced I have been pleased with the general outcome of your negotiations.

feedback-gaia-may

Alienys Duarte

Academic Team

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