CASE STUDY: RULES OF NEGOTIATION
Part A: Summary
Negotiations plays a very significant role in any business that is conducted between two or more parties or firms. Negotiations help the parties to get the best outcome in terms of quality and quantity. It also provides them with an opportunity to make the deal as economic as possible. We are going to analyse and understand 15 rules of negotiation.
The first rule helps to understand the fact that almost anything and everything can be negotiated. One should not only focus on one particular issue while negotiating, but at the same time, he must have a broad vision about the other possible issues that are to be negotiated. After observing various issues, one can develop and guide the other parties in the deal as well as carry negotiation as per the issues that he wants to deal in.
The second rule contains having a clear vision and this would help the deal to be cracked as per one’s will and requirements. One must have the ability to visualize the outcome of the deal and this will help him to negotiate accordingly with the counterparts in the negotiation.
The third involves getting as much information and in-depth knowledge of the terms that are going to be used in the negotiation from one’s side. One should also know the importance and value of the things that he is going to negotiate with the parties.
In the fourth rule, there is a clear provision to be made for asking questions on topics that one does not understand and in order to understand the needs of the other parties. One has to be clear about the understanding that he develops from the counterparts in the negotiation.
The fifth rule is an important one and it focusses on the power of listening. One has to be a good listener in the deal because this motivates the other person while he is trying to communicate something while putting forward his point in the negotiation.
In the sixth rule, one has to develop an estimation of the level of acceptance that would be appropriate from his point of view in the negotiation. This will give a limit of the acceptance that one has to observe in his negotiations.
The seventh rule inculcates the feeling of aspiring high in terms of goals and ambitions that are to be set up while carrying the negotiations. This will help to estimate the outcome in terms of one’s will power and firmness. The aim of the individual should be high while carrying negotiation with the counterpart and observe that the results are achieved as planned by the individual.
Eight rule displays that there has to be various alternatives from the individual that have the potential of proposing an adaptable strategy from the negotiating point of view between the parties. The individual should possess various strategies at the back of her mind while negotiating with the counterparts in the deal.
In the ninth rule, it is proposed that one should be highly adaptable in terms of development of strategies with respect to the counterparts in the negotiation. This is described by providing an example of dolphin where it can adapt itself in the sea that consists of sharks and carps. One should be flexible in understanding the needs of the counterparts so as to develop strategies in the negotiations.
The tenth rule emphasizes on being honest as well as fair enough while carrying the negotiations. This will help to maintain a good relationship with the counterparts and also helps to gain their trust in the negotiation. The concept of honesty is felt by the counterparts during the negotiations while developing their point and this principles will not go neglected and unseen by the counterparts.
In the eleventh rule, the author states to be firm by not accepting the first offer that is made by the counterparts in the negotiation. This might be a trap by the counterparts to check if the party actually knows what he wants in the negotiation.
In the twelfth rule, one has to observe firmness and strength of opinion from the negotiations point of view. The counterparts should not feel that during the negotiation the other person does not have a firm hold on the requirements that he wants from the negotiation. One has to be strong in the power of decision over what he needs to choose from the things that are provided during the negotiations from the counterparts.
In the thirteenth rule, one has to analyse slowly and understand the needs of the party or the counterparts in the negotiation. One should not provide concessions too easily which ensures that the counterpart does not take it for granted. This makes sure that the concessions are not very often asked by the parties in the negotiations.
Fourteenth rule involves developing a friendly attitude in the negotiation without losing one’s focus of the subject. One also has to be cooperative enough to give other counterparts a chance to put forward their point in the negotiation and feel that they are not neglected and neither is their opinion. One should not be aggressive or rude while expressing his point of view to the counterparts in the negotiation.
In the fifteenth rule, the influence that the competition has on the counterparts while carrying out the negotiations is to be considered. It will to help to understand its power and the counterparts will provide more number of concessions that it has planned earlier in order to sustain themselves in the cut throat competitive field and ensure that they have got the deal even after making so many adjustments from their side.
These are the rules of negotiation that one has to observe and understand while carrying a negotiation with the counterparts. These also supports the concept of understanding the behaviours of the counterparts in the negotiation. Along with the consideration of the rules of negotiation, they also have to develop an in depth knowledge of the points regarding the deal that an individual is going to be carried out in the negotiations with the counterparts.
1) There were few mistakes made from both the sides, from the commercial as well as project manager. There were few rules of negotiation that were broken and not understood by the characters in the scenario.
The project manager should not have been frustrated at the pints that were put forth by the commercial manager in front of the suppliers while explain in the different risks that he undertook in performing various tasks. The commercial manager had not discussed complete matter from the supplier’s point of view with the project manager. This breaks the third rule which involved preparing and planning things in advance. At the same time, there was breaking of the second rule too, which involved a clear vision from the outcome point of view from both the managers especially the project managers. They also missed on the 14th rule where they were supposed to be cooperative and friendly with their counterparts, whereas here they were having clashes within their views while negotiating with the suppliers about their demands and risks. There was no understanding and bonding among the commercial and project managers in terms of their tasks and risks that they took while developing the tasks and then negotiating about them with the suppliers.
There should have been a proper understanding and clear communication among the two managers while developing their point which was to be put forth against the argument that was to be made with the supplier.
2) The customer and the supplier were not having a clear understanding of the points that were to be mentioned at the time of design by the two parties while carrying the deal.
In this situation there is a violation of the second rule of negotiation where there has to be clarity among the vision that the party wants from the other parties involved in the negotiation. The supplier and the customer did not have the clarity about the product where the customer was not satisfied with the design that was provided by the suppliers. Suppliers from their side, thought that they had done their bit in designing the product and it was as per the requirements mentioned by the customers. He also described that the changes that were demanded by the customers required expertise and were extremely complicated from the design point of view. There is also breakage of the 9th rule in the development of design between the supplier and the customers. They were not at all flexible from the suppliers side to involve the needs of the customers in their design and at the same time customers were also supposed to have feature of adaptability while accepting the deal from the suppliers about the design of the product. From the supplier point of view, there was not proper understanding of the needs of the customers and this violates the 13th rule of negotiation which involves proper understanding of the client’s needs.
3) The companies were struggling and striving hard to get the job that involved getting greater work, higher volume of effort and at the same time greater price from their side. The lead company had to observe these criteria in the meeting that was going to be held between the four companies.
Firstly, the absence of the project manager in the meeting that was set up for preparing and planning for the negotiations that was going to be held between the four companies. This violates the 3rd rule of negotiation which involves considering the needs of the counterparts in advance and developing strategies for the negotiations with the other companies. There was observed as the project manager was not involved in the preparatory meeting that was done for the negotiations. The lead negotiator was not having a clearance of his goals and arguments with reference to the project manager. This violates the 2nd rule of negotiation where the vision of the same members have to be on the same line and lead to a similar outcome by following the same pattern of arguments. However, there was a huge problem in the management where there is a lack of synchronization between the lead negotiator and the project manager. These serves to be the major loophole in the negotiation that was provided by the company which actually depicts the lack of communication among the team members.
4) This involves a case where there is a negotiation between the supplier’s team and the customer. Customer wanted to place an order for an electronic equipment and at the same time they did not have clearance of the requirements from their side.
The supplier is found to have an advantage over the customers in negotiating the deal with the customers and resulting in either extension of the delivery date or asking for a bonus if it is to be completed on time. The suppliers from their side involving the project manager and the commercial manager would involve following of the 6th rule which involves setting up of goals for individual deal points. This was not carried by them and this led them in a critical situation where the customer asked for a delivery plan as per his wish and the supplier agreed to that without negotiating on that. There is also violation of 8th rule which involves developing alternate strategies to the customer’s demands. This is observed from the negotiating point of view from the suppliers where they are found to be having no potential alternate strategy to answer the demands of the customers. Also there is a breaching of the 12th rule of negotiation, where the parties in the negotiation were supposed to have strength of opinions which is not found from the supplier’s point of view.
The rules of negotiation which were observed in the article and were applied on the case study provided in the coursework. We have use d the rules of negotiation were found to be violated in different ways which has been described above. This will also help in better understanding of the negotiation concept.
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In the 21st century, with the advancement of technology, there are a large number of businesses that are constantly entering the market. These business are striving hard to achieve a niche for themselves in the global market. There are increasing number of opportunities available to the potential business players and at the same time they have to accustom to the ever increasing demands of the customers in order to ensure a competent customer satisfaction and content. Consequently, the concept of international business or multi-national business has gained huge popularity as more and more companies are going global. A multi-national company is a company that would be having its operations in more than two countries across the globe.
Multinational companies tend to maximize their reach globally for connecting to large number of people and transforming them into potential customers for the company’s products or services. There is a considerable amount of research that has to be carried out for incorporating a company into a multi-national firm that would be handling international business across different countries. This research does not only involve considering foreign markets, but also includes considering the local markets that would help them in establishing a firm hold in a specific region. The evaluation of the changing trends that are existing in the market is very important for developing an international business. Multi-national companies have to keep a track of the changing market conditions that are prevailing in the foreign markets where they have established their enterprise. The global and local context of international business requires evaluation and analysis of various factors that are going to be discussed in the below section.
Significance of research in local or global context
There is an extensive research that is to be carried out while developing an international business and developing a multi-national company that would be functioning across different nations. The level of research is very critical and it depends on identifying the target market and target customers that have the potential to achieve the desired level of business from the foreign countries. But, in order to establish a firm hold across the globe, a business has to first be a market leader in their specific business in the local markets or local areas. It requires great efforts to be carried by different departments that are present in the company.
The evaluation of the potential customers requires an in-depth understanding of the needs of the people. Developing the factors and elements that are needed by the people is followed by evaluating the options available. It is then followed by significant research to be carried out for selecting the best possible option that would help them in achieving a large share in the local market. After completely catering to the needs of the customers and people in the local market, a company can develop plans and strategies for its expansion into different countries. For this purpose, there is a considerable amount of research to be carried out regarding the culture, traditions, lifestyle and earning patterns of the people living in the foreign country. The demographics and the business trends have to be merged for deriving an appropriate business strategy for expanding a business from local to international boundaries through developing a multi-national company.
It is very important to understand the local context of the business before making it global as it will not be able to achieve the required level of popularity and support from the market. On the same note, there has to be considerable and extensive research regarding the local factors that have the potential to affect the business. Gathering knowledge and obtaining expertise would help the company to sustain in the local market. It is after establishing a niche in the local market that a company would look for expansion into overseas markets. It would be a critical decision that has to be taken after evaluating and analyzing certain important factors that contribute in determining success of a specific business in the international market. These factors have been discussed with the help of expert researches by business scholars and authors and is described in the below section.
In order to enter the international market across different countries, a company needs to develop strategic alliances with popular and well-known local enterprises or small firms that occupy a great share in the market. This is very important for ensuring that strategic flexibility is obtained that would incorporate the ever changing market conditions and demands of the local people. In 2014, Aldakhil, Abdullah and Nataraja, Sundaram have helped in determining the environmental factors that contribute to the success of any international business for a multinational company through developing International Strategic Alliances. In order to measure the performance of a firm, they have discussed various factors that would help a business to engage in strategic alliances through considering the example of various U.S. enterprises that would partner with multi-national companies and execute their international business (Aldakhil & Nataraja, 2014).
There is another research by authors and business research scholars Dirk Gilbert and Patrick Heinecke in October, 2014, that highlights the importance of developing regional strategies for achieving tremendous growth and success for a multi-national company. They have carried out modelling through the structural equation and derived the interrelationship between the regional factors and the distance between the regions. They have analyzed and evaluated the data that has been collected from the top 500 firms of Fortune Global firms. The degree up to which a regional exposure to the product or service would be useful for developing a significant share in the local market has been determined. The various strategies that are to be incorporated for inculcating the traditional and local values, characteristics and attributes that are expected from the products or services are mentioned and they involve developing a considerable research from the global as well as local context of the business (Gilbert & Heinecke, 2014).
The importance of an extensive and widespread Research and development (R&D) process has been developed by the business authors Michele Cincera, Claudio Cozza and Alexander Tubke in December, 2014. They have derived a research that involves sampling of about 130 large companies that are related to R & D and are based in Europe. The selection of location for expanding the business and taking it to new frontiers has to be carried out after carrying a considerable amount of research about the location. There has to be a local support from the people in the R & D that is carried out by the company in local as well as foreign market. When a foreign location is selected for expanding the local business to different countries, the economic cost has to be considered (Cincera, Cozza, & Tubke, 2014). It will help in measuring the feasibility for the entire process of expansion and also guide in the financial management process for handling the business in different countries word wide.
The companies have to inculcate changes in its operations as well as its products or services owing to the ever changing trends that are prevalent in the market. In January 2016, Michael Hitt, Dan Li and Kai Xu have developed the process of graduation of the international business strategies and concepts that would be useful for taking a business from local dimension to global dimension. They have developed the importance of obtaining global diversification throughout the processes that are adapted by the business to become a Multi-National Enterprise (MNE). There are many strategies that have been explored regarding the opportunities that are available to the Multi-National Enterprises (MNE) for expanding their business in a new territory or country. At the same time, emerging trends in business, different levels of complexities, emerging trends, sustainable factors and business capabilities are to be explored while expanding a company from one region to another region in some different country (Hitt, Li, & Xu, 2016).
In December 2015, Zhaleh Najafi-Tavani, Ghasem Zaefarian, Stephan Henneberg, Peter Naude, Axele Giroud and Ulf Anderson have stated that knowledge management serves to be one of the most important factor while developing an international business in a multi-national company. They have described the role that developing subsidies play in the success of multi-national companies. The contribution of the relationship that is developed between the headquarters and its subsidiaries help in establishing a firm ground for the development of business in different nations across the globe. It is also very important for the managers to consider the characteristics that are derived in developing subsidiaries in the business and these characteristics include, socialized mechanisms, values that are shared, the autonomy features and power to contribute from within. They have developed evaluation by considering 184 U.K. subsidiaries that are governed by international business. Thus, developing a business that would be knowledge intensive and involve developing subsidiary management across the different nations would be very important (Najafi-Tavani, et al., 2015).
These are the various literatures that have contributed immensely in developing a significant research regarding the development of international business through multi-national companies from global as well as local context. The high levels of competitiveness that are existing in the local as well as global market has to be considered from the business point of view. The researches have helped in determining the importance of several factors that are to be researched upon before expanding any business into foreign markets. These factors include the environmental consideration for sustainability, important elements related to R & D to be carried out for taking the organization or business from local to global, development of regional strategies for formulating International Strategic Alliances and developing an extensive knowledge based subsidiaries that would help any business to grow in the international market. Thus, there is a huge significance of carrying a research in developing a business from the local as well as global context.
Aldakhil, A. M., & Nataraja, S. (2014). Environmental Factors and Measures that Affect the Success of International Strategic Alliances. Journal of Marketing & Management., 17-37.
Cincera, M., Cozza, C., & Tubke, A. (2014). Main drivers for local and global R&D sourcing of European Multinational Enterprises. Eurasian Business Review, 227-245.
Gilbert, D., & Heinecke, P. (2014). Success Factors of Regional Strategies for Multinational Corporations: Exploring the Appropriate Degree of Regional Management Autonomy and Regional Product/Service Adaptation. Management International Review (MIR)., 615-651.
Hitt, M. A., Li, D., & Xu, K. (2016). International strategy: From local to global and beyond. Journal of World Business, 58-73.
Najafi-Tavani, Z., Zaefarian, G., Henneberg, S. C., Naude, P., Giroud, A., & Andersson, U. (2015). Subsidiary Knowledge Development in Knowledge-Intensive Business Services: A Configuration Approach. Journal of International Marketing., 22-43.
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Table of Contents
Analyzing the current situation 3
a. The firm 3
b. The industry the firm operates in 3
c. Competition 4
d. Major Challenges the firm/industry faced with 5
Business Strategy of the firm 5
Cost leadership 6
Cost Focus differentiation Focus 7
Implications on firm’s economic performance. 7
• External environment: 9
• Internal environment. 9
Evaluating internal and external environment through SWOT Analysis 10
• Rivalry in the industry 11
• Market growth rate 11
• Firm’s market share 11
Criteria Matrix to Evaluate Alternatives 12
Alternatives to Solve the Highlighted Issues or Problems and Recommendation 12
Action Plan and Contingency (emergency) Plan 13
Analyzing the current situation
The current situation of the airlines industry and the hold of AirTran Airways in it has been analyzed on the basis of the following four parameters:
a. The firm
AirTran Airways is an American airlines that is involved in providing cost effective services to the passengers. It was the first airline who provided Wi-Fi on flights in July 2009. It was adopted in almost all of the Boeing 737 and Boeing 717 jets that are utilized by the airlines. Its most important characteristics is that it provides low fare travel experience to its customers and hence tends to provide an economic solution to the expensive air travelling across different airlines across the United States.
The AirTran Airways is a subsidiary of the AirTran Holdings Inc. where it has been providing its services across the United States. The headquarters of the company is at Orlando, the central and major hub of the flights and operations is at Atlanta. It tends to be the second largest carrier in Atlanta. It had a fleet of about 86 Boeing 717-200 aircrafts, 50 of the Boeing 737-700 aircrafts and with these fleet they offered about 700 flights every day to different cities in US (Byles, 2009).
b. The industry the firm operates in
There has been a tremendous loss in the industry. It can be seen from the declining demand where there was loss of about US$170 billion throughout the airline industry. The loss that has been observed in AirTran is about US$4.7 billion. There has been an entry of large number of cost effective and low fare airlines in 1978 when the US airline industry was deregulated. There was a huge failure in the 1996. However, AirTran was able to recover the losses that had led to the falling in the sales and profits of the company. However, the other companies were not able to adapt themselves as per the falling demands in the airlines industry and those who did adapt, were facing other technical and safety issues. It includes the crash of the flight no. 592 of the ValuJet Airlines where it claimed life of about 110 people (Byles, 2009). It was after this that the ValuJet had to serve a ban of about 4 months by the Federal Aviation Administration. Thus, as a result their image had fallen so much that it decided to merge with the holding company for the AirTran Airways that was known as the Airways Corporation Inc.
There is a highly competitive environment developed in the airline industry. It involves considering the rivalries in the aviation market. The rivalries for the AirTran Airways is the Virgin America, Delta, United Airlines and the Air Canada. They have been adapting changes in their functioning and the products and services offered in a very slow manner. They have not been a pioneer in the field of technological innovation in terms of providing hi-tech products and services throughout the air travel provided by the airlines.
The competition between the AirTran Airways and other airlines can be evaluated through the provision of the air quality rating rankings that have been shown in the below table for 2007 and 2008:
d. Major Challenges the firm/industry faced with
Maintaining sustainability at economic costs tends to be the major challenge of the Airline industry. It refers to the development of various characteristics that would stand apart in the industry for developing a niche for itself for the AirTran Airways in the glob airline industry. There has been a tremendous loss in the airline industry as the demands have been falling since 2008. The forecasting of the loss amounted to about US$ 170 billion in the airline industry (Byles, 2009).
Business Strategy of the firm
There are various elements that are to be considered while evaluating and analyzing the business strategies of a firm. It has been discussed below:
Cost leadership refers to the concept of developing a competitive advantage in the respective industry through providing cost effective programs that are one of the lowest costs offered in the industry. The concept was developed by Michael Porter that involves developing a cost effective business strategy that is achieved through the operations of the AirTran Airways.
The quality and cost effective service that is provided by the AirTran Airways as compared to its competitors like the JetBlue, Delta and Southwest airlines tend to serve a major role in the contribution of other elements in the field of the Airline Bag fees that are collected by them has been shown in the table below:
Differentiation refers to the development of business strategies that involves development of an altogether new product or service in the global industry. It is carried out through emphasizing on the innovative element of the strategic management (Tanwar, 2013).
Cost Focus differentiation Focus
The focus of the company refers to the characteristics that the company emphasizes on while development business strategies and other operations across the company. It can either be cost focused or differentiation focused (Tanwar, 2013). Hence, the main element of the industry refers to the development of the services and products by the AirTran Airways through the cost focus business strategy that includes a small inclusion of differentiation. Hence, cost focused strategy of AirTran Airways is visible from the low cost air fares that it provides. However, the differentiation element is observed in the development and provision of Wi-Fi services on the flight to its customers which was one of the most innovative implementation that differentiated them from their competitors.
Implications on firm’s economic performance.
The implication of the business strategy on the economic performance of the AirTran Airways has been provided in the table below:
Internal Analysis of the Firm from Strategic Management Perspective
From the strategic management perspective there are many factors that are belonging to the external as well as internal environment that is observed for a company in the industry. It has been shown in the following figure:
• External environment:
It refers to the elements that are affecting the business from the external side and the company hardly has any control over it. However, the company can develop strategies for the growth of the business during such times.
• Internal environment.
It refers to the elements that are present in the activities and other operations carried within the organization. It can be completely controlled as it is in the power of the airlines to track the internal elements regarding the performance of the employees and other operations across the system (Tanwar, 2013).
For proper explaining and evaluation of the internal and external factors affecting the business strategy, SWOT analysis has been carried out for the AirTran Airways.
Evaluating internal and external environment through SWOT Analysis
Internal environment factors Strengths:
• Providing cost effective services to the passengers.
• First airline who provided Wi-Fi on flights in July 2009.
• Provides low fare travel experience to its customers Helps in getting an economic solution to the expensive air travelling
• Negligence of quality
• Excessive importance on the cost cutting
• Extensive number of flights not available
• Very meagre Global presence
External environment factors Opportunities:
• Increasing exposure to different countries
• Large number of cost effective services
• Number of travelers who are looking for economic air travel across he cities in US has been increasing Threats:
• A decline in the demands of the customers
• Deterioration and loss in the airline industry
• Increasing number of potential competitors
• Competition from the existing rivalries.
• Rivalry in the industry
Delta airlines tends to be one of the most significant competitor for the AirTran Airways. Though, Delta Airlines has a bigger fleet and wide range of operations, it has been provided with a considerable amount of competition from the AirTran Airways. The comparison of the domestic markets available for AirTran Airways and Delta Airlines has been shown in the table below:
• Market growth rate
There has been a continuous increase in the growth rate of AirTran Airways, except in the year of 2008, when it had suffered loss. There is a stable growth of about 7 – 9% every year in the market revenue generated by the AirTran Airways.
• Firm’s market share
The market share that the firm and other companies have in the US market has been provided in the below table:
Criteria Matrix to Evaluate Alternatives
Alternatives to Solve the Highlighted Issues or Problems and Recommendation
Thus, it can be recommended that the presence of the Airlines has to be increased throughout the globe by increasing the fleet of the flights and providing flexible services in terms of the options available to the customers for different class of travelling. However, with the cost effective services, it should also increase the number of quality services that contains providing exclusive air travel experience at effective high costs.
Action Plan and Contingency (emergency) Plan
Developing an action plan and a contingency emergency plan involves the following steps to be taken:
1) Business impact analysis:
i) Exercise and maintenance:
(a) Continuous improvement
ii) Disaster Recovery planning
(a) Audit DRP plans and processes
(b) Output to the management
iii) Business continuity plan
(a) Safety management
(b) Security checking at regular intervals
(c) Quality management procedures
(d) Emergency landing and other activities
Byles, C. M. (2009). Airtran Airways, Inc. AIRTRAN AIRWAYS.
Tanwar, R. (2013). Porter’s Generic Competitive strategies. IOSR Journal of Business and Management , 11-17.