CULTURAL NEGOTIATION: ALPHA-BETA

ROLE OF ALPHA

The underlying structure of the exercise this week was teammates different from
the other negotiations due to the introduction of cultural differences between the
negotiating parties.

PRE-NEGOTIATION PREPARATION

The readings for this class gave a good understanding of the differences in
negotiating styles among multiple cultures. For example, in the articles ‘Getting
to Si, Ja, Oui, Hai and Da’ talked about the importance of building trust when
negotiating with particularly Asian Cultures. It says that trust can be divided
into two categories: cognitive and affective. Cognitive trust is based on the
confidence you feel in someone’s accomplishments, skills, and reliability.
However, it is equally to build Affective trust which arises from feelings of
emotional closeness, empathy, or friendship. After reading this article, I
developed a fair idea about ways of expressing disagreement, the importance of
building cognitive trust and the ways in which questions could be asked.

After reading the case in the class, the structure of the negotiation was quite
clear to me: WIN-WIN. It is because both companies ALPHA (GE) and BETA
(HITACHI) possessed expertise in different segments of the same business. While
ALPHA had a unique strategic advantage in installing factory automation
systems, large industrial sales, distributive and service network; it did not have
advanced robot manufacturing technology, which was BETA core strength. On
the other hand, BETA would benefit from the strong marketing relationships of
ALPHA if they decided to do business together.

Also, in the preliminary talks between the companies, multiple points were
already agreed including duration of the relationship and the underlying
structure of this exchange. Due to these factors, I had a strong feeling the deal
would go through and an impasse was highly unlikely.

The next step was to discuss and exchange ideas with my teammates: Anthony
and Dongjie. My objective of this internal discussion was rank the rank the
issues, define the BATNA and the negotiation strategy and chalk out the opening
offers and subsequent MESOs. I also wanted to understand the personality of
team mates to maximize the use of our strengths during the discussion.

There was a bit of difficulty in ranking the issues as we were not sure on the
quantitative impact of the transfer of manufacturing technology and access to
vision technology. This is how we ranked the issues:
1. Number of Models
2. Royalty Rate
3. Transfer of Manufacturing Technology
4. Number of Units
5. Access to Vision Technology

Next, we chalked out the strategy/approach to the negotiation. To align ourselves

to ALPHAN negotiating style, we decided that 1) Show respect to BETA’s culture
but stick to our negotiating style 2) Though it was a WIN-WIN approach, we
decided to give a moderate opening offer 3) Respectfully show all emotions on
table 4) Ask open-ended questions. Also, we were not sure what to expect in
terms of cultural barriers, we decided to learn as we go during the negotiation
process.

We decided on the following BATNA:

Issues BATNA
Number of Models 6
Number of Units of Each
Model 250
Access to Manufacturing
Technology Yes
Access to Artificial
Technology Yes
Royalty % 6%

Based on our ranking of issues, we decided on the following MESOs.

Issues MESO A MESO B MESO C

Number of Models 7 8 8
Number of Units of Each
Model 120 200 220
Access to Manufacturing
Technology Yes Yes Yes
Access to Artificial
Technology Yes Yes Yes
Royalty % 6% 5% 4%

DURING NEGOTIATION

The negotiation started greeting each other and exchanging pleasantries. There
was a bit of confusion when we started with a greeting. They bowed down and
we extended our hands for a handshake. But, we immediately accepted the
different approach and moved on.

BETA started by talking about our flight, hotels, families, children, vacations,
CAJUN food, dance forms, weather, dogs….. Actually, everything other than
business. It was quite funny though! As we decided to show our respect to the
culture, we let it boil for the first few minutes. But, there was a point when
Anthony and I had to step down and navigate the conversation towards business
discussions.

As decided to ask open-ended questions to understand the motivation of BETA

to make the deal today. Questions such as “How do they see the robotic
market?”, “What are their major challenges?”, and “Which geographic areas and
sectors do they wish to expand?”. The answer to these questions consolidated
our belief that BETA was equally motivated to partner with ALPHA due to their
challenges with sales and service network. At this point, we were sure that this
was a WIN WIN situation and an impasse was unlikely.

One of the things that frustrated us was the lack of feedback and long pauses.
So, we decided to rank the issues with them and this was the result:

Issues ALPHA BETA

Number of Models 1 3
Number of Units of Each
Model 4 2
Access to Manufacturing
Technology 3 5
Access to Artificial
Technology 5 1
Royalty % 2 4

From this issue ranking, it was clear that No of Models, No of Units,

Transfer/Exchange of technologies were close to integrative issues. Royalty was
closer to distributive issues with low priority for BETA.

We presented our opening offer on the table. But there were no counter offers
from the other side. So, we suggested that BETA takes some time as a team (in
line with their culture) and we moved out of the room.

After the short offline conversations within teams, BETA gave us their
counteroffer. Though, it was quite aggressive but was in line with the issue
ranking. To push the conversation further, we presented our MESOs (As
mentioned above).

We were closest to MESO C and started to discuss that in more detail.

 Issues MESO C
Number of Models 8
Number of Units of Each
220
Model
Access to Manufacturing
Yes
Technology
Access to Artificial
Yes
Technology
Royalty % 4%

As a number of units were quite important to them and low priority for us, we
were able to negotiate a higher number of models and lower royalty for a higher
number of models for them.

Though we wanted to set terms of exchange for access to artificial technology

(such as 50% access, 75% access and year in which it could be accessed), both
teams couldn’t quantify it due to lack of information in the article.

WHAT WORKED WELL?

Though based on the facts and the motivation for each team, an impasse was
unlikely but due to cultural reservations, BETA was very slow with their business
responses. They started to talk random nonbusiness stuff in the middle of the
conversation that wasted a lot of time. At a certain point, an IMPASSE seemed
more than likely due to the slow pace of the negotiation. However, my team and
I did a decent job in pushing the conversation further and respectfully bring
them back to deal discussions.

Both teams (ALPHA and BETA) played true to their characters. On one hand with
Nicole, Evan and Jerome played super slow, rarely made an eye contact, on the
other hand, Anthony, Dongjie and me played loud, impatient characters
including banging tables at a time with aggressive body language.

WHAT DID NOT WORK WELL?

Like other teams, we completely missed the point of not committing to more than
1200 robots in the first year. From the business perspective, it was not wise
because it would lead 1) Higher Inventory Costs (due to low turn ratio) 2)
Reduced Cashflows.

Also, we could have learned/used few words in the local language just to build
the trust as it is a major part of their culture.
FEEDBACK

TEAM ALPHA (MY TEAM)

I believe my team did a good job in playing true to the character. Anthony, in
particular, showed all signs of ALPHAN negotiating style including banging of
table at times (it was planned!). He tried to build rapport during the start of the
negotiation and then quickly switched to ALPHAN mode. He had stuck to the
strategy we made but improvised as the negotiation moved forward. However, I
felt that at certain points, TEAM BETA convinced him with their random stories
but he quickly understood and bounced back.

Dongjie also made good points during the negotiation and tried to
clarify/reinforce the points agreed with BETA to ensure if we had the same
understanding. However, Dongjie seemed to play passive which was contrary to
ALPHAN style.

TEAM BETA

Team BETA also played very well and true to the character. Nicole, in particular,
tried to talk us into random nonbusiness stuff, which was a great attempt at
trust building. Also, the team had divided their responsibilities with each person
representing their own issue. When we asked a question to Nicole about no of
units, she quickly passed it on to Evan who was responsible for it. She asked
good questions about our motivation and issue ranking particularly on the
number of models.

Anthony also made some great points and asked open-ended questions to
understand our stand on technology transfer. He also asked the same question
in multiple approach, maybe to check if we were consistent.

Evan also worked towards building trust in the beginning but soon went into a
passive mode. I believe he was playing true to cultural habits but it would have
been nice to listen to his perspective in the meeting.