Negotiation Management: A Role Play Approach. Working Paper from the Supply Management Institute's series Purchasing and Supply Management [1 ed.] 9783896443342, 9783896733344

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Negotiation Management: A Role Play Approach Working Paper from the Supply Management Institute's series Purchasing and Supply Management Supply Management Institute SMI™ Univ.-Prof. Dr. Christopher Jahns

Nikolas Krawinkel, Roger Moser, Johannes Röhren, Arne Semsch and Michael Taterka

A collaborative publication from SMG Publishing AG

Verlag Wissenschaft & Praxis

The German Library - CIP-Affiliation

The German Library lists this publication in the German national bibliography;

detailed bibliographic data is available on the Internet at http://dnb.ddb.de.

© SMG™ Publishing AG, 2005

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SMG™ Publishing AG ISBN 3-907874-34-X

Verlag Wissenschaft & Praxis ISBN 3-89673-334-6

Printed in Germany

Table of contents 1

Case Study Description.........................................................................................2

2

Personality Description.........................................................................................4

2.1 2.2 2.3

3

Dr. Gonzalez (Purchasing Manager / Buying Firm)....................................5 Mr. Leibacher (Engineer / Buying Firm)........................................................6 Dr. Silver (CEO / Supplier).............................................................................. 7

The Perspective of a Systematic Coach........................................................... 8 3.1 3.2 3.3 3.4

Dr. Gonzalez (Purchasing Manager I Buying Firm)....................................8 Mr. Lebmann (Engineer / Buying Firm)....................................................... 10 Dr. Silver (CEO / Supplier)............................................................................ 11 Summary......................................................................................................... 12

4

Theoretical Background..................................................................................... 13

5

Solution....................................................................................................................15

5.1 5.2 5.3 5.4 5.4.1 5.4.2 5.4.3 5.5 5.6 6

Generation of Alternatives.................................................................................. 34

6.1 6.2 6.3 6.4 7

Must / Can Criteria......................................................................................... 34 Possible Alternatives..................................................................................... 35 Benefit Value Analysis...................................................................................38 Analysis of Possible Threats.........................................................................39

Strategic Solution Proposal...............................................................................41 7.1 7.2 7.3

8

Basics...............................................................................................................15 Case Map........................................................................................................ 15 Sociogram........................................................................................................17 Stakeholder Analysis......................................................................................19 Automotive Producer..................................................................................... 21 John Silver Inc.................................................................................................23 Influence Assumption.................................................................................... 25 Focus Finder................................................................................................... 26 5 Forces........................................................................................................... 29

The Goals of Cooperation.............................................................................42 The Strategic Process...................................................................................43 Summary......................................................................................................... 50

Outcome & Results...............................................................................................51

Acknowledgement...................................................................................................... 52 Literature....................................................................................................................... 53

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Case Study Description1

For more than 20 years, John Silver Inc., a medium-sized dashboard supplier

located close to London, has delivered dashboards to a large automotive producer with production facilities near Berlin. The relationship has always been good and both accomplished their duties without any major problems or

complaints. Recently, the situation has changed. For some weeks the automotive producer has experienced quality problems with the supplied

dashboards. A conflict has arisen as neither John Silver Inc. nor the automotive producer feels responsible for this problem. Furthermore, the

prices for raw materials have increased and therefore, the supplier demands a higher price for the supplied dashboards. John Silver Inc. is one of just a few

suppliers that provide suitable dashboards.

Since the beginning of this year, more and more customers have complained about vibrating dashboards. When driving 120 km/h or more, disturbing noises

are audible from the dashboard. The automotive producer has an excellent reputation regarding quality standards and is the market leader in the supreme

upper premium segment. The producer is worried about its customers’ perception regarding the high quality products and fears that its image will be damaged. Recently the company had similar problems with a supplier that

delivered defective parts and believes to be confronted with the same situation again.

The automotive producer is a large organization with a hierarchical structure. Dr. Gonzalez is a young successful purchasing manager and joined the

company ten months ago. He is 33 years old and known to be dominant, determined and assertive. His colleague, Mr. Lebmann, is an engineer and has been working for the

company for more than 25 years. He is 57 years old and described as a

harmony seeking, conservative and cooperative person, rather introvert than outgoing. His knowledge concerning technical aspects of the project is

unquestionable.

1 This case study is completely fictitious.

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John Silver Inc. is an innovation leader in its market and the second largest

supplier of dashboards. Just a year ago the company invested a large amount

of money to build a new research and development facility. Dr. Silver is the CEO of John Silver Inc. He is known to be very determined,

self confident and sometimes a little fickle. He is 53 years old and plans to visit Berlin on Friday the 25th of May - two weeks from now - for negotiations

about new prices and the above mentioned quality problems. Due to the importance of the automotive producer as the company’s main customer, he

wants to negotiate with Mr. Lebmann and Dr. Gonzalez in person. Mr.

Lebmann and Dr. Silver have known each other for almost two decades and

so far their relationship has been very good.

Your task is to develop a negotiation strategy including adequate preparation. You should bear in mind that every person has different

objectives

and

that

everybody

has

a

different

personality. Therefore, you should try to work out a strategy to solve conflicts and to negotiate - if possible - a result which

satisfies both parties’ needs.

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Personality Description

2

The personalities of th are

persons

and

differer rathe

a

provide

complex and challengin

storyline.

potential

The

conflict

among the three me

have to be considere

as

relationships.

read

the

as

well

Carefull

th

through

description character

of and

yoi

try

t

identify yourself with it. is

also

focus

on

important

the

t

overall

situation in order to anticipate how certain situations might put pressure on the

characters. Each personality has different strengths and weaknesses, which will become apparent in a stressful situation. Moreover, you should think about

different steps in the negotiation process and how the persons might feel and react to them.

As you will see, different personality types will be involved and it is your task to

overcome arising conflicts. A careful preparation should enable you to handle these problems.

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Dr. Gonzalez (Purchasing Manager I Buying Firm)

Dr. Gonzalez is a successful, career-oriented purchasing manager. He has experienced a quick and uncomplicated rise in the job ladder. He is 33 years

old and joined the automotive producer ten months ago. Dr. Gonzalez was appointed to the purchasing position because of his ability to push through his

ideas and goals. He is a self-confident, innovative businessman despite being a reserved person. Due to the hierarchical organization structure, he is confident to lead the

negotiation for this company. He is willing to change things and do everything necessary to defend his ideas and beliefs. Moreover, he is an unscrupulous

manager who tries to avoid closer relationships with costumers. His opinions tend to be hard on the problem and the people; in fact he is a real hardliner.

As a consequence, he always searches for the only answer - the one he

accepts. Sometimes he tends to act quickly and chaotic. He is a distrusting

nature insisting on his position. Dr. Gonzalez is a tough negotiator willing to

sacrifice everything in order to win a negotiation.

His decisions are

independently taken from the other participants. Consequently, he tends to see the other participants as competitors, although they are members of this

team. Dr. Gonzalez is not used to being confronted with technical issues and therefore not used to working with engineers. The negotiation with John Silver Inc. is the first time Dr. Gonzalez works with Mr. Lebmann (the responsible engineer at the buying firm). They do not know each other well. In fact, a relationship with Mr. Lebmann hardly exists. Hence, the relationship can be

characterized as a sceptic, low trust relationship. A predominantly disturbed

communication can be recognized as a matter of fact this can turn out to be a high conflict potential which should not be neglected. Yet, both team members believe that each individual is in charge. Dr. Gonzalez is a daring negotiator and his goal is to win this negotiation in order to show his ability to succeed as

the responsible purchasing manager. Some time ago, Dr. Gonzalez received information that John Silver Inc. is facing financial problems. It is probable that he will be confronted with a goal conflict, on the one hand he wants to win the negotiation and on the other hand he might face a conflict with his colleague

about the leader position.

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Mr. Lebmann (Engineer / Buying Firm)

Mr. Lebmann is an experienced and appreciated engineer who has been with the buying firm for two decades. He is known for his expertise in technical matters. He has a friendly and respectful relationship with Dr. Silver, CEO of

the supplier. He is a structured problem solver who is known for his analytical skills. His attitudes are organization and security-based and are the result of a strong focus on personal contacts and communication. He is able to affect

compromises by his cooperative ways. Nevertheless, he can be characterized

as old-fashioned due to the fact that he is afraid of risks, changes and

conflicts. In critical situations he tends to be soft, helpful and likes the feeling of being needed by his team members. On the other hand, he is precise,

reliable and systematic. His focus is on playing fair. On the other hand he is a

determining negotiator. Guidelines have to be fulfilled with a nitpicking strictness.

Mr. Lebmann hardly knows Dr. Gonzalez. He believes that there will not be any problems if Dr. Gonzalez joins the negotiation and thinks that they will

agree on how to solve the presented problems. Mr. Lebmann is confident that he will find a common base with his new team member to achieve good

results. Still, Mr. Lebmann fears to be dominated by Dr. Gonzalez’s strong

character. He wants to avoid a hierarchical conflict with the new purchasing

manager. However, he is aware of Dr. Gonzalez’s claims to lead the negotiation and is willing to step aside.

Nevertheless, Mr. Lebmann is an inflexible person who feels affronted by the

generation conflict. His relationship with Dr. Silver can be described as a friendly, respectful and open-minded cooperation. They are associated with each other through a long and stable business relationship. Sometimes it seems to be something close to a friendship, but in fact they are two two-fisted

negotiators who manage to differentiate between business and personal matters. They are facing simply soft problems which are dominated by each

other’s appreciation. They make concessions to cultivate the relationship and

one may recognize a high level of trust.

Mr. Lebmann’s goal is to maintain the business relationship with John Silver Inc., because the supplier has proven to be a reliable partner who delivers always on time and guarantees high quality standards. Furthermore, Mr.

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Lebmann has recognized that the quality problems are probably not caused by the John Silver Inc. A quality check of the supplied dashboards has proven the high quality; as a consequence, he is aware that the problems are occurring

due to wrong implementation.

2.3

Dr. Silver (CEO I Supplier)

Dr. Silver is 53 years old and the CEO of John Silver Inc. He is a goal-

orientated, dominant manager who is a resolute negotiator. He has been in

the business for over 25 years now. His experiences in negotiating with large

automotive companies and his determining mindset make him a though opponent. He is well-structured, organized and precise. Dr. Silver can be characterized as a conservative, calculating business man who acts with high

commitment and rational knowledge. Moreover, he is a consequent decision maker who relies on nothing but this experience and knowledge. Objectives

play an important role in his mind and sometimes he seems to be inflexible. Dr. Silver’s company is one of a few suppliers for quality dashboards; as a

consequence of this seller’s market, he has a strong position in the negotiation. Order and security are two really important issues in his life and he fears changes and risks. Recently, his company has been confronted with an economic slowdown, which might lead to financial pressure. In addition, the

prices of raw material have increased. Therefore, his short-term goal is to reduce costs. Long-term goals are to assure security and sustainability.

In order to deliver a picture of Dr. Silver’s relationship with Mr. Lebmann one has to consider that they appreciate each other. Usually, they are simply

facing small problems and they make concessions to cultivate the relationship. Even though, one can recognize a high level of trust. This negotiation will be a

tough one because of the economic circumstances the company is facing. The uncertainty caused by the new participant Dr. Gonzalez will change the game.

Dr. Silver is well aware of communication problems within the automotive

team. Therefore, he will try to separate the people from the problem and to

focus on interests, not on positions. As a matter of fact, he sees a chance to play Dr. Gonzalez off against Mr. Lebmann. He especially focuses on his goal

to reduce costs and wants to yield to principle, not to pressure.

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The Perspective of a Systematic Coach

By Dr. Karin Martens-Schmid An additional comment to “Negotiation Management: A Role Play Approach”. The authors developed creative and convincing solutions to the particular negotiation situation, all of which assume that all conflicts concerning the participants in the process and their constellation had been overcome thus

enabling constructive communication on the relational level.

Systemic coaching as a personal-related and context-oriented consultancy tool can be regarded as a very beneficial way in order to broaden the

individual perspective of the participants as well as a good preparation to negotiation situations. What could have been said, if each and everyone had

have a personal coaching session beforehand?

3.1

Dr. Gonzalez (Purchasing Manager / Buying Firm)

Regarding the negotiation Dr. Gonzalez exposes himself to a high pressure to

succeed. He is new to the company and is much younger than the other men

who naturally are more experienced; moreover, a good relationship exists between the other two. Therefore, he is forced to demonstrate his power,

competence and position. Thus Dr. Gonzalez - considering his not very sociable and rather reserved behaviour - would be easily opposed to his negotiation partners right from the

beginning. If he keeps trying to “win” the negotiation desperately he will fail to create a mutual appreciation of the participants. Consequently, constructive

solutions (“win-win”) will be out of the question. In a coaching session possible threats relating to his expectations would have to be reflected. This could be achieved by asking the question how he - from

his and the company’s point of view - could be a successful negotiator. First of all, the significance of the perceptions and assessment of the roles and

interests of the other participants in the negotiation must be analyzed.

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Possible hazards deriving from this “tunnel vision” could be addressed.

Potential strategies to approach the partners - without giving up one’s own interests - could be discussed in order to develop communication on a

relational level. These topics on self-reflection regarding personal attitudes as well as the

broadening of perception of the other participants had to be complemented. A detailed analysis of the context as well as of each partner’s role and task will

contribute to an overwhelming understanding of the issue. This would reveal

that there is no definite result before the end of the negotiation process as the complex relation network between the participants has to be taken into

account. Therefore, a coach could recommend that Dr. Gonzalez should clarify his own attitude towards Mr. Lebmann and their roles during the negotiation

process on a mutual basis beforehand.

Besides,

possible

strategies could be developed on how Dr. Gonzalez could secure his leading position from the company’s point of view and how Mr. Lebmann’s experience and expertise could be integrated into the negotiation process. Thus, an

inefficient fight for power and positions during the negotiation could be

avoided.

When addressing Dr. Silver, Dr. Gonzalez should point out the successful cooperation the two companies have had in the past, thus appreciating the good relationship between Dr. Silver and Mr. Lebmann. During the coaching, Dr. Gonzalez could realize that this would not harm the accomplishment of his

interests. In fact, it would strengthen his position presenting himself as the “newcomer” who wants to maintain good communication between the two

parties and also strives for an acceptable solution for either party.

Eventually, the coaching could help Dr. Gonzalez to find new workable solutions which would lead to an expansion of his role spectrum. As leader in

the negotiation he would not just be a decision maker thinking in linear structures, but also a flexible designer and moderator. Therefore, he needs to

overcome

his

apparent fears

that

contact with

others

and

valuable

communication on the relational level could weaken his position.

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Mr. Lebmann (Engineer / Buying Firm)

Analyzing the context of the negotiation

in order to understand the

expectations and roles of the participants would be of great importance when coaching Mr. Lebmann. Apart from that, his loyalty conflict (affiliation to the

company vs. long lasting friendly relationship to the supplier) would have to be reflected. This would help him to create a clear attitude towards the others and the interaction with them during the negotiation.

Since Mr. Lebmann rather tries to avoid conflicts it would be very important to develop a clear understanding of his role within the negotiation process. This

should help him to present himself as a very experienced and knowledgeable participant who is of great value to Dr. Gonzalez. Additionally, the analysis

should reveal the high pressure that Dr. Gonzalez is exposed to and enable

Mr. Lebmann to act more relaxed in the negotiation. Through the coaching Mr. Lebmann could learn that it might be more useful from a strategic point of view to let Dr. Gonzalez lead the negotiation. Mr. Lebmann would be the supportive

expert dealing with technical questions.

Three major issues would have to be discussed between Mr. Lebmann and Dr. Gonzalez before the negotiation process:

Active clarification of the participants’ roles in a cooperative way to point out Mr. Lebmann’s perception of the quality problems’ causes (as part of the development of a

negotiation

strategy) in

order to

benefit from

his

experiences.

Taking these points into account will help to develop a synchronized strategy for the negotiation. As a result of this preparation process, Mr. Lebmann could

expect his colleague’s respect towards the long lasting, good relationship with the supplier.

From my point of view as a coach - unlike the authors have suggested - Mr.

Lebmann would not be able to play the role of the “relationship manager”, especially not if neither roles nor strategies were clarified in advance. Since he

is rather risk averse and shy he would be “forced” to discuss positions especially in tense situations.

The change of his self-conception and the role of Dr. Gonzalez are crucial to a successful outcome of the negotiation. Only after he has been able to reflect

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his own position, to broaden his plans of action and to take over relational

guiding tasks a win-win situation might become more probable.

3.3

Dr. Silver (CEO / Supplier)

Dr. Silver is an “old stager” who totally relies on his experience. A coach could

offer him to discuss possible threats in the upcoming negotiation.

A first aspect would be his conflict of securing the relationship to the automotive producer and the pressure to lower costs. Coaching could help to prioritize possible outcomes of the negotiation.

Another topic during the coaching could be an analysis of the other participants and their expected roles within the negotiation. It would be wise to

develop an attitude which does not put too much pressure on Mr. Lebmann

because otherwise he might pull out of the negotiation process as he enters into a loyalty conflict. Dr. Silver could come to the point where he decides not

to focus on the long lasting relationship with Mr. Lebmann, but to address him

as an experienced expert in the course of the negotiation.

Regarding Dr. Gonzalez coaching could stress the importance of situation evaluation from his perspective. The high pressure Dr. Gonzalez exposed

himself to would become apparent: not only to succeed as a newcomer in the

company but also to face two experienced experts that have built up a close relationship. The tension that is related to that could be seen as another threat

to a successful outcome of the negotiation. Therefore, a coach could recommend considering aspects such as Dr. Gonzalez’s responsibility for

showing appreciation towards Dr. Silver. Thus Dr. Gonzalez would need to

fight for his positions and could rather contribute to a constructive solution of the negotiation. Dr. Silver’s ability to relate to not just personal interests but also to issues regarding the negotiation could be used more effectively.

A coach would also ask him in which situations he would react concerned. In the conversation it could be discussed how to behave in such situations and advised not to put too much attention to the situation but rather focusing on his strategy. Basically, the coach’s task would be to point out that playing off Dr.

Gonzalez against Mr. Lebmann harms the business relationship with the

automotive company. Either of them would probably insist on his own position

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in order to avoid losing his face. This would not lead to a successful outcome

of the negotiation.

3.4

Summary

Coaching as part of the preparation for the negotiation process could serve as

a tool to analyze the negotiation process together with the client. A broader perspective on the roles and expectations of the participants could be gained

and possible plans of action and distinct strategies could be derived.

Furthermore, an understanding for the others’ initial situations as well as the ability to reflect about oneself could be developed. Thus, threats relating to

prejudices and other emotional burdens could become apparent and could be

addressed, which otherwise would narrow the opportunities for a successful outcome of the negotiation.

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Theoretical Background

In order to provide an adequate theoretical background a short introduction to

LUHMANN’s systems theory, which focuses on organizations as part of social systems, will be presented in the following. It is important to know the sense­

making of each individual in order to gain a deeper understanding of the

underlying processes of negotiations. The negotiation strategy can be derived from the general assumptions made. In order to provide this knowledge, psycho systems and organizations have to be considered.

Generally speaking, a social system is communication-based and operates in the medium of sense with the goal of complexity reduction. A social system is not able to perceive. Perception is done by psycho systems which are part of

the environment of social systems and structurally engaged with it through the basic operation of the social

system - the communication. Psychological issues are not part of the communication, but can be addressed by

it. The system is sense constituted as well as sense constituting. “The system “is” the difference between the

system and its environment.” (Luhmann & Baecker, 2004, p. 66). This seems

to be a paradox, but it is not really. The system is sense constituted, which means that the original sense given which separates the system from its

environment by just focusing on a defined part of it, creates a difference

between the system itself and its environment. This difference is the system as it is constituted by the sense. Therefore, it is also sense constituting. The system is constantly giving sense to its actions - it creates new differences by

running through sense-making processes.

In order to influence organizations, it is necessary to have a closer look at these processes. It is not the organization which perceives actively, but the

psycho systems of its environment. Consequently, the manipulation of their

perceiving is of greater interest when it comes to negotiations. The psycho system is only able to perceive what is part of its environment, e.g. information, rumours, actions etc. In order to influence organizations’

behaviour, the information available for the involved individuals is essential.

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Preparing a negotiation knowing that it is based on double contingency opens the gate to several solutions. Double contingency allows the negotiator to consider better solutions than the best negotiated one. It is important to accept

that there is more information than currently inherited in thinking,

and

through

the

joined

ones

sense-making

processes possible alternatives increase. Sense­ making processes are based on three phases. (1)

During the design phase, a new situation is

identified

and facts

are

assigned to former

experiences. (2) In the selection phase, this data is interpreted based on the former interpretation cluster and different explications can be derived.

From these, the most logical one becomes sense. (3) The retention phase finally saves the gained sense, uses the interpretation cluster and influences the upcoming sense-making processes.

Negotiation management has to focus especially on the first phase in order to get to a common sense and create win-win situations. (For further information

refer to Luhmann & Baecker, 2004).

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Solution

5.1

Basics

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In this part of the solution development, basic analysis is executed and a

general overview of the case and its underlying problems and conflicts is presented. The relationship

between the three individuals involved is analyzed by a detailed sociogram.

Furthermore, there will be an analysis of the possible groups of interest and each stakeholder is weighted by

specific factors in order to provide a clear description of possible conflicts

between the stakeholders and the negotiation goals.

5.2

Case Map

The Case Map serves as a framework to get an overview of all important

issues regarding the negotiation. It is a useful tool for developing a suitable solution and it helps to keep all the important aspects in mind.

Its key

elements are the following: 1. Key problem

The key problem forms the nucleus of the case map. When working on the

other parts it has to be borne in mind that they are based on and strongly relate to the key problem. 2. Stakeholders

In the classical case map, stakeholders are listed in the upper left corner. In

order to get a clear image of the post-negotiation period and to exclude unexpected disturbances caused by people not directly involved in the negotiation process, all relevant stakeholders have to be identified and an

analysis of their possible interests has to be executed.

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3. Analysis of possible disturbances

As part of a good preparation, an analysis of possible disturbances is

mandatory. It serves as warrant for flexibility in the course of negotiation. After having completed the analysis, the negotiator will be able to react quickly and

act properly when unexpected circumstances or situations arise. 4. Sociogram

The sociogram is another important field of the case map. It serves as a tool for showing the relationships of the different participants in the negotiation, the

influence of others and the usual paths of communication. The latter is a very

important aspect for the preparation of the follow-up negotiation. When having the items identified, the party will ensure that any necessary information gets across in the right manner, at the right time, to the right person.

5. History This section of the case map shows the previous course of the cooperation up

to the present. This tool serves to

serves conclude from the past in order to

derive possible solutions for the future. As a part of the preparation for the negotiation, this history should be considered.

STAKEHOLDER

POSSIBLE

Perspective of the relationshio

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Sociogram

The sociogram is a method to show the relationships between the participants of the negotiation and their potential areas of conflict. It visualizes each

participant’s view of the situation. This is important to illustrate the each

member’s estimation of the situation and to give a recommendation of actions

to be taken. The sociogram consists of four levels: >

Roles in the Decision-Circle,

>

Riemann Typologies,

>

Adopt-Status and

>

Intenseness of contact.

Moreover, the connections between the persons show the specific estimation of the individual relationship as well as the possibility to access the critical participants in case of non-established

relationships.

In particular, the

sociogram helps to create strategies for the meeting and to prepare a better estimation of the participant’s behaviour.

Dr. Silver sees Mr. Lebmann as an evaluator who is cooperative

and a principal supporter. Their

relationship is characterized by multiple contact.

Dr. Silver sees Dr. Gonzalez as a distanced doer and authority to

make a deal with. Due to a non­ existing contact, he is unsure how

to evaluate his attitude towards him. Therefore, he believes the relationship to be critical and is aware of possible mischief.

Dr. Gonzalez sees Mr. Lebmann as a conservative evaluator. He assesses him as a non-supporter due to the hierarchical conflict, distrust and the fact

that they hardly know each other. The relationship is characterized by few contacts. Consequently, he evaluates the relation as critical. Nevertheless, he

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knows that Mr. Lebmann knows Dr. Silver and is aware of the possibility to gain information this way. Furthermore, Dr. Gonzalez believes that Mr.

Lebmann is allied to Dr. Silver. Dr.

Gonzalez

refers to

Dr.

Silver as a decision maker. He

considers

Dr.

Silver

as

a

distanced doer and opponent.

So far, they have never met.

Mr.

Lebmann

perceives

Dr.

Gonzalez as a decision maker. He sees him as a visionary

person willing to change things. Nevertheless, he considers him to be a supporter who is ready to work together in order to achieve satisfactory

results. As a matter of fact, their relationship barely exists. However, he believes that Dr. Gonzalez is supportive.

Mr. Lebmann has known Dr.

Silver

for

a

long

time.

Consequently, the engineer is

aware of the fact that he is making the decision about the

supplier’s company. Moreover,

Mr. Lebmann appreciates that Dr. Silver is willing to find a

solution and to cooperate. As a result, he believes Dr. Silver to be neutral and, due to multiple contacts, he regards the relationship as

supportive.

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5.4

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Stakeholder Analysis

Relevant Stakeholders

A special kind of stakeholder-analysis is a perfect starting point for the negotiation. Assuming that a normal stakeholder-analysis for the whole company has already been made in the past to support the strategic management

process

within

the

company,

this

negotiation

special

stakeholder-analysis is much smaller and can be done in a shorter period of

time. Basically, it is similar to the traditional one, but still differs in certain aspects. The way it is done is illustrated below:

First of all, the relevant stakeholders of the negotiation are identified by selecting them from the already existing stakeholder-card. The focus is on the

following questions: > What kind of expectations do the respective stakeholders have regarding the negotiation?

>

How can they influence the company or their future after the negotiation?

> What consequences can the result of the negotiation have? Secondly, this new negotiation stakeholder- card has to be specified by a

stakeholder-chart. This stakeholder-chart describes the single stakeholder. One example would

be

the segmentation of the stakeholder suppliers into supplier A, supplier B, etc.

The

creation and

a

stakeholder­

negotiation

card

of

a

negotiation

stakeholder-chart

guarantees that the most

important groups which influence company success and are directly related to the negotiation or its results are taken into account during the negotiation process.

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Similar to the normal stakeholder-analysis, the expectations of each relevant stakeholder have to be identified. Sometimes only the claims which are

necessary to avoid negative influences are determined. In contrast to the

normal stakeholder-analysis, the third step, the expectation identification

process, does not have to be too comprehensive e.g. the expectations do not have to be divided into different dimensions. Additionally, the different stakeholders ’ reactions to possible outcomes of the negotiation are assumed.

Thus, negative as well as positive reactions can be presupposed and may be prevented. Finally, the negotiation stakeholder-analysis can be supplemented with an influence assumption. The influence power is estimated using the

already created normal stakeholder-analysis as background. This shows which power the respective stakeholder possesses and therefore, how heavily

he/she can harm the company if the negotiation goals are not achieved in a

proper way.

Summing up, the negotiation stake-holder-analysis defines the stake-holders

which are directly affected by the negotiation or its results. Furthermore, their claims, expectations and wishes are specified. Additionally, their influencing

and harming power is determined to ensure that all relevant expectations are

taken into account to ensure that the best alternative becomes the outcome of the negotiation process.

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5 .4.1 Automotive producer After the relevant stakeholders have been selected from the traditional

stakeholder-card (chart to the left), the most important stakeholders of each

chart

group are determined below).

producer’s

(the

automotive

The

group

stakeholder

‘supplier’ for example is subdivided

into

John

Silver

Inc.,

general

suppliers and alternative suppliers.

Afterwards, the different expectations of the various stakeholders are

to

anticipated

possible

assess

reactions from the negotiation’s

AUTOMOTIVE PRODUCER

outcome.

the

Consequently,

company gets an idea what the • TV • Car Magazines

desired

result

be.

might

it

helps

• Newspaper

Furthermore,

• Etc.

understand the stakeholders, the

cause-action-relationship • All shareholders

to

and

to

avoid negative reactions. For some groups, the automotive

• Future customers

producer

only

has

to

avoid

• Current customers

negative reactions and consequen­

• Potential customers

ces,

e.g.

different • John Silver Inc. • General suppliers • Alternative suppliers

negative

media,

publicity

by

the

because

negotiation was cancelled without an appropriate or fair outcome. In

this case, no specific solution is

expected, • Automotive producers in the supreme upper premium sector

but

problem-solving

surveillance.

the itself

process

of

under

is

It also has to be

taken into account how the media • Internal

might react to explanations.

• External (John Silver Inc.)

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Customers: Current customers with a defective dashboard expect a solution for the

problem, that the former quality is re-established and older products will be

improved.

Maybe

compensation

is

sporadically

requested.

Future

customers expect that such a mistake will not occur again as well as a good after sales service. Additionally, the price should not increase.

General customers might be concerned even though they don’t have any problems with their cars.

>

Shareholders:

Expect a good solution for the problem, preventing harm to the image and ensuring that the turnover, profit, etc. does not decrease.

>

Media: Do not expect anything, but bear a certain risk in case sensitive information is published. A communication policy has to be implemented to

ensure that the quality problem is solved quickly. Otherwise the quality

issue will have a negative impact on the public image.

>

Suppliers:

General suppliers have a special interest in the way the automotive producer deals with suppliers if problems arise. It has to be clear that the solution/result is reasonable, appropriate and that a fair negotiation took

place integrating different views. In case of a break-up of the partnership alternative suppliers have to be considered in order to ensure a quick solution of the problem. John Silver Inc. as the negotiation partner is the

most involved stakeholder. Therefore, his expectations will be described in

more detail later on.

>

Employees:

External employees expect that they are considered during the decision and negotiation process, meaning e.g. secure jobs, loyalty and the same

salary. Internal employees expect that the company believes in them and that it takes them and the external employees into account.

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5.4.2 John Silver Inc. After the relevant stakeholders have been selected from the traditional stakeholder­ card

for

John

Silver

Inc.,

the

most

important stakeholder of each group is shown in the tables on the left. The stakeholder group ‘Customers’, e.g. is

subdivided

into

automotive

producers,

other customers with the need for dashboards and other customers which are supplied with certain products not connected to dashboards.

As

described

»ecific

beforehand,

expectations

of

the

each

akeholder must be identified:

Customers: • TV • Car Magazines

le dashboard receivers expect that

• Newspaper

ey are informed about the cause of

• Etc.

e current problem to evaluate the

iportance for their business. • All shareholders

In

der to see how John Silver Inc.

>als with problems arising in a • Automotive producer

• Other dashboard recipients

• All other customers

irtnership, transparency is needed,

this context, a fair negotiation has be guaranteed. If John Silver Inc. responsible for the quality problem,

• Supply chain members ( Dashboard )

good solution for everybody (other

• Supply chain members (other items)

istomers)

• High quality dashboard producers

is

necessary.

Other

istomers are not as interested in all e details as the receivers of the

ishboard are, but still care about e result.

• Internal • Represented by trade unions

Shareholders: )ss of profit is unacceptable. Thus,

e relationship should be continued thout spending too much money.

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Media:

They also do not expect anything from John Silver Inc. but bear a certain risk, if any sensitive information is published. A communication policy has

to be implemented ensuring the quality problem is solved quickly. Otherwise the quality issue will have negative impact on the public image. If the partnership ends, the financial difficulties will move into the public

focus and will also discourage other customers. >

Suppliers: The expectations always depends on the specific supply chain members

and how they define their role or part in the whole supply chain and how

they want to be integrated into the supply chain management of John Silver or the automotive

producer. Therefore,

different degrees of

information, communication, collaboration, loyalty and integration are

expected. The other suppliers hope to see an accommodating John Silver Inc. to conclude/assume how the company would react within a similar

situation.

>

Competitors:

Represent a big threat. Depending on the outcome, they may get the chance to become the automotive producer’s new dashboard supplier.

>

Employees: When problems arise, internal employees are always afraid of losing their

jobs, especially if rumours about a critical financial situation come up. Loyalty is of special importance. Problems should not be carried out on

their back. An integrative solution with them is desired. The trade unions will be involved if the employees are threatened somehow. As a

consequence, they should not be disregarded.

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5.4.3 Influence Assumption In this section, the importance of the respective stakeholders is defined. How much influence has the stakeholder? This helps to find out on which

stakeholders the company should concentrate. Whose expectations should be fulfilled rather than others in order to minimize negative or to maximize

positive reactions. It is another tool to optimize the results of the negotiation. The more influence a stakeholder has, the more his/her expectations should be taken into consideration. In the case of the automotive producer the

following figure shows the assumed influence of its stakeholders. high

Current & future customers/Media

Shareholders General customers Competitors/Internal employees y Suppliers/ 'External Employees

I N F L U E N C E

low

Subsequently, the same influences have to be assumed for John Silver Inc.

high

Shareholders Other suppliers/Other customers

Media/ Competitors

Supply Chain Members/ Employee^ | Other dashboard receiver

I N F L U E N C E

\

low

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Focus Finder

The focus finder is a tool to illustrate the different levels of interests and

limitations. Furthermore, it helps to analyse homogenous target groups. Via the focus finder it is possible to differentiate between the different layers of interest. They are divided in economically related interests, personal interest

and limitations. In addition it displays the individual focus of every participant.

Dr. Silver Idea, project, concern Negotiation with the automotive producer; higher price for the supplied dashboard due to an increase in prices of raw material

Economic/Job-related interests

-Find a solution -Achieve a long-term relation/contract -Rise the price for the supplied dashboard -Security/guaranty/reliability

Personal interests %

Attitude towards: • Topic • Person Company

Maintain the good relationship with Mr. Lebmann

uestions and objection Keep the margin in order to be liquid/stav in bushess

Audience, partner, clien

Economic limitations

Personal limitations

Financial pressure and economic problems

-Friendship with Mr. Lebmann -Risk aversion

Goal, result of presentation Maintain the relationship and stay in business

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Dr. Gonzalez

Idea, project, concern

Negotiation with the dashboard supplier; monitor the quality problems of the dashboard and assure high quality standards

Economic/Job-related interests

-Win the negotiation -Monitor the quality problems -Assure high quality of the supplied dashboard -Guarantee the own quality -Decrease the price

Personal interests

Attitude towards:

-Win the negotiation to show his skills/expertise -Show off -Self-affirmation/ego boost

• Topic

uestions and objection!

A battle against two opponents

• Person Company

Audience, partner, clien Economic

limitations

-Competitors -Seller's market

Personal limitations

\ \

-Inexperienced I -No communication! -No contact to / the participants /

Goal, result of presentation Win the negotiation and respect

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Mr. Lebmann Idea, project, concern Negotiation with the friend from the dashboard supplier; monitor the quality problems of the dashboard and assure high quality

standards Economic/Job-related interests

-Monitor the quality problems -Win the negotiation or find an agreement -Guarantee the own quality

Personal interests %

Maintain a good relationship with Dr. Attitude

Si ver

uestions and objection!

towards:

• Topic

Fears to be dominated and changes

• Person Company

Audience, partner, clien Economic

limitations

-Competitors -Seller's market

\ \ -Friendship with Dr] Silver । -No communication with Dr. Gonzalez / Personal limitations

-Risk aversion

J

Goal, result of presentation Maintain the relationship and assure quality

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5 Forces

There are five principles of negotiating, also known as the 5 Forces.

>

(1) Separate issue and relationship

>

(2) Interests instead of positions

>

(3) Develop many options / alternatives

>

(4) Look for inter-subjective criteria

>

(5) Develop best alternatives

These five principles should be considered in order to achieve the best possible agreement.

(1) When it comes to negotiations between two sides linked through

friendship, it is important to distinguish between the objectives and the

relationships between the partners. Relationship problems have to be addressed and solved at the beginning of the negotiation. To get along with

each other in a professional way, trust, mutual acceptance and smooth

communication are vital. (2) After having separated objectives and relationships, the next step is to get from positions to interests. Questions like why, what for etc. help to

understand the interests of the other party. Knowing that both sides might

have various interests makes it easier to find out about common interests even though different positions are obvious. An overview of the basic interests

was provided by MASLOW’s (1954) Hierarchy of Needs.

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In order to get from positions to interests it is vital to be determined but flexible, to make one’s interests clear and to look forward instead of backward.

Interests form positions, they can be used as a basis and when developing

ideas it is important to combine interests of both sides; positions can be found which accomplish the main interests of both parties.

(3) The third principle of negotiating is the development of different options. This inherits brainstorming, a broader base for the options, experts’ points of view and to avoid focusing on a single possible or right solution from the start.

In order to facilitate the decision-making it is important to pay attention to the

others’ needs and opinions. To postpone an agreement is a better solution

than deciding on something which does not fit. Different result levels can help

to achieve at least certain efforts and can be used as a starting point for later negotiations.

(4) If conflicts arise during the negotiation process, it may be because there

are no inter-subjective criteria. Conventions, values and fair procedures may help to overcome such a situation. To avoid this, it is essential to first agree on

principles

(must

criteria) and then go on with

the

Specific

negotiation.

problem-solving

methodologies can be of further use.

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(5) A good agreement is always better than the best alternative one could

come up with alone. This includes the further development of promising ideas

as well as a list of possible actions in case of failure. Especially, the relationships between the participants need further attention.

Dr. Gonzalez (G) / Mr. Lebmann (L): Dr. Gonzalez wants Mr. Lebmann

to provide him with technological

whenever

support

He

needed.

wants to show that he is the leader

and able to achieve merits on his

own. He wants to prove his skills to his

fairly

unknown

subordinate.

They hardly know each other.

Dr. Gonzalez (G) / Dr. Silver (JS):

Dr. Gonzalez wants to get the best

possible

solution

for

his

company. He wants to beat Dr. Silver and he is willing to fight.

According to him, somebody has to suffer - but that will not be him.

In fact the two men do not know

each other.

Mr. Lebmann (L) / Dr. Gonzalez (G): Mr. Lebmann wants to cooperate

with

Dr.

Gonzalez

in

order to

achieve a benefit for his company and secure the partnership with John

Silver

harmonic

Inc.

He

negotiation

wants

and

a

looks

forward to seeing his friend again.

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Mr. Lebmann (L) / Dr. Silver (JS): Mr. Lebmann wants to find a joint solution

and

partnership.

to

deepen

the

He enjoys meeting

Dr. Silver again and is not willing

to harm him. They have known each other for over 20 years.

Dr. Silver (JS) / Dr. Gonzalez (G): Dr. Silver wants to clarify the quality issue and talk about the

increase in raw material prices.

He wants to get a fast and quick

solution and expects Dr. Gonzalez to

act

rationally,

but

rather

inexperienced and wants to close

a good deal.

Dr. Silver (JS) / Mr. Lebmann (L): Dr. Silver wants to solve the

quality problem and needs the

technical

support

from

Mr.

Lebmann. He wants to maintain the friendship with Mr. Lebmann

because it might be of use during the negotiation process.

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The conflicts underlie rather the relational aspects than the issues themselves. Therefore, it is important to find constructive criteria. Mr. Lebmann plays an

important role as he might be able to initiate an integrative solution.

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6

Generation of Alternatives To

be

able

to find

an

optimal

solution,

different

alternatives have to be developed and compared. It has to be outlined which criteria are of special importance and

which have to be accomplished. Furthermore they have

to be analyzed concerning their utility. Finally possible threats have to be analyzed and a “solution proposal triangle” has to be constructed to provide a visible outcome of strengths and weaknesses of each alternative.

6.1

Must / Can Criteria

To generate alternatives the must/can criteria have to be taken into account. The must and can criteria can be derived from the stakeholder analysis. The stakeholder analysis informs the company about the expectations of their

stakeholders and which stakeholders are more important than others. Consequently, the company knows what it should care about while making

any decisions. Must criteria are those which definitely have to be fulfilled, because they could have a big impact on the company’s future if not fulfilled.

The can criteria on the other hand are desirable to fulfil but not absolutely

necessary. The company should try to fulfil as many can criteria as possible, but if not it does not have a very strong (negative) impact. One must criterion

of the automotive producer for example is the re-establishment of the former

quality,

because

not

only

current

customers’

and

future

customers’

expectations are high, but also because it is necessary to maintain the

competitive advantage. An example for a can criterion of the automotive producer would be the higher quality in the near future. This is only a can criterion, because only the future

customers might expect it. The buying decision though is not only dependent on the development of the dashboard. Other developments maybe are more

vital and compensate that the quality of the dashboard is still the same.

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JOHN SILVER INC.

AUTOMOTIVE PRODUCER Assurance of quality

MANAGI Ml M

(Ml)

Recovery of the relationship (Ml)

Must Criteria

Quick problem solving(M2)

No image impact

No increase in costs (M2)

Problem solving

(M3)

(M3)

(Cl)

Open-Book-Policy

(Cl)

Absorption of costs

Maintaining the price

(C2)

Supply Chain responsibility (C2) k • Security of employment(C3)

Maintaining the relationship(C3) J

Can Criteria

Cross-Company teams (C4)

Innovations

(C4)

Exclusiveness

(C5)

Exclusiveness

(C5)

R&D Cooperation

(C6)

R&D Cooperation

(C6)

6.2

Possible Alternatives

“Develop as many options as possible, evaluate and decide later“

The best preparation for a negotiation is to create different alternatives. These alternatives should be based on the must and can criteria, which have been

determined

beforehand.

It

has

to

be

considered, that there is no one and only solution. Negotiators should broaden their option base in

order to be flexible and to make adjustments during the negotiation process.

Additionally, they should avoid to judge possible options too early, instead analyze topics from various points of view. It also has to be borne in mind that

sometimes the better solution is not only about demanding something from the

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other side, but also about helping it to solve its problems, thus creating a win­ win situation.

Automotive Producer (Buying Firm) To show the variety of possible alternatives, three proposals are shown below:

AAP 1. The automotive producer does not want to pay for the increased price of the raw materials. In addition the quality problem has to be solved with the

help of an independent expert. It is his task to find the cause for the poor quality. Once this has been done, the responsible company has to solve the problem by re-establishing the former quality and compensating the other party for all costs which have arisen since the problems have occurred. Independently from the outcome the partnership continues.

AAP 2. The second alternative can be divided into three parts: First of all the current quality problem has to be solved. Therefore, an independent expert will also have to analyze the issue and find the responsible for the problems.

The occurred costs are taken over by the company which did not fulfil its tasks

properly, including compensation for the customer. Secondly the quality has to be re-established and a new quality management

system will be implemented. This management system will ensure that similar mistakes will never happen again. Therefore, the relationship has to be

modified. A deeper cooperation is the basis for a great future and a successful development.

The automotive producer sends out its own employees, e.g. experts, managers and workers, to the production facility of the John Silver Inc. They

do not only check the production plant and production procedures, but also offer the opportunity for improvement. They support the communication between these two companies as well as adjusting the process and product. On the other hand the automotive producer provides a continuous feedback to

monitor the present quality and development status. Finally the costs, including the increasing price of raw materials, are solved

through bundling effects and in-house consultancy. Due to a large variety of models the automotive producer has a huge amount of raw materials. As a consequence, the automotive producer offers to supply John Silver Inc. with

the necessary raw materials. Large economies of scale can be established,

especially if other suppliers outsource the procurement, too. Furthermore, the

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automotive producer’s in-house consultancy is sent into the partner’s company to

uncover

cost-saving

potentials

to

discover

process-

and

product

innovations. Therefore, it is necessary that the automotive producer has

access to all books and financial

documents. In exchange all savings and

earnings are shared equitably, meaning 50:50.

AAP 3. The third alternative is to solve the current problem and cooperate with John Silver Inc. until the automotive producer has found a new partner. A pitch

will be scheduled, where all interested suppliers can present and place their

offers. The one that fits best to the automotive producer’s requirements is awarded the job.

John Silver Inc. (Supplier) AS 1. John Silver Inc. will transfer the increased cost of raw materials directly

to the dashboard price. Moreover, it denies responsibility for the defective dashboard; therefore, the company is not willing to pay any costs concerning

compensation or quality adjustments. AS 2. The second alternative aims at maintaining the partnership, with a more intense cooperation. Another part is the acceptance of the increased dashboard price due to higher raw material costs.

The partnership maintains even though John Silver Inc. does not cover any costs of the debugging process. It is unacceptable for the automotive

producer; an independent advisory opinion will have to be enforced. Depending on the result, the respective company will have to cover all costs connected with the issue.

John Silver Inc. (LSI) strives for a common solution, which will form the basis for a better cooperation in the future. First of all, the automotive producer

should define and communicate its expectations more precisely and should

present the evaluation criteria in advance. Besides, in order to have more influence and to avoid further mistakes, LSI wants to be involved in the whole

installation process. In addition, LSI is better informed and can react faster,

more flexibly and will be able to meet expectations. Furthermore, it can give advice and provide ideas for improvement.

These alternatives only serve as a framework for the actual negotiation. There is always room for changes and adjustments. A combination of different

alternatives is also possible. As will be shown in the solution, the negotiator

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has to understand that it is not about the “either” (you get) “or” (I get) game.

The goal should be helpful to “decide in favour or against an agreement by comparing it with your best alternative”.

6.3

Benefit Value Analysis

AAP AS M C

stands for the alternatives of the automotive producer stands for the alternative of the supplier stands for the must criteria stands for the can criteria

X = the proposition totally fits the alternative I = the proposition partly fits the alternative * The abbreviations used are related to the must/can criteria and the possible alternatives analysis

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6.4 Analysis of Possible Threats The analysis of possible threats shows certain scenarios that may harm or result from the actual negotiation. It serves as a tool to evaluate the probability

that certain disturbances occur and what impact they have on future business development.

Probability ------------ ► o%

100 %

Termination of the partnership Image harm

Conflict Dr. Gonzalez I Dr. Silver Personal ties Mr. Lebmann I

Disagreement about cost coverage

Lay-off of employees

Trade Unions

The above chart shows seven important threats that have to be considered in

the meeting between the automotive producer and the John Silver Inc. The first threat for both sides is the termination of the partnership. Since it is difficult to decide beforehand whether the cooperation fails, there is a 50:50

chance that this will really happen. A failure would have a great impact on both sides. The automotive producer would have to find a new supplier, which

would be a very costly and time-consuming process. Besides, this would not solve the quality problem. On the other hand, this would even worsen the

financial situation of the John Silver Inc. since a termination would mean the loss of an important customer and thus a loss of profit. The company would be

in danger of going bankrupt. Image harm is another important threat that has to be taken into account. It mostly depends on a quick solution of the quality

problem. Considering the same reasons as in the first threat, there exists a

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50% chance that this will happen. The automotive producer must find a quick and proper solution to satisfy its customers as fast as possible. Otherwise they will lose their trust in the product/company. This would lead to a loss of current

and future customers not only of this special model but all others as well. A great impact on the business would have to be noticed.

Thirdly, based on the personal description and the sociogram there is a great probability that conflicts between Dr. Gonzalez and Dr. Silver arise. Depending

on how they are able to respect the other this might have quite an impact on

the outcome of the negotiation since they both have to agree on a decision.

The personal ties between Dr. Silver and Mr. Lebmann have 70% probability to influence the course of the negotiation especially since Dr. Silver thinks that

Mr. Lebmann will be the key to access Dr. Gonzalez. As consequence other problems might arise.

Nevertheless, this will not have a great impact on

further business development. Costs were the dominating issue in the first

place. Therefore, it is almost sure that both parties will disagree on that point.

If neither side is willing to find a solution, other conflicts might arise, which consequently would have a great impact on the future development. The last two threats are interconnected. As a result of the negotiation it is quite probable that employees will be laid off -

especially on the side of John Silver. This always includes the

trade unions which will fight against such a decision. Depending on the pressure they exert on the company, their actions can

have a great impact on business. In this case it can be expected that they will not have a great impact on the future performance of the John

Silver Inc.

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Strategic Solution Proposal

The case presented inherits three main problems which were to be solved during the negotiation. In the first place the personal relations between the

three participants were an obstacle to a smooth process and everyone had to get from positions to interests - in the case of Dr. Gonzalez and Dr. Silver - it

turned out to be a rather big conflict potential. Secondly the quality problems had to be discussed in order to be able to find a way of successful cooperation

in the future. Thirdly the higher prices for raw materials were a threat to John

Silver Inc.’s prosperity and a solution was necessary to guaranty their liquidity.

These problems were addressed in the negotiation as seen in the supporting videos and now a strategic plan needs to be developed and executed. In order to solve the three mentioned aspects, the parties agreed upon certain measures to be taken. Firstly a higher degree of cooperation between the two

firms in the fields of research and development is necessary to avoid the same

kind of quality problems in the future. To lower the overall costs, the

automotive producer is willing to purchase the granulate materials and provide them to John Silver Inc. at purchasing price. Furthermore in-house consultants

of the automotive producer will examine John Silver Inc.’s processes and help them to implement Lean Production to decrease overall production costs and

find potential savings in their processes. As a result of this cooperation Dr.

Silver agreed upon an open book policy, and certain margins and the

distribution of future savings have to be examined. The negotiation lead to an integration of John Silver Inc. and a strategic partnership in order to reduce

costs, improve quality and be able to find innovations for the dashboards and

processes.

These measures are examined in detail in the following pages.

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7.1

The goals of cooperation The three criteria shown in the diagram to the left visualize the main goals of the

upcoming

cooperation

between

the

two

firms.

Cost reduction, increasing quality and a high degree of innovativeness allow them to

rebuild a successful partnership. Further­

more, all three dimensions will be examined and the gained measures will show how to achieve these goals. As they are interdependent, it might be hard reducing

e.g.

costs

while

at

the

same

time

improving

quality

and

innovativeness. Consequently, the structure has to be changed and certain processes have to be implemented. Furthermore, the whole process has to be

monitored strictly to reveal weaknesses and potentials. At the end of the day the

whole cooperation is going to be efficient, effective and successful.

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The Strategic Process

7.2

I

In

be made in order to be able to achieve the

ASPECTS

I

stated

an

beginning

the

several efforts have to

FORMAL

are

MANAGI Ml M

open

These

goals.

policy,

book

an

agreement on certain margins, how to

due

savings

divide

lean

to

production and process optimization and decisions on which IT systems are to be implemented to improve communication. Both parties should

appoint employees who work for the cooperation and who provide the

other side with information.

CO OPERATE ON

Once

the

have

agreed

two

parties on

these aspects, the

■ Cost structures ■ Current margins

in-house

■ Cost drivers

consultants of the

automotive

producer

shall and

examine

all

introduce

Lean Approach to

processes

the production of John Silver Inc.

in

efficiency

order

and

to

increase

effectiveness.

■ Profit margin dashboard ■ Profit margin other products

■ Process optimization (50/50) ■ Lean Production (50/50) ■ Raw Material (50/50)

As a result, the overall costs should number

decrease of

and

defective

the parts

■ Order System for purchasing ■ Communication Systems ■ Push & Pull System

should fall noticeably.

Two measures have to be taken. Firstly, Supply Chain Partnering (SCP) will

show which fundamentals of partnerships have to be taken into account and

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afterwards the process of integration by Early Supplier Involvement (ESI) is presented. As basic assumption underlying the process of cooperation in the supply chain

between the automotive producer and John Silver Inc., the Supply Chain Partnership Approach focuses on certain actions which companies have to

recognize, monitor and encourage. Both parties have to expect a continuing involvement

over

an

extended

time

during

this

and period

■ Monitoring

■ Encouraging

develop

complementary capabilities.

In

order to establish a more

■ Recognition

■ Participation

■ Risk Management ■ Integration of Supplier Value

coherent

planning they have to share their information regarding customers, risks and

chances. Furthermore, they always have to consider the mutual impact of decisions taken by both sides. Additionally, joint plans have to be developed to

remove waste such as inventory and enhance innovation. Communication plays a prominent role for cooperation and agreeing on the principles of interaction is of outstanding importance to communicate in a successful manner. The

acceptance of margins and the necessity to reduce costs are to be acknowledged. Having in mind the principles of SCP and ESI enables the supplier to take a

stake in early stages of development. As a matter of fact, a large part of total life-cycle cost (LCC) is due to decisions taken in the design phase of a product.

To avoid quality problems and to realize potential savings, it can be a great

contribution to decrease costs if the John Silver Inc. is involved in these processes. This way they are able to criticize designs and suggest alternative materials as well as contributing their knowledge of the respective customers.

They also might learn about a variety of possible improvements for their own manufacturing. Being involved in this early stage enables John Silver Inc. to

adjust the dashboards to certain needs of the automotive producer and allows transferring changes directly into their production. This way, the time-tocustomer is minimized and the quality of the delivered products should be

increased. Another fact to be mentioned would be the higher degree of risk sharing which makes it possible for the supplier to dedicate more efforts into innovative products and processes. ESI helps the automotive producer to

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integrate the supplier value into their own firm which leads to a top- and a bottom-line impact and a reduction of the current risk position due to specific

knowledge provided by the supplier.

One of the major problems discussed in the negotiation were the COST MANAGE MENT

increased raw material costs. Neither the automotive producer nor Silver

John

Inc.

is

willing

to

accept

higher costs

-

and

consequently, lower profits. In order to decrease not only the

purchasing costs for raw material but also the ones occurring

during

manu­

the

of

facturing

the

■ Products

STANDARDIZATION

■ Materials

dashboards and the implementation

the

at ■ Teamwork

automotive

producer, a stand­ ardization

LEAN PRODUCTION

of

an improvement of

efficiency

■ Information Display Systems

■ Total commitment to quality

materials used and

the

■ Processes

of

SUPPLY MANAGEMENT

■ Bundling of purchasing activities ■ Early stage involvement

■ Supply Chain Management

Supply

Management as well as the introduction of Lean Production is necessary and

makes sense. Wherever possible the use of products as well as direct and indirect materials

should be standardized. Bearing in mind that the automotive producer is located in the upper supreme premium segment, there might be certain limitation due to

customers’ expectation of uniqueness and individuality. A great potential lies in

the use of direct and indirect material which might differ between the two firms.

There the possibility of standardization exists and the potential saving needs to be executed. The processes ought to be standardized as well. The information

flow can be improved and concept-to-customer cycles will be shorter. A result

would also be a decrease in costs and an increase in flexibility because the

time-lag between input and output is diminished.

Regarding the higher

complexity as a result of the cooperation, common processes inherit the

advantage of complexity reduction which facilitates decision-making. Both parties already agreed on having John Silver Inc.’s production and processes examined by the automotive producer’s in-house consultants. The

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aim of this action is to implement the Lean Approach in John Silver Inc.’s manufacturing. The aim is to transfer the maximum number of tasks and

responsibilities to the actual value adding workers in order to detect defects directly and eliminate their causes. To achieve this, teamwork has to be developed among the line workers and training is needed to enable them to execute various tasks, e.g. uncomplicated repairs, quality checks and materials

ordering. A simple but comprehensive information display system shall give an overview of the overall situation of John Silver Inc.’s plant to provide those who

need it with information in order to respond quickly to occurring problems. The

supervisors have to be trained to support and encourage their shop workers to think and act positively on how to improve efficiency at their working place.

Wherever possible, activities, which are not core competencies, are to be outsourced and by simultaneous engineering of product and production

machinery, development time can be reduced. A total commitment to quality improvement has to be communicated. Furthermore, there should be the possibility for each employee to apply for every project he/she is interested in.

The project managers can select the best workers to achieve their goal and it is guaranteed that the projects are endowed with the fitting personnel according to

their importance for the companies’ success.

There is an agreement on transferring certain purchasing activities from John Silver Inc. to the automotive producer to use economies of scale and bundle materials to achieve lower prices using the buying power of the automotive

producer. Through early involvement and integration of John Silver Inc.’s

engineers into the early stages of development and research, both parties are enabled to reduce total costs in the design phase of new cars. By concentrating

their experience and knowledge on the stage which accounts for a large part of

future costs, alternative materials and different processes might be applied and

consequently costs could be reduced. Additionally, engineering changes can be executed without severe cost consequences. The involvement of John Silver Inc. should not be the only step but be the beginning of the efficient

management of the whole supply chain. The lessons learned in this cooperation should be transferred as well to the sub-suppliers in the second and third tier which will be the task for John Silver Inc. and must be supported by the

automotive producer. Once certain standards for processes and common IT systems are implemented, these should be standardized throughout the whole

supply chain.

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To increase the overall performance of the supply chain, Supplier Relationship CRM (DOWNSTREAM)

Management (SRM) has o

Customer

Automotive Producer

Longjohn 2nd tier Silver Inc.^ supplier

be

to

implemented

luarantee the

upstream

nteractions between the SRM (UPSTREAM)

iuppliers

the

and

producer.

automotive

Customer Relationship Management (CRM), which focuses on the downstream

between the automotive producer and its customers, enables the company to react and manage customer needs and reveal future potentials.

Quality is the most important issue for both companies as they are QUALTIY MANAGE MENT

quality leader in their markets. Maintaining quality standards as they are cannot be the only goal, another one should be to

constantly improve the quality level over time. In order to do so, a Total Quality Management (TQM) and constant innovation is

indispensable. In order to secure the present market

share and possibly increase

it,

of

quality

the

the

dashboards and the cars

has

to

be

assured. To achieve this goal, TQM is a useful process tool. Both firms jointly have to

implement this tool cross-sectional and create a strong awareness of quality being essential to the overall success. The continuous effort to improve and cooperation through all layers has to come to the fore. As a result, efficiency as

well as motivation will increase and the error ratio decrease significantly. Just guaranteeing quality might be enough to stop customers from changing, but to

gain new customers and improve market share, the cooperation between the

automotive producer and the John Silver Inc. has to increase their innovation

potential. In order to create competitive advantages, certain incentives have to be installed. Each employee should be encouraged to participate actively and

rewards might help to find innovations for processes and products. A large

potential underlies the cooperation because the knowledge transfer might unveil

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unnoticed possibilities. In addition, the constant personnel change between the different projects assures the transfer of knowledge within one firm and the

costs are recaptured by pioneer rent and increased market shares. A reward

system regarding special efforts and a larger budget for research and development will lead to innovations as well.

Even though many chances and improvement are resulting from the

cooperation between the two firms, certain measures have to be

MONIT ORING

taken in order to minimize risks which occur during the partnership. Monitoring

the

processes

is

essential to avoid

opportunistic

behaviour and to detect inefficiencies. The John Silver Inc. is the

best dashboard supplier on the market and to assure this position, its performance should be

compared to that of its competitors’ once in a while.

PERFORMANCE EVALUATION

actual

The

■ Constant cost reduction

■ Quality measures ■ Amount of implemented innovations

achievement of clearly

defined goals and an evaluation

of

performance

their

MARKET EXAMINATION

■ Quality comparison

■ Price comparison ■ Innovativeness

are

necessary in order not GOAL ACHIEVEMENT

to loose pace.

■ Percentage of achieved goals

■ Percentage of outperformed goals

The best planning is in vain

without

conti-

nuously monitoring performance. In order to do so, specific measures have to be formulated to be able to compare achievements with goals. For this purpose,

figures regarding an annual cost reduction of 5 % for example have to be

negotiated. Additionally to cost reductions, a quality improvement indicator has to be

installed which shows the change in defective parts per 100.000. Measuring performance concerning

innovativeness is rather hard to achieve. One

possibility is the amount of actually implemented innovations per year or the

ratio of innovations implemented compared to suggested innovations. It is also

imported to install certain safeguards in order to prevent opportunistic behaviour. Once selected as partner for a strategic partnership, the John Silver Inc. might slow down their efforts after a while. To avoid this and to put pressure

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on the partner’s performance, the automotive producer ought to compare their performance regarding prices, innovativeness and quality once in a while, for example every two years, with the competitors in the dashboard market. That

does not have to lead to an end of the relationship, but if John Silver Inc. is not

competitive at this given moment, efforts have to be done to change that fact.

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Summary

The three defined goals, cost reduction, quality

improvement and innovativeness are going to be

achieved. The strategic process will lead to an

optimization of these obstacles. By passing all the three

mentioned

steps

and

implementing

the

methods, a solution of the problem is feasible. The defined goals solve all the problems inherent in the

case which were in the first place the conflict between Dr. Gonzalez and Dr. Silver. Dr. Gonzalez achieved an important merit and is able to change some things in the company as he mentioned in his

presentation. Dr. Silver saved his company from bankruptcy and is able to

come back to his headquarters close to with

London

a

newly

signed

contract

securing a long-term strategic partnership.

Mr. Lebmann saved the negotiation from failure by being integrative and focused on the relationship. The John Silver Inc. is able

to keep its margins and get a consultancy which

it

usually

could

not

afford.

The

automotive producer is able to assure the high quality of one of its core products and might benefit from the integration of the supplier’s value and

improve its own innovation potential.

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8

S I »• P I V

M A X M, I M I M

I N X I I I I

I I

Outcome & Results

Systems theory based negotiation management is not an alternative to

personality based negotiation management, but an important and essential tool for successful negotiators. For one who understands that there is no

difference between the best negotiated alternative and the common sense

created by joined sense-making processes, it is needless to say, that negotiation management and systems theory are strongly connected.

This case study was based on this theory and its assumptions are derived from the basic hypothesis of LUHMANN's theory.

The work tried to give several insights into a current approach of negotiation management. To achieve this, the acting person has to include double

contingency and the other mentioned assumptions from the beginning of this paper. In order not just to mention but also to visualize these assumptions, the

reader is provided with video sequences and sound clips to bring the

experience through his senses to his sense.

A number of management approaches were used to generate an overview of possible tools for preparing a negotiation. Time might of course be a limited resource so it is important to mention that not all of the presented tools have to be used. Nevertheless a good preparation of negotiations is the key to

successful outcomes.

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Acknowledgement The authors want to thank Dr. Martens-Schmidt who provided an interesting

comment on the behavioural aspects of the three participants and Stephan Möller who guided the authors with his excellent negotiation management training for their contributions.

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Literature BEA, Franz X. / HAAS, Jürgen (2001): Strategisches Management, 3rd Edition, Stuttgart.

BESANKO, David / DRANOVE, David / SHANLEY, Mark (2000): Economies of Strategy, 2nd Edition, New Jersey. CHOPRA, Sunil / MEINDL, Peter (2004): Supply Chain Management Strategy, Planning, and Operations, 2nd Edition, Upper Saddle River (NJ).

FAULKNER, David / DE ROND, Mark (Editors) (2001): Cooperative Strategy, 2nd Edition, New York. FISHER, Roger / URY, William (1992): Getting to yes. Negotiating an agreement without giving in, London. HIRSCHSTEINER, Günter (1999): Einkaufsverhandlungen. Techniken, Regeln, Praxis, Stuttgart.

Strategien,

JAHNS, Christopher (2004): Einkauf & Supply Management. Working Book. St. Gallen & Sternenfels. JAHNS, Christopher (2004): Supply Management. Neue Perspektiven eines Managementansatzes für Einkauf und Supply. St. Gallen & Sternenfels. JAHNS, Christopher / MOSER, Roger (2005): Supplier Value - How to define and integrate the value of your suppliers. Working Book. St. Gallen & Sternenfels. LEWICKI, Roy J. / HIAM, Alexander / OLANDER Karen W. (1998): Ver­ handeln mit Strategie: Das große Handbuch der Verhandlungs­ techniken, St. Gallen & Zürich.

LUHMANN, Niklas / BAECKER, Dirk (Ed.)(2004): Einführung in die System­ theorie, 2nd Edition, Heidelberg.

MASLOW, Abraham (1954): Motivation and personality, New York. MINTZBERG, Henry (1994): The Rise and Fall of Strategie Planning, 20th Edition, New York. SCHRANNER, Matthias (2001): Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle, München.

VAN WEELE, Arjan J. (2002): Purchasing and Supply Chain Management Analysis, Planing and Practice, 3rd Edition, London.

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Literature BEA, Franz X. / HAAS, Jürgen (2001): Strategisches Management, 3rd Edition, Stuttgart. BESANKO, David / DRANOVE, David / SHANLEY, Mark (2000): Economies of Strategy, 2nd Edition, New Jersey. CHOPRA, Sunil / MEINDL, Peter (2004): Supply Chain Management Strategy, Planning, and Operations, 2nd Edition, Upper Saddle River (NJ). FAULKNER, David / DE ROND, Mark (Editors) (2001): Cooperative Strategy, 2nd Edition, New York. FISHER, Roger / URY, William (1992): Getting to yes. Negotiating an agreement without giving in, London. HIRSCHSTEINER, Günter (1999): Einkaufsverhandlungen. Techniken, Regeln, Praxis, Stuttgart.

Strategien,

JAHNS, Christopher (2004): Einkauf & Supply Management. Working Book. St. Gallen & Sternenfels. JAHNS, Christopher (2004): Supply Management. Neue Perspektiven eines Managementansatzes für Einkauf und Supply. St. Gallen & Sternenfels. JAHNS, Christopher / MOSER, Roger (2005): Supplier Value - How to define and integrate the value of your suppliers. Working Book. St. Gallen & Sternenfels.

LEWICKI, Roy J. I HIAM, Alexander / OLANDER Karen W. (1998): Ver­ handeln mit Strategie: Das große Handbuch der Verhandlungs­ techniken, St. Gallen & Zürich. LUHMANN, Niklas / BAECKER, Dirk (Ed.)(2004): Einführung in die System­ theorie, 2nd Edition, Heidelberg.

MASLOW, Abraham (1954): Motivation and personality, New York. MINTZBERG, Henry (1994): The Rise and Fall of Strategie Planning, 20th Edition, New York. SCHRANNER, Matthias (2001): Verhandeln im Grenzbereich. Strategien und Taktiken für schwierige Fälle, München.

VAN WEELE, Arjan J. (2002): Purchasing and Supply Chain Management Analysis, Planing and Practice, 3rd Edition, London.

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