Sam’s story says a lot about effective negotiation techniques and problem solving. Here’s how he tells it:
As the Chief Operating Officer of an American cell phone case manufacturer, I’m intimately familiar with all the in’s and out’s of factory operations.
On this day, like usual, the factory floor was abuzz with the whirring of machinery. But when I walked in, I noticed that something was different. To my immediate left, I saw a sea of broken phone cases in a pile on the floor.
And there – in the middle of the mess – stood the Chief Engineer and the Factory Foreman who appeared to be having a heated discussion.
I stepped in and asked what the problem was.
The foreman explained that a specific part was being produced incorrectly. This created flawed cases that had to be rejected because of the imperfections and later fixed by hand.
This was resulting in overtime hours, greater expense, and not surprisingly, major stress.
The foreman believed the issue was caused by a product design error, so naturally, he wanted the engineering department to fix the problem. He also wanted any overtime expenses to come out of the engineering department budget.
However, the engineer squarely placed the blame on a piece of machinery that he believed to be in disrepair.
They tried to work it out, but they were at an impasse. And they were looking to me for help.
1. What sources of conflict is the manufacturer experiencing?
2. What different styles of conflict management are available to the Chief Operating Officer? Which do you recommend he use? Why?
3. How can the Chief Operating Officer help to solve the impasse?
1. What is a crisis? What types of crises might affect an organisation?
2. How can/should organisations plan in advance of a crisis?
3. Discuss the impact of and importance of social media and online communication during a crisis.
1. Describe the differences between Distributive and Integrative Bargaining.
2. What effect does framing have on negotiations?
Part D Case Study
The Australian – Japanese Sugar Negotiations
In the late 70s a famous misunderstanding between Australian sugar cane growers and Japanese sugar refiners occurred. It rumbled on for years. Both parties were indignant and perplexed at the other’s “bad behavior”, as they saw it.
The Japanese refiners had signed a ten-year, long-term contract to buy Australian sugar at the then market price, less $5 a ton. The Australians would get the security of a ten-year sales agreement. The Japanese would get guaranteed supplies at a competitive price vis-à-vis other refiners. Everyone seemed happy and the deal was signed.
Hardly was the ink dry on the paper than the price of sugar on world markets crashed by $10 a ton. The Japanese refiners faced the prospect of paying more for their raw sugar than anyone else, a cost that would fatally impact on the price of refined sugar and everything made from it.
Up to this point, both cultures probably saw eye to eye. It had been a good deal but now circumstances had changed and the Japanese refines faced genuine difficulties. The cultural split occurred over what to do about this. The Japanese suggested to the Australians that the contract be renegotiated. After all the Australians could not possibly wish their partners to lost money; mutual satisfaction and lasting relationships were surely the ideal.
The Australians pointed out that a contract was a contract. The Japanese had given their work. Fluctuations in the world price of sugar were not unusual. All business involved risks. Had the price risen, not fallen, the Australian growers would have been the losers. You cannot go crying to your partner every time the markets shift.
1. What has each party (Japan/Australia) done to cause the other to accuse it of “bad behavior”?
2. In your opinion, how should cultural differences be taken into consideration during international business negotiations if they are to be successful?