Background Briefing
A company primarily occupied in snack production and the food industry is looking for potential partners for a collaboration for their new line of products. Their work in the market has been on the decline recently, for the most part due to the existence of additional competition and a general long-standing inability to establish their name in the market. The corporate advertisement managers have decided to enlist the support of more successful organizations as a way to build a stronger customer base and make the potential profits for the future period increase. A number of potential partners have been reviewed, including other snack companies occupying the same market niche.
The big company on the market was the prime first target for negotiations, but the terms and conditions of the deal, as well as the idea of collaborating with a larger business was seen as a potential danger. After completing negotiations with the company that holds the most dominant position on the market and reviewing their terms, Company 1 has decided to meet with another potential collaborator. Company 1 is a recently emergent business on the market, currently still trying to fully establish their brand as an important contender. In this process, they are also attempting to properly work within the boundaries of their cultural and national roots, as the company was not initially built in the country it operates.
Their decision on whether to conduct the collaboration with Company 2 or the big company is reliant on the results of negotiations. Company 2 produces and sells snacks in the same market as both Company 1 and the big company, and has recently started a new line of chocolates with unique flavors. Company 1 has arranged a meeting with the representatives of Company 2 consisting of a sales manager and a department leader responsible for the new product line.
Company 1’s employees handling the negotiations include a sales representative and a marketing campaign manager. The main goal for both the first company is to secure an advantageous deal with a new collaborator while ensuring the quality of the final product. The goal of the second company, on the other hand, is to establish potential long-standing relations with Company 1, as well as to ensure that they strike a deal regarding the collaboration.
Information for Each Party
Company 1
Company 1 has been an important part of the market for the recent 20 years, establishing a good reputation with both the customers and the local community. The company was started in another country initially, bearing distinctive cultural and idealistic differences from organizations native to this community. The process of communicating with other snack companies on the market currently presents a challenge for it, as the ideas of corporate management and marketing differ.
Company 1 finds itself currently struggling to keep a stable foothold while also gaining revenue and maintaining an existing customer base. While their amount of experience and expertise in this field is more limited than that of their competitors, they are determined to further expand their business capabilities and sentiments. Their snack assortments have been expanding in assortments and flavors throughout the years, largely in part due to the shifting desires of the market. In the recent 5 years the company has also begun to expand globally, fueling the need to consistently uphold their brand image and identity.
Corporate leadership has noted that while the popularity of the brand has been on the increase, the customer retention in the more local areas and among its initial sale demographic, i.e. young adults and teenagers has been on the decline. The emergence of the big company on the market presents both a danger and a potential opportunity for development, as they are likely to be good partners for future collaboration. The move of launching a collaboration with another brand is seen as a way to introduce Company 1 back into the mainstream consciousness and also give it the ability to introduce more bold and interesting flavors into its main line of snacks.
The negotiations with the big company have largely been successful, with the other party offering one of their subsidiary snack lines as the main target of the collaboration. An issue arising from that collaboration, however, is the lack of a more local focus from the bigger snack company, as well as potential concerns of being overshadowed by their success. Branding and marketing directors have expressed worry about the collaboration campaign bringing more benefits to the other side of the deal. Coming to negotiations with Company 2, Company 1 aims to find the best balance between recognizability and profitability of a collaborator brand while also retaining the focus on the local market. The potential favorable timeframe for the collaboration is two months, with the results of the initial sales and popularity being used to evaluate the prospects of future partnerships.
Company 2
Company 2 has been a staple of the market for around 100 years, becoming a local household name and an important part of the local food culture. Their snacks are enjoyed by a variety of demographics, including teens and adults alike. The range of flavors presented offer a refreshing variety between both old and new, including more usual types of products and new and fresh selections. Starting and staying as a local business, the company has been able to establish a strong identity and personality.
The company is firmly staying in it’s home market, with no current plans for global expansion or rebranding. The collaboration efforts are seen as a way to bring more popularity in the existing market and improving the overall sales of the product. The bigger snack company represents a significant threat and a potential business rival to company 2, as their business is continually expanding in the local market. Collaboration with Company 1 is seen as another way to secure a competitive advantage. The main possible benefit of conducting the collaboration is in further boosting the sales of the company, improving their public image and opening up the potential for later collaborations with other brands. A significant problem can be identified in trying to manage professional relations with company 1, as their management is distinctly different from Company 2.
The cultural and managerial differences between the two businesses are seen as a possible barrier to communication, and a potential reason for an inability to establish favorable terms. Additionally, the company does not have as much to gain from the collaboration as the other company, meaning that arguing for better terms of the collaboration is necessary. In regards to the potential timeframe of the collaboration, the second company is more reluctant to support the collaboration, as their current sales model and strategy are sufficient in providing the necessary profits to the company. They are seeking to reduce the overall period of the partnership to one month as a way to minimize the potential losses if the strategy fails.
Debriefing for the Instructor
The instructor should hand out the informational pages to the representatives of each party, who will then use the time required to get accustomed with the case and formulate their main approach to the situation. The main goals of the two companies are similar but strikingly different. The first company seeks to find the most advantageous and profitable collaborator for their deal, as well as to negotiate the potential details of the collaborative deal. In the discussion with Company 2, they are seeking to be convinced that what they offer is more valuable and convenient for their company in both long and short term.
As the partnership involves both parties developing a product together, they are willing to negotiate and reach certain compromises regarding the chosen brand line, presentation and focus of the collaboration. The second company has the overall goal of managing the influence of its competition on the local market, as well as the general financial incentive to find favorable terms for the collaboration. The potential of a partnership between Company 1 and the big company is detrimental to Company 2’s business model and development, as it is more likely to divert the public attention from their products. The collaboration, in this light, is viewed both as an opportunity to establish fruitful future interactions with Company 1 and a necessary step to hinder the development of the big company.
For the negotiations, both parties need to participate in a discussion that is supportive of their mutual interests, and pushes the discussion forward while maintaining respectable terms of the deal. By applying the BATNA principles to the negotiation process, it is possible for both parties to find common ground in the discussion. The two parties will need to find the correct methods of collaborating with each other while also respecting the needs and requirements of both organizations. Additionally, it is necessary for the businesses to find a way to cooperate despite their cultural and organizational differences.
The Scenario and the Key Learning Points
There are a number of key learning points that must be met during the duration of this exercise in order for it to be beneficial and productive. One of the first skills that one needs to facilitate is communicating with another party on equal grounds. The process of communication itself can proceed in a variety of ways, including both productive and unproductive ways of leading negotiations. The most important aspect of communication is the exchange of information, based on both parties giving and receiving information in return. By correctly providing information to one’s negotiation partners, a person can improve the overall clarity and effectiveness of the process. The need to establish the main needs of both companies during the negotiation process drives the back-and-forward communication, teaching individuals how to build trust.
The second potential learning outcome is the need to keep consistent goals during the process of negotiation. This means that each party should be able to both push their particular agenda during the process and also be malleable to possible changes. The value of compromise and cooperation in the process can be learned through engaging in communications. In this present example, communications over the potential terms and conditions of the collaboration will prove to be an effective field for practicing compromise during negotiations. Another point for learning and improving negotiation skills involves giving trust and trusting others. Trust in the communication process involves taking considerable risks, as making compromises and believing the other party’s honesty and intent.
Managing interests of parties in a competitive environment can be regarded as another potential learning outcome of this process. Both companies can be understood as rivals in a common market, with a general need to promote their products and seek out competitive advantage. This means that both parties generally prioritize their own self-benefit instead of giving another company a possible lead in a local market. This, however, means that the reaching a possible agreement on how best to proceed with the deal might be a difficult process. Learning the skill of balancing competitive interests with cooperative aims must be achieved. In the effort of negotiating the most preferable timeframe for the collaboration, as well as Company 2’s efforts of presenting their deal as the most preferable one this learning outcome can be met.
The last potential learning outcome for this exercise concerns the correct ways of handling different cultural and organizational circumstances. The cultural and national backgrounds of different organizations can lead to a difference in values, goals and approaches. In negotiations, there exists a need to take into account the potential differences companies have in the process of communication. In particular, the crucial part of negotiations concerns assuming differences instead of similarities, and respecting the variety that can come from companies of different backgrounds.