- Issues for Tom Muccio
Tom Muccio has the responsibility of renegotiating with Wal-Mart for a deal that does not pressurize the retailer to accept large product inventories. The extra inventory would require Proctor and Gamble (P&G) to do advertising and to offer price specials for the goods to move, this is extra expenses for P&G (Sebenius & Knebel 3). Internal letdowns is another issue, whereby P&G lacks the incentive and structure for customer relationship improvement, there were internal conflicts between the new teams approach and the sales people who wanted to handle both sales and customer handling as it was the traditional norm (Sebenius & Knebel 3). The other issue is external letdowns whereby some Wal-Mart workers have been resistant to changes, even after mutual agreements are between the firms (Sebenius & Knebel 3). Lastly there is a geographical letdown that restricts the interaction between the negotiating firms since Wal-Mart’s headquarters personnel are located in the state of Arkansas, while P&G staff and managers are situated in the state of Ohio, this geographical distance hinders the operational understanding between the two firms (Sebenius & Knebel 3).
Not all of the issues are under P&G. P&G can effectively address internal issues such as the motivation of its workers, and the improvement of customer relations. The salespersons need motivation and a redefinition of their work description such that their duties and responsibilities do not collide with the new teams duties. In order to handle the external issue, the two companies should organize joint social activities whereby they can have a chance of interacting, and reducing personal differences. After the joint social activities, it will be easier to negotiate with Wal-Mart successfully. Trading commitment is one of the methods of gaining the other partners favor as well as to develop creative and outcomes that maximize value (Patton 290). In the case of the geographic distance, P&G should consider meeting the travel and accommodation expenses for both firms if the returns from the success of the deal will return the spent money within reasonable time, and if the deal will reasonably increase P&G’s margins.
- Renegotiation Actions
In order for P&G to succeed in the negotiations with Wal-Mart, they should follow the problem solving “circle of value” as recommended by Sebenius & Knebel (293-295). First Sebenius & Knebel advocate that the parties should work together as colleagues, in the determination of whether the agreement will benefit both parties (293). As the parties work together, they should postpone commitments so each side had enough time to consider fair value distribution in the agreement, and parties should give each other enough time to make sense of the intended deal (293). Instead of the parties negotiating for position, they should seek for solutions to their interests, which should increase the satisfaction of joint interest and seeking a common ground for divergent interests. For instance, P&G seeks to reduce the quantity of stock that they were insisting forcing on Wal-Mart. A recommended approach convincing Wal-mart would be to inform them on the reduced transportation cost to be incurred from the acceptance of a reduced quantity of goods. The other point is that the acceptance of a reduced quantity of goods would leave Wal-Mart with more space for displaying other goods. P&G can also consider making some sacrifices with the intention improving the employee relations between the firms and the reduction of deterrents to negotiation. This can be done by hosting a joint social activity exercise and P&G’s payment for the accommodation and travel expenses for both companies company’s representatives, for the negotiations to proceed without geographic hindrance, and to gain Wal-Mat’s favor.
- Elements of Negotiation
Patton defines interest as an individual’s or entity’s motivation, need, or want. Individuals negotiate with the intention of having their interests satisfied (280). The business atmosphere was changing such that, retailers such as Wal-Mart preferred to deal with large suppliers on condition that the supplier and retailer got 50% of the sale of the product(s) (Sebenius & Knebel 2). This arrangement reduced P&G earnings. Despite the reduced earnings, Wal-Mart was P&G’s third largest customer without any communication with P&G’s senior management (Sebenius & Knebel 2). Lou Pritchett, P&G vice president noted unexplored opportunity and a change in market power for which he made the decision to pursue a new relationship between the two firms by paying Sam Walton, Wal-Mart’s founder visit, with the intention of negotiating for a higher percentage for P&G.
Legitimacy is another element that is critical in negotiation, whereby Negotiating parties, prefer deals that a fair (Patton 281). In the P&G-and-Wal-Mart case, Tom Muccio points out ” Unattainable operations efficiencies” as one of the letdowns to successful negotiations, and he points out a case whereby, Wal-Mart refused to accommodate P&G’s pre-built panel program although is saved $0.35 labor cost per package. Wal-Mart deemed the deal unfair because of the enormous paper work Wal-Mart had to fill each time they purchased the pre-built panels (Sebenius & Knebel 4).
Communication is the process by which the negotiating parties discuss and address all the other six elements of negotiation (Patton 284). Communication is present in the P&G-and-Wal-Mart case in various instances such as Lou Pritchett’s face-to-face meeting with Sam Walton, whereby he gets to learn that Walton is not willing to negotiate. Therefore, P&G embarks on a strategy of changing their operations and policies, such that they could be similar to Wal-Mart’s “everyday low prices” (EDLP) (Sebenius & Knebel 3). For the new changes, P&G approached two firms to carry out the tests as their alternative move. P&G had to collaborate with the two firms through coordinated communication as opposed to the earlier approach of independent sales calls by product departments (Sebenius & Knebel 3). The favorable results of the test led Tom Miccio’s assignment to further the partnership initiative with Wal-Mart (Sebenius & Knebel 3).
Works Cited
Patton, Bruce. Ed Moffit, Michael L. & Bordone, Robert C. Negotiation. Jossey-Bass Publishers. 2005.
Sebenius, James & Knebel, Ellen. Tom Muccio: Negotiating the P&G Relationship with Wal-Mart (A).Harvard Business School. 2007.
