Situation overview
In 1980s, the Chinese government was planning to buy a new technology developed by K. G. Marwin Inc Trilliamp Process. The government was planning to implement this technology at the ethylene facility in Lanzhou, the capital of Gansu province. Marwin had exceptional negotiation skills, and this helped in a contract with Chinese Government. Marwin recommended Auger-Aiso, a Japanese company the most capable for producing the turbines. However, the Chinese government also invited other manufacturers from United States for the production of machinery. The case discusses the negotiation among these competitors and manufacturers and the Chinese government and how the negotiation was undergone. The Chinese government used different techniques for negotiation, and this case has analyzed their negotiation skills and has provided recommendations and negotiation tactics.
Central issue
The central issue of this case has been the negotiation skills and the tactics used by the Chinese government to agree on the contractor and to reduce the price of the contractor. Chinese is renowned for their negotiation skills and how they can reduce the price of any product or contract. These techniques and tactics used by the Chinese government helped in reducing the price of the preferred supplier and save cost. If these tactics were not used then they may have to sign the contract at a higher price and contractor may not have reduced the price.
Significant factors
Throughout the negotiation period, there are a number of factors that can be grouped together in order to better explain and analyze the negotiation process and tactics. This part of the report will analyze the case and analyze the techniques used by the Chinese government as well as Glazer, the Japanese company, Auger-Aiso, branch manager from the United States. Thus, it will help in analyzing how both the parties were negotiating and how they were managing the negotiation process.
- The Chinese government was highly renowned in reducing the price, and all the negotiation process was aimed to reduce the price of the contract. One of the first techniques and tactics used was to increase the competition and include more competitors in the process. Even though, Auger-Aiso was the preferred vendor, but by including other players from United States, the bargaining power of Auger-Aiso was reduced, and Auger-Aiso would have seen that the contract may be awarded to other competitors. Thus, considering the competition, Auger-Aiso would be ready to negotiate and reduce its price and offer some more incentives than initially Auger-Aiso would have offered. Moreover, the Chinese government started discussing and showing a lower bid price than they have received. Thus, it further created doubts in the mind of the suppliers, and they were supposed to reduce the price to win the contract.
- The other technique used by the Chinese government was to change the negotiation team and this would allow the negotiator to start the negotiation process again. Moreover, the new team could apply new techniques and strategies to further reduce the price. Moreover, one of the antagonists from the team started identifying issues and burst loud in front of the team of Auger-Aiso and then the protagonist would intervene to calm down the environment. This would have created an understanding that this protagonist is with the supplier side and wants the contract to be awarded to Auger-Aiso. The other important negotiation strategy used was to delay the process and not to give any counter offer. If the Chinese government started giving any counter offer, then the deal may have closed or awarded a little earlier. However, they delayed the process in order to make sure that they get the most from what they are paying.
- On the other hand, Glazer also used some negotiation strategies and tactics to manage the negotiation process. Glazer had learned about some of the training tactics that the Chinese people use for negotiation and therefore when some of these techniques were applied by the Chinese people, he was to figure out. Glazer also knew that Auger-Aiso was the preferred supplier from the beginning, and this gave the edge to the company in winning the contract.
Value Creating Opportunities
It is important for negotiation to be successful that both parties believe they are at a win-win situation. If one of the parties feel that they do not win from the deal, then it would not help in completing the process successfully, or it may influence the outcome of the deal. To make the deal a win-win situation, it is important for Glazer to communicate with the other suppliers as this would have allowed him to understand whether these Chinese people are communicating the message appropriately. Moreover, Glazer should have at times stuck on his words or prices and rather started discussing and communicating about his successful completed projects and major clients. This would have given an idea to the Chinese people that Glazer has already offered a good price that he can offer. Moreover, considering his expertise, experience and quality, they cannot get a good deal at this price. On the other hand, Chinese government was highly effective and ready to negotiate as low as they can and they were highly successful in the negotiation process.
Recommended Negotiation Strategies And Tactics
It is important to have a proper plan for negotiation and proper strategies. Recommendations for negotiation tactics and strategies have been discussed below:
Understand the culture
An important strategy is to understand the culture and the business practices of the people with which the contract is being signed. The other party can identify and analyze by understanding the culture, how would they act or react to a certain situation and what strategies they would use for the negotiation purpose. Even though, Glazer had learned about the culture and business practices, but he should have been trained and learned enough and studied previous cases when Chinese companies have negotiated. This would have further helped in knowing and formulate strategies in how to deal.
Understand the body language of the other person
The body language and gestures of a person are important communication methods. These are non-verbal communication techniques, but these techniques are very helpful in communicating the message. At the time of negotiation, the person should understand what the body language and gesture are saying and then he or she can modify his words and speech accordingly. Thus, at the time of negotiation, Glazer should have started understand what the body language is saying and then he should have negotiated accordingly.
Think beyond
Negotiation a step ahead is important in winning the negotiation with the other person. One should think of what a person will say if plan A is executed or how a person should react if plan B is implemented. Thus, by identifying these forward steps, a person should be able to become a better negotiator and identify what strategy or tactic can be helpful. Glazer should have also proposed that he could do the job at a lower rate at the quoted price, however but it would have impact the quality of the product. Such statements would have helped Glazer in increasing the price of the bid.
