Business Success through Negotiation - Assignment Example

Running Head: Business Success through Negotiation Business Success through Negotiation Babcock and Brown takeover of Forth Ports of the [Name of the institution] Business Success through Negotiation Babcock and Brown takeover of Forth Ports Introduction Culture has always generated controversy for its innate ability to elude any exact meaning. What is culture? In ancient times it was defined as "the sum total οf the equipment οf the human individual, which enables him to be attuned to his immediate environment on the historical past on the other". It reflects in effect what humans have added to Nature. Every society and culture has different ways οf interpreting and defining occurrences by the way their own culture or society functions. To me culture is a societys way οf life. Culture is peoples ethnicity and their traditions carried down from generations past. Culture is also coerced and forced into our beliefs by government, religion and society. This paper will be based upon business culture οf international business and who would best manage these businesses. Business culture is a central element in negotiation. Every company has its own corporate culture. Thus some companies are focused on short term results while others look at the long term. Similarly, companies have varied cultures as regards treatment οf employees from different backgrounds, dress codes and criteria for performance reviews. Businesses based in different countries may well have corporate cultures that reflect cultural elements drawn from national cultural characteristics. This varies enormously, particularly when more and more companies operate in the global marketplace with employees drawn from a widening variety οf national, ethnic, religious, and gender backgrounds. In negotiation it is crucial to avoid getting trapped by prejudiced expectations οf how a person from a certain background will behave. Focusing instead on the interests οf the stakeholders will help overcome cultural barriers both real and perceived and derive agreements that lead to mutually favourable outcomes. It is my opinion that expatriates have a self cantered approach when dealing with foreign nationals. On the other hand, foreign nationals know the limitations οf doing things and most importantly are able to be more flexible. In spite οf the expatriates shortcomings however, there are some basic steps they can employ to minimize business culture shock. Not letting culture shock take them by surprise, learning to recognize the symptoms and expecting culture shock to happen irrespective οf the type οf business they are conducting and giving themselves time to adapt to and not rushing into too many work related projects. Learn about a particular task or project and the people you are going to be dealing with prior to leaving for an assignment. Seek out help from others experience either within ones own company or externally. Upon arrival in a new location, identify the key players and allow time for building support networks with international partners, make sure that the organisation gives some time to study the culture and lessons learned prom previous encounters. As with any stressful situation do not fight it embrace it. Not only will this help with a particular situation but will garner a solid working relationship from those counsels you seek. Finally do not forget about yourself; reverse culture shock must be considered and is normal. The positive aspects οf culture shock are that people who experience it adapt better to their new environment then those who do not. Negotiator plays the key role during the negotiation process whereas others tend to be observer or calculator instead οf analyst or summariser due to the passive and reticent performance throughout the whole negotiation. Theoretically speaking, channelling all communication through a team spokesperson reduces the inadvertent revelation οf information (Roy J. Lewicki, 2003). In addition to reducing the number οf people who can actively reveal information, this allows other members οf the negotiating team to observe and listen carefully to what the other party is saying so they can detect clues and pieces οf information about the other party’s position. However, as a newly formed team, learning to work or collaborate together effectively is uneasy. Collaborative learning as the basis for effective organisational team building requires a level οf personal familiarity, intimacy and trust, allowing team members to listen to one another with respect and understanding (Bright, 1998). But, for most newly formed teams, achieving this level οf personal interaction and team harmonisation are not an easy or a natural process and sometimes it could be problematic. There are too many factors affect a new team; we need time to build harmonization and to use individual diversity effectively. Task 1 – Chronology December 13, 2005 Shares in Forth Ports rose 33p to 1570p amid renewed speculation of interest from a private equity bidder. March 26, 2006 Forth Ports will be the only remaining listed port company in the FTSE 250 if Associated British Ports falls to a Goldman Sachs-led bid January 12, 2008 Babcock & Brown has quietly snapped up a 10 per cent stake in Forth Ports, which controls seven ports in Britain, including Tilbury in London and Grangemouth in Scotland. January 14, 2008 Babcock & Brown takes 20 per cent stake in Forth Ports January 15, 2008 Babcock & Brown harbours hope of Forth Ports bid after buying stake Babcock and Brown’s takeover of Forth Ports Task 2 – Issues Forth Ports is known as much for being the only listed ports operator remaining in the UK as for its ownership οf the giant Tilbury and Leith docks. For months, however, it has been as much a question οf not if but when it would be taken over, following a familiar path trodden over the past four years by rivals starting with Mersey Docks, then P&O, PD Ports and, 16 months ago, Associated British Ports (ABP) for Pounds 3.3 billion including debt. The onset οf the credit crunch last autumn brought valuations οf ports back to levels sufficiently attractive to allow Babcocks infrastructure funds to pull off a trio οf ports deals in December. Forth Ports shares, meanwhile, fell from a high οf more than Pounds 22 in early 2007 to under Pounds 17 by November, triggering Babcocks first investments in Forth. Forths attraction for any investor lies in its simple business model οf strong cash flows from the ports operation producing operating margins οf about 25 per cent, which allow for the gradual regeneration οf a large landbank οf dockyards into huge housing and commercial office developments. The next few years should see a marked pick-up in business, not least from Tilbury, where the Olympic Games and plans for hundreds οf thousands οf new homes in the Thames Gateway will ratchet up the transport οf materials by sea. Meanwhile, Forth is sitting on 450 acres οf land ripe largely for development into housing, valued a year ago at Pounds 400 million. In September the company submitted the biggest planning application in Edinburghs history for the regeneration οf Leith Docks, with scope for 16,000 homes. Shares in Forth surged yesterday 152p to Pounds 20.90, valuing the equity at about Pounds 950 million, or 12 times forecast headline earnings for next year. ABP, P&O and PD Ports all sold on multiples οf between 14.5 and 15.5 times expected earnings. Task 3 – Power With Forth offering a dividend yield οf over 2 per cent, business growth on the horizon and a likely bid battle, there are still gains to be had for buyers. When contributing to a team, I am quick to see advantage οf new opportunities and take it, especially during distributive negotiation, also I try to sense each possible alternative and concession from the other party since I don’t want to face temporary unpopularity if it leads to worthwhile results in the end. But, the negotiation should be well prepared, structured and controlled, otherwise I feel not at ease. More preparatory works like role allocation and discoursing order should be well arranged beforehand to avoid unnecessary nervous occurred from disorder οf individual role, which brought negative influence for the whole negotiation overall. Also, it should avoid being dominated by one ‘Shaper’ (Belbin’s nine team roles,1996) and other members seem to be aloοf about the issues, which lead to perform passively and reticently. Furthermore, sometimes, I should listen comprehensively instead οf be selective listening or hear what I interested and used value judgments to evaluate the source οf messages since I am apt to get too caught up in ideas that occur to me and so lose track οf what is happening. When involved in a project with other people, I am always ready to back a good suggestion in the common interest. But I need to enhance my vigilant ability to prevent careless mistakes and omissions being made. Nevertheless, I can find a line οf arguments to refute unsound propositions every now and then. Reviewing the ES478 negotiation role play, our opponent’s main tactic is snow job or kitchen sink (Roy J. Lewicki, 2003) through presenting much information about many different items, thus becomes difficult for us to detect which items are really important. At the beginning, they gave us a shock-opening offer that astonished our team member. Theoretic analysis indicates that negotiators who make exaggerated opening offers get higher settlements than do those who make low or modest opening offer (Roy J.Lewicki, 2003). First, it gives our opponent room for movement and therefore allows their time to learn about our team’s priorities. Second, an exaggerated opening offer acts as a metamessage and may create, in their mind, the impression that there is a long way to go before a reasonable settlement will be achieved; we felt that more concessions that originally intended may have to be made to bridge the difference between the two opening positions, as a result, we have been wrong in estimating their resistance point. However, in the real negotiation situation, such opening offer could be summarily rejected by the other party and communicates an attitude οf toughness that may be harmful to long-term relationships. In addition, opening stance can’t be belligerence to attacking the positions, offers. In response, the other party may mirror the initial stance. Thus, moderateness and understanding position is better, even if the attitude is not mirrored, the other’s response is likely to be constrained by such a moderate opening stance as let’s be reasonable people who can solve this problem to our mutual satisfaction. Also, during the distributive part οf the role-play negotiation, they successfully adopt selective presentation to lead us to form the desired impression οf their resistance point or to open up new possibilities for agreement that are more favourable to them than those that currently exist. Nevertheless, we play well in displaying emotional reaction to facts, proposals and possible outcomes through which to provide information about what is important to them. The Australian investment group is the No3 bulk port operator in Europe and wants to become the biggest. It acquired PD Ports two years ago in a deal worth Pounds 260m and has secured funding for a ports acquisition in Belgium. Shares in Forth Ports have soared in recent months from Pounds 17.26 in October to close at Pounds 19.38 on Friday. Investors have been attracted because its steady cashflows make it an attractive defensive stock and because it has good growth prospects. It is expected that Tilbury Docks, owned by Forth Ports since 1995, will become the distribution hub for construction materials for the 2012 London Olympics. In addition to its port operations, Forth Ports owns substantial amounts οf property around some οf the ports, particularly Edinburgh. The company is in discussions with the Edinburgh city council over a planning appli-cation for further regeneration οf Leith Docks. As to the language we used, I think our team can perform better if we ask value-free, informational questions to find out what our counterpart’s underlying needs are. Next, avoid judgmental styles οf questioning, even though my first instinct is to use them since if not put these questions appropriately will help or hinder the obtaining responses. For example, during the role-play negotiation, I am not satisfied with the order they offer and asked instantaneously “How did you ever think you could get that order?” Actually, I put them on the defensive. But if I say, “I’m not sure I understand why that order is so important to you. Can you explain your concerns?” Maybe I will far more likely to obtain useful information about our counterpart’s underlying concerns. Finally, after intense negotiating, actually, in order to achieve profits, we can’t reach any agreement at that time until we present several alternative packages to our counterpart since producing ideas or providing two or three alternative packages to counterpart in such a short time can be a very effective technique to closing a negotiation. In terms οf following machine negotiation, our opponent team has one core negotiator, two analysts, and one observer. Occasionally, the two analysts also play the role as the calculator and summariser. Since it’s under competitive negotiating environment, we are use distributive bargaining tactics. Our role is the buyer, the seller gave an initial offer significantly lower than their target point and even lower than seller’s resistance point in terms οf unit price, quantity, delivery time,etc. Actually, we are in negative bargaining range and fell into stalemate every now and then. The only way we can do is to make concession οf our resistance points and then try to get the settlement as close to the other party’s resistance point as possible or adjust our bargaining mix as well. Nevertheless, we all have same expectation οf the negotiation results and know the outcome values and costs οf termination (William,2003), we gradually have motivation and commitment to work together through identifying needs and problem-solving method, which makes the negotiation shift to integrative negotiation approach. It’s a big progress for both οf the team and we signed a win-win contract finally. However, combining with negotiation theory, such kind οf practice makes us feel that purely integrative or purely distributive negotiation situations are rare, most situations are mixed-motive, containing some elements that require distributive bargaining processes and others that require integrative negotiation. Consider how an imbalance between high power and low power parties might shape a negotiation process. How might an experienced mediator deal with this problem? Provide practical examples where appropriate. Task 4 – Strategy The issue οf power is inherent in negotiations. In most negotiated conflict situations, one party has more power than another. They may use their greater share οf power to shape and manipulate a negotiation to achieve their desired objectives. Furthermore, when the power differential is substantial, this usually has a significant effect on both the substance and process οf the dispute. This imbalance in power can be generated by a number οf factors such as information and expertise; control over resources (money, supplies, manpower, time, equipment, critical services, interpersonal support); and location in an organisation structure. In order to resolve such a conflict, a third party negotiator or mediator, can be used to help the parties negotiate an agreement which they then have the option οf accepting or rejecting. To be successful, a mediator must have a thorough understanding these sources οf power, as well as adopting various negotiation tactics. In some cases, mediators will play a problem-solving role focused upon negotiating an agreement to the immediate dispute. Whilst in other cases mediation focuses more upon improving relationships, with the assumption that the improved relationship will lead to conflict resolution or constructive confrontation. Power imbalances are evident throughout society. They may be generated by how much information or expertise someone may have compared to someone else. For example a university lecturer may have more power than there student because οf the knowledge they posses on a particular subject matter. Power imbalances can also occur when someone has control over resources (money, supplies, manpower, time, equipment, critical services, and inter-personal support). This is most commonly seen in global economies with governments comprising power over their citizens, because they control the various resources. Similarly, in the workplace, a manager or business owner holds a higher degree οf power than his employees because he or she controls the resources within that working environment. However, their power is also derived from being located in a particular position in an organisational or communicational structure. Whilst, there are an infinite amount οf other examples οf power imbalances that society provides us with, which encapsulate these different sources οf power to varying degrees, to list every single one would be a pointless exercise. Recent studies οf power imbalances in negotiation have focused on the behaviour and tactics adopted by the parties involved in the negotiation. "Power leads to such behaviour as: greater visual dominance; more expressions οf overt hostility toward ones opponents; greater feelings οf competitiveness, power and control; greater expectations οf cooperation form ones opponents; greater satisfaction with the outcome οf negotiation; and a stronger belief that one had been successful." References Adler G; Ready D.A.; Schneider, S.; Johansson B.; Trompenaars F.; Borboa R.: The Case οf the Floundering Expatriate: Harvard Business Review, Jul/Aug95, Vol. 73 Issue 4, p24 Bright, D. & W.Parkin (1998) ‘How negotiators work in teams’, Journal: Management Research News, 21(7), 20-36 Gangemi J.: Soothing Culture Shock: B-School News, Business Week Online: 1 July 2005: http://www.businessweek.com/bschools/content/jul2005/bs2005071 Kelley.R, small business: Canada, ‘5 Ways To Negotiate More Effectively’ http://sbinfocanada.about.com/cs/marketing/a/negotiationkr.htm (accessed April 10, 2008) Lewicki, R., & Alexander H.(1998) Negotiation Tactics, http://arapaho.nsuok.edu/~philljam/labor/Negotiation%20Tactics.doc (accessed April 10, 2008) Lewicki, R., Saunders, D. & Minton, J. (2003, 4th ed.) ‘Negotiation, International Edition’, NewYork:The Free Press. Lewicki, Roy J ~David M Saunders~Bruce Barry . Negotiation. 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