Mort Lake Negotiation Plan - Term Paper Example

Running head: MORT LAKE NEGOTIATION PLAN Mort Lake Negotiation Plan Does identifying different phases in a negotiation help us understand and developthe negotiation? Why or why not? - Student’s Name Student Number Course Code Date of Submission Name of Professor Number of Words: 1,592 Introduction A good negotiation is not only focused on trying to win more than the party being negotiated with but to enter into a business agreement wherein both the negotiator and the person being negotiated with feels satisfied with the agreement (Reck & Long, p. 13). Given that the negotiator and the person being dealt with are both satisfied with the common grounds they have agreed with, there is a strong possibility for both parties to be able to establish a stronger and long-term business relationship as compared with a situation wherein the negotiation was done on a one-sided basis. The purpose of this study is to determine whether or not learning the different phases of negotiation could solve the dilemma between the Town Council and the top management of Broadside Paper Mills. With regards to the question as to whether or not the process of identifying the different phases in a negotiation could help us better understand the situation between the Town Council and the Broadside Paper Mills; I strongly agree that having read the different phases of negotiation could help both parties develop a win-win situation. Body of the Paper: Analysis The three stages of negotiation model includes: getting to know the other party involved in the negotiation process, making attempts to establish a range of settlement, and eventually make the final decision based on facts presented in the given case (Rojot, 1991, p. 175). Before making any attempt to establish a wide-range of settlement with the Town Council, the top management of Broadside Paper Mills should carefully plan on some strategies that could enable both parties to come up with a win-win situation. Ignorance is never an excuse. Therefore, careful planning is an important part of negotiation process. Before trying to set an appointment with the Town Council to discuss the issue about sharing of funds which will be spent on the total costs of establishing a filtration plants and road pavement costs, it is important on the part of the top management of Broadside Paper Mills to conduct a cost-benefit analysis to ensure that the deal that will be presented to the Town Council is equally beneficial to both parties. This is the only way Broadside Paper Mills can convince the Town Council to consider their business proposal during the bargaining process. Becoming familiar with the entry phase of negotiation is a crucial factor that determines whether or not the outcome of a given negotiation process can be successful. Right timing is very important in negotiation process. As explained by Zartmann (2002) and Rubin (1989), the process of knowing the phases of negotiation could somehow enable the negotiator to know whether or not it is the right time to begin the pre-negotiation stage, the formal negotiation stage which normally takes place after the preparation stage, and end the bargaining process which is the post negotiation stage. For example: During the pre-negotiation stage, both the Town Council and top management of Broadside Paper Mills discussed the issue about the need to solve problems related to air and water pollution particularly in Simpson Lake. During the discussion, both parties agreed that they need to implement a clean-up measure in their town. However, conflicts regarding who to shoulder the expenses of cleaning up the water system became an issue. To convince the top management of Broadside Paper Mills to share the improvement expenses, the Town Council offered the business some tax advantages for paying 50% of the interest paid on loan rather than forcing the Town Council to increase the business taxes. According to Saunders (1985), learning the factors that could significantly affect the pre-negotiation stage is important because this stage could enable the Town Council and Broadside Paper Mills to develop a common understanding which usually serve as an agreement framework. Normally, it is the agreement framework which has been developed based on the outcome of the pre-negotiation stage is used for the preparation stage before the formal negotiation stage begins. In the given case scenario, it was mentioned that Broadside Paper Mills lack the money to pay the cleanups of water system and road pavement but is obliged to find a solution to enter into a win-win negotiation process with the Town Council. This leaves the company with no other choice but to get some loan to finance the project. To lessen the burden of Broadside Paper Mills, the Town Council decided to offer the company some tax advantages for paying up 50% of the interest paid on loan. With regards to the Council’s position, the council cannot afford to pay the entire costs of establishing a filtration plant and pavement of the roads. Since the company also benefits from the use of the road, the Town Council expected the company to pay atleast the initial cost of 1.2 million dollars on top of the costs of road pavement within its vicinity. Since the company will be obliged to pay the road pavement expenses, the council decided to grant the copany the ownership of certain roads aside from decreasing the road taxes for them. Given that the Town Council will pay for the initial cost of road pavement, the road taxes that will be charged to the company will be increased according to its maintenance costs. As explained by Saunders (1985), “negotiation process can be time-consuming and difficult than reaching agreement once the negiotiation has began” (p. 249). Since the Town Council has already declared what they wanted from the company, the top management of the company should come up with a negotiation plan than can be beneficial to both parties. As explained by Adair et al. (2004), “the other party’s negotiation strategies can help negotiators direct the negotiation process to facilitate the generation of joint gains” (p. 108). Therefore, entering into a compromising agreement with the Town Council will enable both parties to easily resolve the problem. The preparation stage includes the gathering of data, analyzing the given scenario, and planning for the best available options. Based on the results of the preparation stage, the company can enter the formal negotiation stage by making appointment with the Town Council (Hendon, Roy, & Ahmed, 2003; Pendergast, 1990). As identified by Weiss (1999), negotiation is composed of other studies including business negotiation, international business negotiation, and diplomatic negotiation. Since negotiation process is dynamic by nature, Shell (2001) suggests the need to be careful when choosing the best bargaining style. In line with this, negotiator such as in the case of the company should consider not only the culture but also the personality of the people behind Town Council. When entering into a formal negotiation process with the Town Council, Broadside Paper Mills should avoid using deceptive tactics to prevent future misunderstanding between the two parties. Although most of us may conclude that the application of deceptive style in negotiation is not an acceptable tactic nor it is an ethical practice, Provis (2000) revealed that the use of deception in negotiation process is a recognized, justifiable, and necessary practice. The problem with using deceptive tactics is that this style of negotiation could lead to the lost of trust between the two parties. During the formal negotiation stage, the company should present their preferred option to the Town Council. For instance: Instead of paying the entire costs of paving the road, the company can suggest splitting the total costs into half since other people are also using the public road. Therefore, rather than paying $2.4 million for the road pavement, the company should only pay the amount of $1.2 million. Similar to the road maintenance, the company should only pay $150,000 which is half of the amount suggested by the Town Council ($300,000). With the use of 6.10% simple interest rate, $1 million interest is based on a loan of $16.4 million. Since the company will loan only $14 million, the annual interest should be 0.854 million; which is equivalent to $854,000. Given that the Town Council offered that the company will only pay 50% of the annual interest rate, the company should only pay $427,000 instead of $854,000. (See Appendix I & II – Computation of Funds Available and the Proposed Annual Expenses on page 8 and 9) Considering the proposed computation as presented by the company, the Town Council will be able to earn annual profit of $573,000 from the company’s bargain. At the end of the 25th year contract, Town Council will be able to earn up to $14,325,000 profit and savings of $800,000 based on the company’s principal loan of $14 million. Therefore, the total revenue will be $1,125,000. In case the Town Council do not agree with the proposed plan, the company could still come up with other options such as delay the plan of building the filtration plants while promoting the local tourism to raise funds, increase profits through campsite establishments, winter sports, races, etc. Promote an annual Mortlake festival or concerts. Given that the establishment of filtration plant is needed right away, the company could offer paying 50% of the costs while sponsoring some major events in order to promote tourism. This option will give the company extra exposure to the public. Therefore, both parties will end up with a win-win situation. Conclusion The process of identifying the different phases in a negotiation could help us better understand the situation between the Town Council and the Broadside Paper Mills. Using the different phases of negotiation as a guide, it will be easier to develop a win-win situation between the two parties involved in the negotiation process. Appendix I – Computation of Funds Available Funds Available:   Broadside Paper Mill Company - $8 million + 1.3 million increase annually   Mort Lake Town Council - $0 (dollars spent raised from increased tax)     Costs Todays Dollars   Filtration Plant 10 million Plant Improvements 4 million Pave Roads 2.4 million TOTAL 16.4 million   Annual Expenses   Loan interest $1 million   Road Maintenance $300,000   TOTAL $1.3 million   Loan due 25 years from now, interest paid annually is $1 million.   [Keep in mind that road maintenance should be divided into half because only some of the roads effect the paper mill. Appendix II – The Proposed Annual Expenses PROPOSAL (Based on the cost list we have been given) Costs Todays Dollars Filtration Plant 10 million Plant Improvements 4 million Pave Roads 1.2 million TOTAL 15.2 million   Guarantee Gin (company, single payment) Company guarantee $2 million Annual Expense  Loan interest $854,000 Road Maintenance $150,000 Annual Gain Company paying interest $427,000 Locals paying guarantee $500,000 After the project starts, the town gain $650,000 or upwards Annual lost and profit (Mortlake Council) = $573,000 End of 25yrs (Mortlake council) Profit $14,325,000 Saving $800,000 Principle of loan -$14 million Total revenue $1,125,000 SOLUTION Get a loan for 14million. Because the 1million interest is based on a loan of 16.4mil, therefore the interest rate is 6.10% simple interest rate. If the loan amount is $14million, then the interest annually is 0.854million; which is $854,000. Half of it is $427,000 (the company pays for half of the interest to gain the advantage of tax) Sell the guarantee to the locals as $500 per year per person to ensure that no increase in land taxes for the next 25yrs (Population of Mortlake is 996 in 2006. Therefore, I assume 1000 in population at the current year) The guarantee to the company is $2million one-time payment to ensure that no increase in land taxes for the next 25 years. The rest of $0.8 million is for cash flow. References Adair, W., Brett, J., Lempereur, A., Okumura, T., Shikhirev, P., Tinsley, C., et al. (2004). Culture and Negotiation Strategies. Negotiation Journal , 20(1):87-111. Hendon, D., Roy, M., & Ahmed, Z. (2003). Negotiation concession patterns: a multi-country, multiperiod study. American Business Review , 21(1):75-83. Pendergast, W. R. (1990). Managing the Negotiation Agenda. Negotiation Journal , 6(2):135-145. Provis, C. (2000). Honesty in Negotiation. Business Ethics: A European Review , 9(1):3-12. Reck, R., & Long, B. (1989). The Win-Win Negotiator: How to Negotiate Favorable Agreements that Last. New York: Pocket Books. Rojot, J. (1991). Negotiation: from theory to practice. Houndmills, Hants: Macmillan. Rubin, J. (1989). Some wise and Mistaken Assumptions about Conflict and Negotiation. Journal of Social Issues , 45(2):195-209. Saunders, H. (1985). We need a Larger Theory of Negotiation: The Importance of Pre-negotiating Phases. Negotiation Journal , 1(3):249-262. Shell, G. (2001). Bargaining Styles and Negotiation: The Thomas-Kilmann Conflict Mode Instruments in Negotiation Training. Negotiation Journal , 17(2):155-174. Weiss, S. (1999). International Business Negotiation. Journal of International Business Studies , 30(2):431-435. Zartmann, I. (2002). Regional conflict resolution. In V. A. Kremenyuk (Ed.)Ed.), International Negotiation: Analysis, approaches, issues (pp. 348-361). San Francisco: Jossey-Bass. Read More