Negotiation Step by Step at Microsoft - Case Study Example

Negotiation Step by Step Student’s Name Institutional Affiliation Date Introduction Microsoft outperformed Netscape browser in the competition for marketing AOL’s products back in 1996. Microsoft’s success at the negotiation table emanated from its effective implementation of negotiation strategies. The war between the two corporations was a case a case of competitive negotiation. At the onset of the negotiation process, Microsoft understood that Netscape held a comparatively better competitive position in browser marketing since it had a strong technical superiority; an advantage that Microsoft did not have. At the time of the competition, Microsoft had just entered the browser market. During the negotiations, Bill Gates maintained focus on Microsoft’s need to expand its market share and presence in the browser market. As a result, winning the bid would impact positively on the objective. The essay reveals how Microsoft underwent all the seven stages of negotiation to outperform Netscape in the negotiation. The Beginning The Preparation and Setting of Goals Having a plan is a prerequisite requirement for setting any goal. Consequently, Microsoft began the negotiation process by having a plan and setting a goal for the negotiation. Microsoft’s goal was to increase its market share and presence in the browser market. Bill Gates understood that AOL would consider its bid as the best alternative to a negotiated agreement (BATNA) if it concentrated on the marketing features that it could offer to AOL. As opposed to Netscape that waited for AOL’s positive response to its proposal, Microsoft endeavored to concentrate on its strength in business marketing instead of competing on technology grounds since it was aware that it could not outperform Netscape on such grounds. Microsoft’s decision to use the creative strategy emanated from its goal to change the weak BATNA or BA position while weakening Netscape’s position on the bid. Initial Interaction Being the second stage in the negotiation process, Microsoft launched the initial interaction with AOL to place its competitive marketing offers on the table. Microsoft understood that the initial interaction would provide a room for exchanging pertinent information regarding the offers that it would grant to AOL in the event that the company accepted its offer. As an initial step, the company commenced the negotiations with David Colburn, AOL’s chief negotiator that also served the position of the Business Development Head. The necessity of engaging in the initial interaction arose from the mere fact that this was a competitive negotiation process between Microsoft and Netscape. As a result, it was mandatory for Microsoft to create rapport and trust and interchange significant information about the product offerings that it was willing to offer to Netscape in the event that it wins the bid. Exchange and Refining Information The effective utility of the exchange and refining of information stage was evident when Microsoft specified the actual product offerings that it would offer to AOL in the event that the latter firm offered it the tender to market its products. Microsoft assured AOL that it would bundle its products into the Windows Operating System, thereby enabling its fast marketing to the intended customers. Microsoft understood that Netscape would not match the marketing capability even if it was a giant in the browser market. At the same time, Bill Gates and his marketers believed that the offer would guarantee a competitive bargaining position for the company since Netscape could not bundle its offering into any operating system. The exchange and refining of information by Microsoft was a critical aspect of the negotiation process as evidenced by David Colburn’s statement. According to the negotiator, the decision of Microsoft to bundle its offering into the Windows OS gave it a competitive position over its competitor, Netscape. On the other hand, Netscape did not endeavor to undergo this stage of the negotiation process thereby compelling AOL to consider giving Microsoft the tender. Reflecting back on its strengths coupled with purposeful questioning and active listening enabled Microsoft to gain a competitive position over Netscape that appeared to have greater technical competence and strength in the browser market. Upon restating the offer of its competitor, Microsoft understood the necessity of changing the nature of the negotiation. The company’s foresight on the issue emanated from its decision to analyze the negotiation and all its potential business openings critically, a step that Netscape did not undertake. The foresight also enabled Microsoft to recommend an offer that saw that AOL does not reject since the offer would be the best alternative (BA) to Netscape’s offer. The proper use of active listening and critical analysis also enabled Microsoft to understand its position in the browser market. The company understood that it was new to the market as compared to its competitor that had gained substantial experience in the browser market. Microsoft also understood that it possessed an inferior product. As a result, it had to consider using an offer that could outperform Netscape as well as enable it to attain its objectives. Microsoft’s negotiation strategy reveals the correct management of information. Posing as a good negotiator, Microsoft understood that this was the stage at which it was supposed to provide information about its capability to bundle its offer into the Windows Operating System. The news sounded positive to AOL as well as proving to be the best information that AOL wanted to hear at that time. Microsoft understood the perception of AOL towards Netscape since the former company believed that Netscape had the much required technical competence, strength and market dominance that could grant it what it needed to market its products. In most cases, negotiators do not understand that technical capabilities and competitive positions held by their competitors at the onset of the negotiation process. The negotiation between Microsoft and AOL reveals a slightly different aspect about Microsoft since the company already had the understanding that its competitor was a giant in the browser business. As a result, there was need to brace itself adequately for the competition by introducing a product offering that would position it at a better position. As a result, Microsoft was able to manage its information properly by placing all its cards on the table, unraveling the conflict surrounding the comparatively better position held by its competitor and tackling the real issue by coming up with a better offer that would enable it to outperform Netscape. Microsoft also understood that necessity of being the last to make the offer. Consequently, it placed its cards on the table after Netscape had made its offer. Microsoft also understood that Netscape was aggressive in the placement of its offer since they suggested a very high per-copy fee. The attitude communicated by Netscape was that the company was very hot in browser marketing. As a result, AOL would have no alternative rather than taking its offer. Having understood the position taken by Netscape, Microsoft endeavored to introduce a better offer that could change AOL focus from Netscape to Microsoft. That explains the reason why Microsoft decided to use a different approach of dealing with the conflict by changing the nature of the negotiation. The Middle The Bargaining The fact that the negotiation between Netscape and Microsoft was competitive in nature implied that bargaining was mandatory. Apparently, negotiators bargain based on their product offerings that they were willing and ready to provide to the tendering company. As a good negotiator, Microsoft reveals its position as an effective manager of concessions. The firm also performed tremendously in brainstorming all pertinent issues about the negotiation prior to placing its offer. Normally, the management of concessions occurs either through desperation or aversion. In our case, Microsoft decided to use the aversion technique. Microsoft understood risk aversion to be the propensity of AOL to exhibit reluctance towards accepting its offer that had an uncertain and higher payoff at the expense of an alternative offer made by Netscape that presented a certain but comparatively lower payoff. AOL was uncertain of the payoff that would emanate from the bundling of its products into the Windows OS. However, it was aware that the payoff would be significantly higher than that of Netscape since Microsoft was a giant in the OS market. Microsoft was slow and reluctant enough to place its final offer after having understood all the technical competencies and limit of offers that Netscape could place. As a prerequisite in managing concessions, Microsoft ensured that it was the last to manage its concessions while leaving Netscape to be the first. By so doing, Microsoft was capable of analyzing the concession of its competitor prior to introducing its offer that would outperform that of its competitor thereby rendering it the winner of the tender. Bill Gates and his team also ascertained that their offer would result in a significant payoff rather than nothing or losses. According to Microsoft, it believed and understood that its offer was a low cost negotiable that held a high value to AOL. As a result, the offer was capable of leveraging the fundamental interests of both parties. Moving Towards Closure Being the fifth stage in the negotiation process, the stage requires the negotiator to express commitment and its role towards the success of its final offer and meeting of deadlines. Microsoft understood that it had substantial power in the OS market. As a result, the introduction of the offer associated with bundling AOL’s products into the OS would change the direction of the negotiation for good thereby kicking Netscape out of the competition. It is indeed evident that Microsoft had the much needed power in the negotiation exercise since the corporation could either decide to grant AOL the offer or deny it altogether thereby preventing AOL from reaping its payoff. The commitment exhibited by Microsoft with regard to the negotiation also provides evidence that the firm had gained enough power in the process since there is a linear relationship between commitment and power. As evidence to Microsoft’s commitment to AOL’s needs, the company maintained focus on AOL’s desire of marketing its products. In the case of Microsoft, its power was real rather than deceptive as is the case in some competitive negotiations. Some of the categories of power exhibited by Microsoft in the negotiation encompass the power of skills and knowledge, good relationships, good alternatives to a negotiation, invented and elegant solutions, commitment and legitimacy. According to the negotiation rule, it is evident that the last 20% of the available time is where 80% of the concessions occur. It is at this stage that a good negotiator either imposes deadlines or makes exploding offers to capitalize on the “scarcity effect”. From the case, it is clear that Microsoft placed its final offer in the last phase of the negotiation. The exploding offer of bundling AOL’s products into the Windows OS was the last offer than Microsoft could place. In the event that AOL failed to take the offer that could have marked the termination of the negotiation, Microsoft could have surrendered the tender. The End Reaching the Impasse At this stage, Microsoft dealt with the impasse as a necessity for the successful ending of the negotiation. Dealing with the impasse enables the identification of differences and gaps that determine whether the deal on the table is equivalent or not equivalent to an agreement. In dealing with the impasse, Microsoft resolved all the minor issues and split the differences to solidify the deal. At the end, it was evident that Microsoft was the winner of the bid. Finalizing and Writing the Agreement Being the final stage of any negotiation process, Microsoft structured and ratified the settlement leaving AOL with the feeling that it had got a good deal. Bill Gates and his team then drafted a final agreement for the deal. Conclusion The step by step negotiation process takes place through seven stages. The stages in their chronological order include the preparation and setting of goals, initial interaction, exchange and refining of information, bargaining, moving towards closure, reaching the impasse and the finalization and writing of the agreement. The success of Microsoft while negotiating for the tender of marketing AOL’s products emanated from its ability to follow the negotiation steps to the latter as well as maintaining its commitment to AOL’s desires. Reference The Negotiation Experts. (2016). Microsoft Finessed Netscape in the Browser War. Retrieved from: http://www.negotiations.com/case/browser-war/ Read More