The Concept, Nature, and Characteristics of Negotiation and Conflict Resolution as Presented in the Case Study
The concepts of power and dependency are clearly outlined in the international defect claim case study (Chang, 2005). The two concepts define the relationship between the supplier and the buyer before the two parties reach an amicable agreement. In professional negotiation and conflict resolution, both parties involved in the dispute should identify their powers, levels of dependence, and interests (Lewicki, Saunders, & Barry, 2005). The strategies that can be used to resolve the current conflict involve distributive, integrative, and mixed-motive approaches (Carrol, 2006). A review of the case study reveals that the concept of distributive negotiation was used. To this end, XYZ presents a claim of poor quality, while ABC Company responds to this by relying on the professional opinion of an expert. The supplier intends to show that the merchandise was analyzed and found to be of high quality before delivery (Chang, 2005).
A conflict involves two or more parties. The parties have a conflict that needs to be solved voluntarily. Besides, the two sides are expected to adopt a “give and take” strategy (Fenn, 2011). The concept is evident in the case study. The textile supply company, ABC, has more power in the negotiation. The company has a market share of 36%, making it a force to reckon with in the Japanese market. In comparison, XYZ, the buyer, is new in the market (Chang, 2005). As a result, ABC adopts the “take it or leave it” approach to refute the claims of compensation. The XYZ Company, being the weaker party, uses the emotional strategy to gain traction in the negotiations.
According to Fenn (2011), interdependence is another characteristic of negotiations and conflict resolution. In this case, ABC has to depend on XYZ to increase its market share. On its part, XYZ needs ABC for the continued supply of raw materials in the textile manufacturing industry (Cheng, 2005). It is noted that the people representing ABC in the negotiations are aware of this interdependence between the two companies. As much as they want to prove that the supplier is more powerful compared to the buyer, they are careful not to jeopardize the relationship between the two parties.
The third concept of negotiation involves compromises and mixed motives. The concept is evident in the case study. The companies are forced to involve a mediator. Sumitomo, the mediator, is used to bring the two warring parties together (Chang, 2005). The settlement claim is contested by ABC, which insists that the company is not liable for the damages cited. On its part, XYZ insists it has to be compensated. With the help of Sumitomo, the two companies can compromise and come to an agreement that is beneficial to both. The supplier will not pay the claims, while the buyer will benefit from discounts and technical support from ABC in the future (Chang, 2005). The two companies are forced to agree because they both have an interest in the partnership. The agreement is also beneficial to Sumitomo as it highlights their credentials as a mediator. The supplier’s need to increase its market share made it possible for the company to cede ground and come to an agreement with the other party. The buyer needs a reliable supplier, highlighting the importance of maintaining the ties between the two entities (Lewicki et al., 2005). The two firms stand to benefit from the business transactions.
Preferred Agreement for a Negotiator
An analysis of the dialogue between the two parties involved in the case study can be used to identify the preferred agreement. The preferred settlement will involve the supplier signing a compensation agreement to make it valid in the future. Besides, the company should promise to give the buyer discounts on future shipments. On its part, the buyer should demonstrate goodwill by increasing the volume of merchandise purchased from the supplier. According to Fenn (2011), a negotiator should not disregard value-creating strategies in conflict resolution. It is noted that a company that values its reputation will not risk having cases of damaged goods made public. For this reason, such organizations depend on peripheral issues to help them build trust with their partners (Lewicki et al., 2005). In this case, the signing of the compensation agreement boosts the confidence the two parties have in the relationship. It also underscores their willingness to continue doing business with each other (Chang, 2005).
A negotiator should be aware of the fact that interdependence as a concept in a negotiation makes it possible to arrive at viable agreements. The need to expand its market share, as well as the competition in the textile industry, allows for a compromise between the two parties (Chang, 2005). The question that the negotiator should address is whether the business transaction between the parties is a one-time thing or a long-term relationship. To this end, the mediator should identify the reputational consequences that may interfere with the trust between the two parties (Carrol, 2006). The emotional outburst displayed by the buyer with regards to the low quality of the merchandise increases the vulnerability of the firm in the negotiations. The supplier may exploit these emotions to further decrease the power of the buyer in the mediation talks (Lewicki et al., 2005).
The mediator should also realize that value claiming and creation lead to interdependence. As such, zero-sum, non-zero-sum, and distributive situations are inappropriate in these negotiations (Chang, 2005). On the contrary, integration and pursuit of mutual interest are the best. Capitalizing on shared interests and non-competing attributes will ensure that a settlement is attained. In the case study, the supplier has more power in the mediation. However, the company has a reputation to protect. As such, the supplier needs to build trust with the new partner to create value. The large market share of 36% is the bargaining point of the supplier. The opinion of the experts also adds value to its argument (Chang, 2005)
The buyer should use the ability to increase its purchasing power as leverage in the negotiations. Withholding information is another strategy that can be used in mediation talks (Carrol, 2006). In this case, the buyer can hint at its intentions to increase the volume of its orders. However, the firm should not quote the exact figures with which it intends to increase its orders. The negotiator should encourage the voluntary sharing or exchange of resources (Fenn, 2011). The sharing should be made more specific to entice the other party. Compromises are also required in these negotiations. For example, the arrogance of the supplier about its huge market share can be used as leverage. It can be used to encourage the supplier to protect the partnership between the two firms.
The Concepts of Independency, Dependency, and Interdependency in Negotiations
Lewicki et al. (2005) define interdependence as the situation where the parties involved in a negotiation intend to benefit from each other. On its part, independence is where one or more of the parties in the dispute are autonomous and do not need the other stakeholders. Finally, dependence highlights a situation where one of the parties cannot exist or operate without the other (Lewicki et al., 2005). The case study of the international defect claim presents a situation where one of the parties is more powerful than the other in terms of its dominance in the market. The buyer is less powerful compared to the supplier (Chang, 2005). Consequently, the supplier can be said to be independent, while the buyer is dependent as far as the negotiations are concerned.
Independency in the case study is made evident by the supplier of the textile materials. The company considers itself to be invincible to some degree considering that it controls 36% of the market share (Chang, 2005). To this end, the firm does not need the buyer to increase its profits. As such, it can easily opt-out of the mediation talks. The arrogance displayed by the company during the negotiations is meant to diminish the bargaining power of the buyer. However, this show of might may be counterproductive. According to Fenn (2011), parties involved in mediation talks should avoid being provoked to react emotionally during negotiations. The reason is that such a situation increases the vulnerability of one of the parties. For example, the supplier dismisses the emotional outburst from the buyer and threatens to pull out of the business deal (Chang, 2005). Another source of power as exhibited by the supplier, and which justifies its independence, is the fact that it operates four major textile firms in Vietnam (Chang, 2005). Also, it has a good relationship with the Japanese Sumitomo Group. The adoption of the “take it or leave it” stance by the company is supported by the technical analysis report, further enhancing the independence of the firm.
Dependency as far as the negotiations are concerned is portrayed by the buyer. The company needs a reliable supplier of raw materials to solve its manufacturing problems (Chang, 2005). The emotional outburst shows how weak the buyer is in terms of negotiation powers. Fenn (2011) highlights the use of time as an important factor in dispute resolution. In the case study, the buyer used the “last-minute escalation” of negotiation tactics to ask for a discount (Chang, 2005). To some extent, it is also evident that the two parties are dependent on Sumitomo. They need the negotiator to act as a “go-between” to avert the losses that may be incurred by both parties.
Despite the dependency and independence of the two firms as illustrated above, it is also clear that the parties have an interdependent relationship. To this end, the supplier needs to sustain its dominance in the market. On its part, the buyer needs a reliable supplier to resolve its manufacturing issues (Chang, 2005). As a result, the two have to agree. They want to nurture the relationship between them. The interdependence is beneficial to the two parties as both are likely to benefit from the agreement. The use of an arbitrator shows the interdependency between the two firms.
Workflow, Negotiation Process, and the Skills Required in Dispute Resolution
Negotiation and dispute resolution are required for effective business management (Fenn, 2011). The negotiation process follows a particular line of thought to reach an agreement between the involved parties. The line of thought and the steps involved is what make up the workflow of the dispute resolution process. The procedure begins by encouraging the involved parties to state their claims. The differences in the opinions and interests of the stakeholders are then identified. Finally, the shared interests are highlighted and discussed (Lewicki et al., 2005). The workflow is identified by the process itself, which involves the goals of the negotiation and the relationship to be established after the engagement. In the international defect claim case study, the negotiation workflow begins when the buyer puts forth a claim of compensation against the supplier. The claim is based on the fact that the merchandise supplied by the distributor was of low quality, which led to losses on the part of the buyer (Chang, 2005). The workflow proceeded with a counterargument from the supplier. The firm observed that a technician tested the samples supplied to the buyer and a report was provided showing that the quality met the required standards.
The adoption of various negotiation strategies then follows. The party with the upper hand in the negotiations is usually the one with more powers (Fenn, 2011). The party has an advantage over the other and, in most cases, determines the outcomes of the mediation talks. Distributive, integrative, and mixed motives strategies are employed depending on the interests of the involved parties (Carrol, 2006). The supplier uses its powers in the relationship to control the talks. The firm quotes its dominance in the market. However, at the same time, it makes it apparent that it is unwilling to give up on the relationship between the two parties (Chang, 2005). On the other hand, the buyer realizes that it has less power in the mediation talks. As such, the firm resorts to the strategy of emotional blackmail and appeal. It threatens to cut its ties with the supplier. Besides, the buyer threatens to inform its business partners of the low quality of materials supplied by its business partner (Chang, 2005).
To agree, both parties must have the skills required to cede ground and make compromises. A value-creating strategy is required at this point to come up with a win-win situation (Fenn, 2011). The two parties come into an agreement when the buyer agrees to abandon its compensation claims. The firm still needs the supplier to access high-quality raw materials. On its part, the supplier agrees to provide technical support and discounts to the buyer. The aim of this is to help the firm expand its market territory and increase its profits (Chang, 2005). In this case, the two parties are a little disappointed. However, they both stand to benefit from the arrangement. The importance of trust and the value of maintaining business relationships play a crucial role in moving the workflow of these negotiations. The workflow process is completed by the mediator. After the parties have presented their arguments, the mediator concludes by suggesting a common ground that will be beneficial to both (Chang, 2005). Sumitomo, the mediator, is also interested in the stable relationship between the warring parties.
Carrol, J. (2006). Negotiation: Managerial psychology. Web.
Chang, K. (2005). Relationship quality and negotiation interdependence: The case study of international defect claim. Total Quality Management, 16(7), 903-914.
Fenn, P. (2011). Commercial conflict management and dispute resolution. New York, NY: Routledge.
Lewicki, R., Saunders, D., & Barry, B. (2005). Negotiation (5th ed.). New York, NY: McGraw-Hill/Irwin.