A negotiation story – a possible joint venture What lessons can we learn about negotiation and about negotiating strategically? © shutterstock.com/tratong

A possible joint venture - the story Two airline CEOs sign an MOU The project teams build a trust relationship and sign a confidentiality agreement The parties put their proposals but fail to agree; the negotiations end in disarray A third party intermediary helps rebuild the process; agreement is reached on the substantive issues, which left the financials to agree upon and …

A possible joint venture - the story and … The European airline puts its financial offer on the table, as does the Asian airline The two positions are far apart Rather than enter into negotiations on price, the European airline walks away How can we tell whether this was the correct decision?

A possible joint venture – the strategic analysis of the end-game, 1 From the European airline’s perspective, what does our context tell us about the strategy factors? Importance of the issue to self a project for strong growth, CEO vision Concern for other’s outcome low instrumentality, contingent only on the benefits from the proposed joint venture Expectation of other’s strategy ?? Time pressure internal momentum but no external deadlines Quality of alternatives other projects and opportunities (but not in China)

A possible joint venture – the strategic analysis of the end-game, 2 From the European airline’s perspective, what do the strategy factors suggest would be the appropriate strategy? So … Importance of the issue to self a project for strong growth, CEO vision Concern for other’s outcome low instrumentality, contingent only on the benefits from the proposed joint venture Expectation of other’s strategy ?? ?? Time pressure internal momentum but no external deadlines Quality of alternatives other projects and opportunities (but not in China) high low low good

A possible joint venture – the strategic analysis of the end-game, 3 From the European airline’s perspective, what strategy do we expect the Asian airline to take? To answer this we must analyse their situation, so … From the Asian airline’s perspective: Importance of the issue to self (i.e. to them) strong growth project, had made major concession to enable negotiations to continue Concern for other’s (i.e. our) outcome low instrumentality, contingent only on the benefits of the proposed joint venture Expectation of other’s (i.e. our) strategy has made the major concession on systems, will expect this to be matched Time pressure internal pressures not to concede increasing Quality of alternatives other projects and opportunities (but not in China) high low concede low good

A possible joint venture – the strategic analysis of the end-game, 4 From the European airline’s perspective, now we have an understanding of the other party’s likely strategy, we can now complete the assessment of the strategy factors: Importance of the issue to self Concern for other’s outcome Expectation of other’s strategy Time pressure Quality of alternatives high low contend low good

A possible joint venture – the end-game The European airline What do the strategy factors suggest? Strategy factor Importance of issue to self Concern for other’s outcome Expectation of other’s strategy Time pressure Quality of alternatives high/low low high contend poor high low concede good high(ish) high compro-mise poor for both high compro-mise low(ish) good for both high/low concede contend compromise high/low good/poor A possible joint venture – the end-game concede contend clear cut compromise creative compromise

A possible joint venture – end-game The European airline What do this suggest about how the negotiations will unfold? Strategy factor Importance of issue to self Concern for other’s outcome Expectation of other’s strategy Time pressure Quality of alternatives high/low low high contend poor high low concede good high/low concede contend compromise Deadlock? high/low good/poor A possible joint venture – end-game concede contend

A possible joint venture – changing the strategy factors? What might the European airline do to change the factors impacting on the Asian airline which might then change the Asian airline’s intention to contend? The importance of issue to them Their view of the outcome’s importance to us Their view of our expected strategy The time pressure they are under The alternatives they have high: reduce it? unlikely low: raise it? only by improving instrumentality value concede: contend? we will contend low: increase it? no external leverage which does not also impact on us good: worsen them? no immediate leverage, same industry context as us

A possible joint venture – end-game The European airline It appears that not much can be changed. So … Strategy factor Importance of issue to self Concern for other’s outcome Expectation of other’s strategy Time pressure Quality of alternatives high/low low high contend poor high low concede good high/low concede contend compromise Deadlock! So be prepared to walk away rather than concede high/low good/poor A possible joint venture – end-game concede contend

A possible joint venture – the end The European airline puts its financial offer on the table, as does the Asian airline The two positions are far apart Rather than enter into negotiate on price, the European airline walks away Was this the correct decision? A good negotiator is one who knows when to walk away rather than reach a poor agreement. 

Strategic negotiating in practice Make enough noise and they will give you anything just to shut you up!