Read the following case study to answer the questions that follow.
Background
EspelTech is one of the world’s major providers of global supply management software and services, which helps companies reduce costs through efficient product and services sourcing. EspelTech has dealt with more than $50 billion worth of products and services in the oil and gas, other natural resources, retail, transport, finance, and industrial sectors for customers including General Motors, Nestlé, Shell, Japan Energy, Mitsubishi, and Cadbury Schweppes. Shanghai-based MJT is one of the biggest gaming and hospitality companies in Asia and is owned by Chinese businessman Tan Wu Bo. MJT has been a EspelTech client for six months, and the companies have signed an agreement to conduct two projects. The first, completed in March 2014 and tremendously successful, saved MJT some $1.5 million, and the second one is about to start. Impressed with the results, MJT wants to explore the possibility of other alliances with EspelTech. As such, a meeting is arranged between MJT’s Senior Vice-President of Finance Iris Ma and EspelTech’s Regional Managing Director Drake Dubois, and attended by MJT’s Vice-President for Procurement Henry Chow and EspelTech Sales Group Director Layton Pang. Ma is keen to explore more projects with EspelTech and has tasked Chow to follow up with EspelTech as soon as possible. The managing director of EspelTech suggests that a session be arranged with key stakeholders from both companies to discuss and assess possible opportunities for other MJT projects.
Possible Deal
Ma and Chow agreed to the suggestion and asked that a proposal be submitted to MJT after the opportunity assessment meeting that was attended by Chow, his assistant Mary Xie, who is also the purchasing manager, and two members from EspelTech. Both parties identified ten possible projects. Xie asked for a proposal to be submitted to MJT through her, and EspelTech provided a competitive price package that included services over a twelvemonth period. As is to be expected from a Chinese company like MJT, Xie asked for a reduction in the licensing fee, additional programme management days (at no extra cost), and an extension of the software term from twelve months to twenty-four months.
In reply, EspelTech put in writing its discussions to date with MJT:
1. MJT had agreed that EspelTech could add value to the projects identified.
2. MJT would sign for a ten-project package to get a competitive price.
3. If EspelTech could meet MJT’s demands, the latter would sign the contract by May-end 2005.
Xie agreed to point one above, but was non-committal on points two and three. After much discussion, EspelTech agreed to lower its fee and provide MJT additional program management days at no additional cost. However, EspelTech said it could not agree to extend the twelve-month term for use of the software without charging extra. Then, to complicate matters further, Xie suggested that MJT could not commit to an agreement even if all the issues were resolved. The most recent negotiations were conducted quite quickly since EspelTech knew that Xie was not the decision maker and approval had to come from her top management. It is quite usual for Chinese companies put in place a structure whereby the foreign negotiator deals with multiple tiers of negotiators before working through the final deal with the senior key decision maker.
Negotiations to Date
EspelTech’s team had received some of the best sales training available. EspelTech’s primary concern was how likely MJT would be to enter into an agreement even if the issues were resolved, and within what time frame. MJT argued that the proposed price was beyond what it could afford, although it acknowledged the need for help from EspelTech to implement the projects, and that it needed twenty-four months to execute the ten projects due to its lack of manpower. EspelTech took the position that, while it was prepared to look into the fee structure and program management term as part of the total package, the request for twenty-four months was not reasonable. Nevertheless, despite arguing that other organisations were able to implement ten projects in twelve months, to satisfy MJT, EspelTech negotiated a mid-way solution: a maximum of eighteen months. When one week passed and there was no response from MJT, Hyper- Hawk asked if it would be prepared to sign if EspelTech acceded to its three requests. Xie replied that she would submit the proposal for approval to her superiors, Tan and Ma, but added that there was no guarantee the agreement would be signed by the end of May. From EspelTech’s perspective, all the issues presented by MJT had been resolved—yet there was still no deal. When asked about the status of the project, MJT cited staff turnover, but then mentioned another possible IT project where there was a clear need for EspelTech. The discussion ended with MJT requesting that EspelTech prepare the preliminary work and submit yet another proposal. Based on the updated information, it appeared that the IT project might get underway earlier than the previously proposed ten projects. Moreover, given that this project had an entirely different scope, there was a strong argument to negotiate a separate deal for it. Whichever proposal MJT wished to undertake first, EspelTech was ready to negotiate and finalise an agreement, but it could not yet tell whether the latest development was a genuine project or a further stalling tactic
1.Use your own words to outline the key issues in the negotiation? What were the main objectives of the parties? Provide specific examples and explain your answer.
2. In what way does JJM show it believes it is negotiating from a position of strength? Provide specific examples and explain your answer.
3. What negotiation style would you say EspelTech used in their negotiations? Provide specific examples and develop your answer.
4. What steps could EspelTech use to counteract the Chinese negotiation style.
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