Negotiation and conflict resolution

Question : Discuss about the Management ? Answer : Introduction: Any kind of transaction is based on a detailed survey and negotiations. The negotiation process is a vital part of the human life and economy as well. It determines how much a product will earn and what amount of the product will be given against that amount. Negotiation or bargaining thus requires skill set and information regarding the product which is being sold. The determination of price, which is one of the basic concepts of economics, is based on the negotiation between the suppliers or producers and consumers. The demand and supply of a product in a market depends on the negotiation between the products supply and demand. The matter can be best shown through a figure as given below. Figure 1: Demand and supply of cars in general. Source: As created by the author. As the figure above shows, the negotiation between the demand and supply curves of cars is determining the equilibrium price and quantity (units in this case) at which the cars are being sold. While buying a car the negotiation is done among multiple key players. The major players are the buyers or consumers and the sellers of the cars. Apart from these two there are other key players like the person who provide the loan to the buyer for the purpose of this transaction, the insurance company representative who insures the car, the government who gets the expenditure tax, and many more. In the views of Corvette, while the negotiation process starts, it involves all the key players at different levels of the transaction process. There are various attributes that affect a negotiation regarding a transaction of a car like the attitude of the sales person, product design, production specifications, price of substitute cars and complementary goods like price of fuel, road taxes, and others. The report focuses on all these matters which affect a negotiation regarding the transaction process of a car. It considers the Malaysian market of cars. The cars which are considered in the report are Mazda CX-5, Honda CRV, Nissan X-Trail, and Korean Marques. For this purpose several measurements are used like GRIP, BATNA, ZOPA, and ACES (Gangopadhyaya et al. 1139-1140). Goals and objectives of the negotiation: The goals and objectives of the negotiation are as follows: Understanding the underlying basics and purpose of the negotiation regarding buying a cross-over type utility car, Finding out an efficient strategy for negotiation of buying a SUV car, Planning a session for the negotiation with the car dealers and bank personnel, Proper usage of communication skills and techniques to avert the potential conflicts with the other key players, Using general negotiation techniques finding out a solution which will be Pareto efficient for all the key players. Grip: The GRIP model is incorporated here to understand four critical attributes regarding the negotiation of buying a SUV car as given below Goals: The goals in this negotiation are different for different key players in this transaction. For example, the buyers primary goal is to maximize the utility from this transaction. For this purpose the buyer can: Ask for lower price of the car, Choose a car which consumes less fuel and gives more mileage, Choose a car which is more spacious, Choose a car which requires less servicing, Choosing a car which can travel easily through all kind of roads. The lower price will help the consumer to have more consumer surplus, which the consumer can appoint in some other transaction purposes. This will increase the consumers net utility. The consumer will try to choose a car which gives high mileage. It will reduce the fuel cost for the consumer. The difference a high mileage car can make will be strongly felt in the long run, as the consumer can save more due to less fuel consumption. It will also reduce the emission of greenhouse gases by the consumer. The environmental issues will also be addressed in this process. Choosing a car which is more spacious will give the consumer more comfort. A car which requires less servicing saves the consumer a lots of resources and time. Choosing a car which can travel through all kind of roads will ensure the cars durability (Beenen, Gerard and Barbuto 149-155). Roles: As stated by Mayer in this negotiation process the key role players are the consumers and the sellers of the vehicles, persons who provide loan to the consumers for buying the vehicle, the insurance company representatives who make insurance policies for the cars, and the government who receives the expenditure tax, and others. The consumers have the role of being the final consumers of the products which in this case are cars. The persons who are providing the loan are usually the banking personnel. The loans play a vital role in the transaction. A high rate of interest might discourage the buyers from buying a car. On the other hand, if the interest rates are reasonable enough, it might increase the sales of the cars. The insurance policies also play a similar role in this transaction. If the premium that has to be given in order to buy the car is high, it will reduce the sales of the vehicles, and vice versa. The expenditure taxes levied by the government also plays a huge role in determining the sales of cars. If the tax rates are high, people will opt for cars with lower prices and look less for luxury cars (Goldstein and Arnold 159). Interpersonal relationships: According to the ideas of DeMarr and De Janasz (654), the relationships between the key role players in the negotiation process revolve around the surplus that can be gathered by the buyer from buying the car and the seller from selling it. In the negotiation process, all the relationships revolve around the buyer (Beenen, Gerard and Barbuto 149-155). The situation can be depicted in the figure below: Figure 2: Interpersonal relationship and flow of product and resources. Source: As created by the author. As the figure above shows, all the key players have a direct relationship with the buyer, which is not in the case of the other key role players. At the end of the chain is the seller, who provides the product to the consumer in exchange of resources, which in this case is money. The resources reach the seller through various key role players. Process: As stated by Moffitt and Schneider (300-320), in this part of the model, the negotiation between the buyers and the other key role players take place. The system of the negotiation determines how the conflicts between the key role players will get resolved. In this negotiation process the buyer sticks to his or her goals (Gangopadhyaya et al. 1139-1140). The process will felicitate the buyer and help the person in acquiring the most possible utility from the transaction. The car that has been chosen by the consumer, from the given options of Mazda CX-5, Honda CRV, Nissan X-Trail, and Korean Marques will be purchased by the consumer by the end of this process. The consumer will negotiate with each of the key role players one by one and simultaneously, as given in the figure above. Batnas of the parties involved: Following the ideas of Ramsbotham, Woodhouse and Miall (165), in this negotiation process, the Best Alternative to a Negotiated Agreement will come when the consumer will find a better option than the negotiated agreement. The consumer can use the BATNA as a point of leverage. In this case, the consumer already owns an Audi 4, which is otherwise in good condition and fully functional. It will work as the consumers safety net if the negotiated option seems to the consumer as not desirable. Following the views of Gates, the utility the consumer can still derive from using the Audi 4 will be his opportunity cost in this case and also the BATNA for him. On the other hand, the seller of the Mazda CX-5, or the sellers of the Honda CRV, Nissan X-Trail, and Korean Marques have the BATNA of not selling their cars to the consumer if the price they are getting from the customer is not desirable to them. The situation can be depicted in the figure as given below. Figure 3: BATNAs of the involved parties in the negotiation. Source: As created by the author. In the views of Celllich and Jain (160), to achieve the desired BATNAs attractive alternatives are required for both the sellers and the consumer. To accomplish this, the parties need to think about a list of actions in case no agreement is reached between the sellers and the buyer. The sellers can lower the prices of the cars or give more attractive deals to the buyer. The buyer can go back to using his Audi 4 if the offered deals do not attract him. As per the ideas of Hicks and Tutu (150-160), if no proper alternative is found, the parties can look for partial solutions. The buyer can be given a offer where he can sell his old car to the seller and get a much more reduced and affordable price for the new car. Exploration of the zopas: The Zone of Possible Agreement or ZOPA in this case will be the intersecting point of the two parties arguments. It will represent a win-win situation. This will work as an equilibrium which will be affordable by both the parties. The situation can be Figure 4: Derivation of ZOPA from the BATNAs. Source: As created by the author. Following the ideas of Dietmeyer and Bazerman (100), to understand whether there can be a ZOPA, both the parties have to understand first the bottom line or the worst case price of the SUV car. If the price offered by the sellers and the price which the consumer is ready to pay does not intersect at any point, there will be no ZOPA, and the negotiation will fail to deliver a positive result. Both of the parties can overcome this situation by reducing the negative bargain zone. A negative bargain Zone will occur if the price of the SUV car offered and the price the buyer are ready to pay does not match at any point (Goldstein and Arnold 159). The situation is shown in the figure below. Figure 5: The negative bargain or mismatch between the two parties. Source: As created by the author. In the figure above the red zone shows the difference between the two parties offering limits. It represents the negative bargain of the buyer and the seller. To overcome this negative bargain both the parties have to follow integrative negotiation." The common interests of these two have to be considered here to find a solution (Baber, William and Ojala 6). The common interest of the parties is to achieve a utility from the transaction of the car. Determination of substantive and relationship reaching considerations: For the purpose of determining a substantive and relationship reaching considerations, the basics of the negotiations has to be understood. The negotiation is triggered by the degree of desire of buy or selling a car, which comes from the subconscious mind of the person. To understand this traits the following analyses are done. Jungian analysis: As per the ideas of Korda (200), the Jungian analysis gives an in-depth view of the unconscious mind of the parties involved in the negotiation. In this case, the purpose of the negotiation is to make a successful transaction of a car. In the subconscious mind the buyer has the desire of buying a new car. In order to make that desire a reality the buyer can sell his old car an Audi 4. He can also exchange it for a new car. As the buyers deep desire is to buy a SUV car, it is most likely that he will go to his extreme limits to buy the car. This is will drive him during the negotiation process On the other hand the seller has the target of selling cars (Christiansen et al. 243-247). He will try to make as much profit as he can, but he will not lose the chance of selling a car while doing so. Thus, he will reduce the price of the car keeping in the mind several issues which will determine the transaction (Clenney et al. 100). Price of the other SUV cars plays a crucial role in this neg otiation process. The subconscious mind of the seller will drive for making a sale. Thus the subconscious minds of both the parties have to be considered as they play the deterministic role in the negotiation process. Pre-preparations for negotiations: In the views of Folger, Poole and Stutman (350), the pre-preparation for the negotiation incorporates all the information gathering events which the buyer and the seller go through. These information helps the decision making process for the buyers, as well as the sellers. It incorporates gathering information regarding the car and the similar cars. In this case, the 2016 face-lifted Mazda CX-5 has a price range which varies from RM 142,375.50 to RM 142,775.50. The other comparable models incorporate Honda CRV with price RM 137,913 and Nissan X Trail with price RM 136,976.95. The Korean marques also have a considerable market in the country. Recently the price of these cars is falling rapidly, making it easy for the consumers to have substitutes. As per the thoughts of Waldman (110-130), for pre-preparations the buyer has to identify the key players in the negotiation and follow the information that has been gathered from the BATNAs and the ZOPA. These will help both the seller and the buyer to determine a substantive and relationship reaching considerations (Dygert, Claire and Elizabeth 105-110). Value creation: Following the views of Cloke and Goldsmith (550), the value creation process is typically connected to the sellers. Adding value to the product will increase its price and utility as well. The value creation process can get disrupted due to some internal as well as external factors. The internal factors of value creation process incorporate creation of an integrative negotiation. It will involve both financial and non-financial terms with the buyers (Dygert, Claire and Elizabeth 105-110). Both the parties require cooperating to achieve the maximum benefit possible by integrating the individual interests into an agreement. In the views of Ramsbotham, Woodhouse and Miall (641-651), only this way a win-win situation can be created. It is also called a Pareto efficient situation where, one party does not have to lose anything while another party increases his or her benefits from the negotiation. The situation can be depicted in a figure as shown below. Figure 6: Win-win pie chart for the buyer and seller of the car. Source: As created by the author. Following the ideas of Bolton and Croson (220), the win-win pie will show the situation in the ZOPA area. It shows that both the buyer and the seller get their share of benefits. The internal value creation process which is incorporated in the win-win pie incorporates several attributes like the attitude of the sales person, price of the other cars, internal strategies, and others. If the attitude of the sales person is friendly, it will make the buyers comfortable, and create a positive environment regarding the transaction (Howard and Vivian 250). It has the potential of making a negotiation successful. On the other hand, if the behaviour of the sales person is rough, it will work as a barrier for the buyer from buying the car from that particular seller. The price of other cars also plays a vital role in the value creation process which is incorporated in the negotiation. The price of the 2016 face-lifted Mazda CX-5 varies from RM 142,375.50 to RM 142,775.50, which is higher than the closer substitutes in the market. It can be used in the negotiation process as price signalling. Here, a higher price ensures a better quality which will attract the buyer. It also adds value to the product. The internal strategies in the car selling company are created in such a way that it adds to the value of the car. As stated by Whatling (332), there are various external factors regarding the value creation process like the rate of interest for the loan given by the bank to buy the car, price war by a similar company, the amount of premium, and many others. If the rate of interest is high, it will discourage the buyer from buying the SUV car, as the monthly instalments will be high for the consumers budget. On the other hand, if the rate of interest is low, the buyer will reconsider buying the car. And due to the low rate of interest the buyer may consider buying a high priced model, as he has to pay less amount of interest. The car has to be insured as it is a safer option , and the buyers are rational. If the premium of the insurance is high, the buyers may not afford it. Hence, even having a desire for buying the car, the consumer will back off from the transaction. However, if the premium is reasonable for the buyer, the deal will be done smoothly. The similar car sellers in the market can go for a price war in order to capture the better share of the market. This will reduce the value of the products in general. To compete with the other sellers, the seller of Mazda CX-5 will also have to slash its price. It might affect the quality of the product negatively. On the other hand, if the prices in the market remain stable, the research and development processes of each company will add value to the products consistently (Howard and Vivian 250). Recommendations: The seller of the cars can make a deal with the banks in order to provide a lower interest rate to the consumer. The seller of the Mazda CX-5 can make a deal with the insurance company to charge less amount of premium for insuring the car. Pressure the government to create a price floor for this type of cars in order to maintain the quality of the products. Explanation: If the car selling company can make a deal with a bank which will provide loans for buying the car at a lower interest rate, it will increase the number of sales for the company. It will also increase the transactions in the bank and thus benefit the bank. Similarly, the car insurance company which will make deal with the car selling company will also benefit from the deal. These two deals will make it easier for the consumers to buy the car. This is how the external value creation process will work. The government interference is needed in case of a price war breaks in. The government creating a price floor under which no seller can sell the cars will ensure that the quality of product remains intact. As stated by Mantel (240-250), following these procedures will not change the shares in the win-win pie chart, but it will enlarge as it will incorporate more values. Positive pitching ACES to close the deal: Following the views of Vindel and Harris (250-290), before pitching the ACES the environmental issues have to be addressed in the negotiation. The environmental issues mainly incorporate the emission of toxic gases from the cars. A car emits carbon monoxide and nitrogen oxides which affect the environment like green house gases affect. To reduce the emission rate, the buyer can focus on buying a car which gives better mileage. This will ensure less oil consumption and less emission. The buyer also can choose a car with more environment friendly engine system. These issues are must in any ethical negotiation process (Lee and Seung 320). Power play: Following the views and ideas of Hames (500), power play is a vital tool when it comes to negotiation. The negotiation results will be in the favour of that negotiator who possesses more power in the table. Using power play technique the seller can get the maximum amount the consumer is ready to pay. Similarly, the buyer can reduce the price to the minimum that the seller can possibly offer. Hence, the power play in this negotiation process has to be assessed from both the players point of view (Trajkovi?, Svetlana and Milos 220). To get the maximum amount the buyer can pay the seller can present the information in a biased way. The seller has to show the buyer that the car is the best in its category in the market and there are no other cars which will give the buyer the same level of satisfaction from using the car. The seller also has to show the buyer how much demand it is for the car in the market due to its positive traits. The advantages of using that car have to be highlighte d by the seller (Alexandris, et al 299-317). As per the ideas written in Harvard Business Review, the buyer, on the other hand, can use power play technique by showing reluctance in buying the car, as he already owns a car with good condition. He can demand for better specifications in the new car than his Audi 4. He can also use proper timing for buying the car. During the end of the year, the car sellers concentrate more on increasing the sales number. The buyer can take advantage of this fact (Schneider and Andrea 13). Due to the rising competition in the market it will be easier to persuade the seller for the buyer. The buyer can even urge the seller to bring in a reasonable interest rate from the bank and get a reasonable premium from the insurance company. It will save the buyer a huge amount of time and resources (Melzer, Philipp and Mareike 1-22). The buyer can replace the old car for the new car as the old cars market value is more than the new car. It will give the buyer an edge over the seller of the Mazda SUV. Product design: Product design is done by the sellers in order to make a sale. In this case, the cars that are being sold are created which, while designing, the producers focus on two facts as follows: How to make the design of the car attractive to the customer? How to make the product more environmental friendly? To achieve the perfect user and environment friendly the research and development department of the car producing companies are engaged. The cars chosen by the consumer here are Mazda CX-5, Honda CRV, Nissan X-Trail, and Korean Marques. The seller of the cars has the information that the consumer already owns an Audi 4. Hence, it will be tough for the seller to convince the buyer to go for a certain design as he already possesses a car which has high design value. To understand the requirements of the buyer, the seller has to use the BATNAs (Saarni and Carolyn 175-180). It will help the seller in determining how to approach the buyer regarding the designs of the cars. The buyers first choice is the Mazda CX - 5. It is comfortable and stylish at the same time. Along with these traits the car is spacious and serves as a utility car. This is the most required attributes of the buyer. The research and development of the cars producing company has used the KODO Soul of Motion design for Mazda CX 5, which gives the car a masculine beauty with a dynamic shape. The design philosophy used for this car by the producer follows the 5 point grille, defined body lines, which is accompanied by a powerful stance. The design matches with the type of the race cars. The first alternative that has been chosen by the buyer is Honda CRV. The car has one of the best designs produced by the Honda Company so far. It is also an utility car like Mazda CX - -5. The car designers have made it environment friendly with the help of the recent research and development departments findings. The car has a export quality which has been appreciated all over world. It increased the demand of the car. According to the Honda Motor Companys president Takahiro Hachigo the model, due to high production and demand carried some faults which were not captured at first test runs. It raised some quality issues. The company is taking care of the problem by focusing more on electrified cars for rebooting the automaker. According to the spokesperson of the company, the model needs to through some updates and changes, which will help the car reach to the standards it was expected to at first. The second alternative that has been chosen by the buyer is Nissan X-Trail. This model was created while focusing on the cross country boom in the economy. During the process the car remained rough around the edges. The design of the car is suitable for urban roads and simple. The past consumers have complained that the model has lost its usability over time. Being a utility car, the Nissan X Trail has lost its reputation due to this. To overcome the problems the company has used second and third generation technologies for enriching the cars utility. The company has adopted a detailed approach for updating the car to the standard it was expected by the consumers to be (Saarni and Carolyn 175-180). Product specification: To understand which car will be apt for the buyer detailed information is needed. According to Trappey et al. (650-670), the product specifications have to be considered in this case to compare between the options and choosing a suitable car. The following table consists of the overall product specifications for Mazda CX-5, Honda CRV, and Nissan X-Trail, which will help the buyer in determining the similarity and differences between the three cars. Specifications Honda CRV Mazda CX 5 Nissan X trail Type of vehicle SUV SUV SUV Type of fuel Petrol Petrol Petrol Engine 2354 cc 2488 cc 2488 cc Power 187 hp 185 hp 169 hp Mileage kmpl kmpl kmpl Torque 222 Nm 250 Nm 233 Nm Seating capacity 5 5 7 Side airbag for safety Yes Yes No On board computer Yes Yes No Fuel supply system PGM-FI Direct Injection MPFI Table 1: Product specifications of Mazda CX-5, Honda CRV, and Nissan X-Trail. Source: A created by the author. The above table will be required by the buyer to decide which car should be a suitable utility SUV Conclusion: As found here, the negotiation process will determine whether a car will be bought by the consumer. The buyer had three specific cars, Mazda CX-5, Honda CRV, and Nissan X-Trail in mind along with the Korean Marques. The buyer also owns an Audi 4. The buyer has the option of buying a SUV car from the given list above. He can also not buy any car at all. It will depend on the level of utility he thinks he will achieve from buying the car. If he thinks the Audi 4 will give him more utility than the SUVs, he will not buy any car. It the product designs and specification of the other cars attract him he will prepare his mind to buy a new car. For this, he will prepare for a negotiation. The negotiation process will then decide whether he will buy a car or not. If the negotiation process presents a win-win situation, the transaction and the purpose of the negotiation will be successful. To get there, the buyer and seller can use the concepts of power play. As the buyer already owns a car it will be easier for him to present strong negotiation points. All the cars in option pass the marks of being environment friendly and having attractive design. Hence, the buyer can choose any of the three cars. He can also not buy a car if he does not get an affordable bank loan interest rate and insurance premium. 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