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Hydra Tech, GmbH is a major producer of hydraulic cranes for both maritime and construction purposes. They are recognized for the quality of their cranes and the inventiveness of their design. The company has produced a low-profile crane with low height, weight, and center of gravity, which allow it to operate in narrow conditions and to pass under low bridges. They have a worldwide service network available 24 hours a day. Mounting of cranes can be done by Hydra Tech's service personnel or by the customer, who is supplied with simple installation manuals. Bertoni Shipping, which operates out of Genoa, is a new but rapidly expanding shipping company specializing in bulk cargo. Bertoni's major concerns are the quality of the product, and thus providing reduced chances of breakdown, speed of loading, worldwide service facilities, training, delivery, and mounting of cranes. They are an interesting customer due to their rapid expansion and good cash flow, which makes them a good credit risk. Hydra Tech would consider winning the first contract an important step in getting in on the ground floor of an expanding company.
Bertoni's engineers have seen Hydra Tech's All Purpose Service Crane, which has twice the capacity of their present cranes. They were interested in a crane with a 25-ton lift capacity whose book price was DM 590,000, with a one year all parts and labor warranty. The cost of mounting the cranes was quoted at DM 7,000 at Genoa. Following a discussion with the engineers, the Chief Purchaser, Roberto Marchelli, contacted Dieter Schmidt, the Head of European Sales for Hydra Tech, to discuss details of a contract for an initial purchase of ten cranes of the type described.
Items to be negotiated are:
1.Price of the cranes. The crane's list price is DM 590,000, but no doubt a discount could be arranged based on the quantity of purchase.
2.Price of mounting. The standard price is DM 7,000 per unit, but a discount could be arranged if there were a number of cranes to be mounted at one time.
3.The length of the warranty. The normal warranty is one year.
4.Lag time between order and delivery, and penalty for late delivery. Normal lag time is three months, which Hydra Tech rarely has any trouble meeting. However,
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Hydra Tech has never had late delivery penalties in their contracts.
5. Credit terms. Common credit terms are 30 days, 1 percent.
6. Training in the operation of the cranes. Free training is not uncommon.
The Case Sequence
1. PRE-NEGOTIATIONS: Roberto Marchelli will contact Dieter Schmidt by phone to arrange a meeting in Genoa. He will express his interest in the cranes and set a time for the meeting. This is to be done in pairs, with one person playing Marchelli and one playing Schmidt. After preparing in pairs, some pairs will perform the conversation in front of the class. After each telephone call, the class will evaluate the students' performance on the basis of language, including both level of sophistication and grammatical correctness.
Each side will prepare for the negotiations by discussing their negotiation strategy and filling out the Negotiations Worksheet and Position Presentation Worksheet (Appendices 1 and 2, “Negotiating in English”, Эмерель Н.И.,
Григорьева Е.Ю.).
2. SOCIALIZING: You will get to know the members of the other team. The tone will be formal, and each team member will introduce himself or herself.
3. SITTING DOWN AT THE NEGOTIATING TABLE: Marchelli will show the German team to
the negotiating table. Each head of team, starting with Bertoni Shipping, will introduce the team members, their name, and title.
The Bertoni Team:
Roberto Marchelli, Chief Purchaser
Antonio Bagio, Comptroller
Victoria Antonelli, Corporate Counsel
Marco David, Chief Engineer
The Hydra Tech Team:
Dieter Schmidt, Head of European Sales
Thomas Well, Production Manager
Heidi Stein, Installation and Service Manager
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4. OPENING STATEMENTS: Marchelli will make a brief statement of welcome. Dieter
Schmidt will thank him for the invitation.
5. OPENING THE NEGOTIATIONS: Marchelli will open the negotiation by saying
something such as, "I suggest we begin with ..." and suggest the first point to be
discussed.
MEETINGAGENDA
1.Price of the cranes
2.Price of mounting
3.The length of the warranty
4.Lag time between order and delivery, and penalty for late delivery
5.Credit terms
6.Training in operation of the cranes
6.CONTINUED NEGOTIATIONS: Negotiations will continue until one or both of the sides
feels a need for a break, either to discuss business separately, contact someone at the head office, or simply to get some fresh air. In the latter case, the two teams can socialize outside of the negotiating room, but remember, this is also a part of the negotiation process and relevant information can be subtly exchanged. Periodically, throughout the negotiations, particularly when some form of agreement is reached, each team should sum up their understanding of the agreement to avoid misunderstanding.
7. FINAL AGREEMENT: When a final agreement is reached, it will be summarized and then written up in the form of a contract.
8. ANALYSIS OF THE NEGOTIATIONS: Make a presentation in which the two teams present the contract arrived at and each team presents its strategy, its goals, and how successful they were in attaining their goals in the contract.
LANGUAGE MASTERY EXERCISE
WRITTEN EXERCISE
If you arrive at an agreement, write up a final contract as a joint assignment involving both teams.
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CASE 4
TOURISM COMES TO ZANIR
Development of a Tourist Resort
Zanir is a poor African country with a beautiful coastline. The Zanirian Ministry of Commerce has recently been contacted by a German tourist resort developer, Abenteuer Urlaub, GmbH., which made a preliminary inquiry concerning the possibility of developing a tourist resort along the Zanirian coastline. At the present time the tourist industry is undeveloped in Zanir, and the inquiry raised an intense debate at the ministry. Zanir could definitely use the income, but some forces in the government are worried about possible negative side effects such as crime and the cultural and environmental impact. In addition, there is the question of the real profit potential since much of the profits could go to the Germans.The case involves several phases: (1) the Germans' presentation of the project, (2) the Zanirians' decision as to whether they wish to enter into formal negotiations, and (3) formal negotiations. In order to understand the background of this debate it is necessary to understand the present situation in Zanir.
Zanir is located on the west coast of Africa, north of the equator and south of Mauritania. Its size – 12,000,000 square kilometers – makes it one of the smaller African nations. However, it has a scenic and unspoiled coast line of 50 kilometers.
It has an ideal climate for winter tourism as the dry season is from November to May, with an average temperature along the coast of 30 degrees centigrade. It has a major river, the Zana, which supplies adequate water for the present population, but would not supply enough water for the hotel complex anticipated by Abenteuer Urlaub. In addition, the water would not be free of bacteria and would probably cause nausea and diarrhea among some European tourists.
The population is 2,000,000 of which 500,000 live in the capital. The remaining population lives in rural areas and is involved in agriculture. The average age is
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relatively low, 32, and the birth and child mortality rates are high, life expectancy is low, 57, and health conditions are poor. The only health clinics in the rural areas are run by relief organizations and missionaries.
Ninety percent of the population is Muslim and 10 percent is Christian.
Agriculture employs 75 percent of the population, mainly on small, family farms of one to five acres. There are a few large plantations owned by whites who remained after Zanir's independence from Great Britain in 1980.The peasants are involved in subsistence farming, while the large plantations produce single crops for export. The major export crops are groundnuts, cotton, and rice. Some beef is produced for local consumption. There is 40 percent unemployment, particularly in the capital which is a magnet for the rural unemployed who gravitate to slums and survive as best they can. The GNP per inhabitant is U.S. $400.
Fifty percent of the population is illiterate. Public schooling is only available to a sixth grade level and attendance levels are low, particularly in the rural areas.
Zanir is a multiparty state with democratic elections. The president is elected for five years in a direct election. The parliament consists of one house, and its members are also elected for a five-year term. There have been three elections since independence. The first five years the country was run by a self-proclaimed leader who has subsequently been re-elected three times in relatively democratic elections. The political situation in Zanir is considered to be relatively stable. However, economic stagnation, rising unemployment (from 25 percent in 1993 to 40 percent in 1995), increasing budget deficits, and national debt threaten this stability. The lack of hard currency has made it impossible for Zanir to service its loans from the International Monetary Fund (IMF), and representatives of the government are currently meeting with IMF representatives to restructure their loans.
In the Zanirian Ministry of Commerce two opposing forces have emerged. One sees tourism as a possible source of desperately needed hard currency, jobs, and