NEGOTIATION & CONFLICT MANAGEMENT

MBAD 6165M

Instructor: Dr. Gary F. Kohut

1st Reflective Paper: Pemberton´s Dilemma

MONTERREY, NUEVO LEON

Carlos Omar Carranza García

1306307

May 07th, 2018

I. PREPARATION & PLANNING

Introduction.
The exercise creates a situation in which decisions have to be made to manage one of
stores. The outcomes (profits and losses) are determined not only by what you do, but
also by a number of other factors such as the goals and motives that you and the other
store have and the communication that takes place between you and them.

Preparation.
Based on the information provided about gain and lose depending on remaining closed or
opened we have the objective to maximize profits, therefore we came to an initial posi-
tion based not only in our interest but in the direct conflict of interest of the other store.

If only one store opens, the other loses. If both open, both lose. However, if both stay
closed, they both won’t be penalized but will also lose the potential profits for that day.

Since we were not able to negotiate or know how they will behave until the initial negotia-
tion period, we reviewed the options and the worst scenario was to remain open until the
initial negotiation period (even losing profit in the initial 4 rounds it will allow us to minimize
the risk to be in disadvantage at the initial negotiation) taking a position instead of negotiat-
ing based on mutual interest but this was because we were not allowed to negotiate.

At this point even we saw that the best option (win-win solution) was to remain closed and
trying to be principled negotiators. Is worth to mention that we identified this exercise relat-
ed to the John Nash´s economic gaming theory in the one the incentive to remain closed
(taking a collaborative approach to the dilemma we were facing) would allow both stores to
make profit vs the option in the one none of the stores were going to profit at all, but we
didn´t know whether the other store team was a soft or hard negotiator so we decided to
remain Open.

We were planning to get to the initial negotiation with the same or better condition com-
pared with the other store, so we planned to get an agreement to remain closed until the
next negotiation period and then based on the situation at that time consider an strategy
that would allow us to have a win-win agreement with a collaborative strategy separating
the problem from the people, focusing on interests, making clear the options for mutual
gain using the objective criteria, so we were prepared to remain closed and offer to them
 to open one or two of the weeks if they closed during the initial four weeks, so they could
recover and to get to the next negotiation in equal circumstances.

Is worth to mention that some of the team members were trying to convince us to be hard
negotiators since the goal was a victory and distrust the other team and consider making
threats if we were having the advantage at the initial negotiation, but we were able to final-
ly agree that was not the proper way to negotiate since the focus was not right because
the objective was to maximize profit, not to overcome the other team.

II. PROGRESSION

As we analyzed and expected as the worse scenario that would let us remain in equal
conditions after the initial four weeks, both stores remained opened with a total loss of
100K, then the initial negotiation happened.

Our emissary had the objective to get an agreement with the other team to remain closed
the next four weeks in order to stop bleeding (losing money) and start gaining profit, also
had to let the other team know that it was also in their best interest, and we were commit-
ted to keep our word and show them that we were trustworthy. Also he told the other team
that we had to collaborate because the possible result was better that if we were taking our
own decisions without taking the other in consideration, that we were not rivals.

Finally we told him to listen to the other group, showing respect and being amicable un-
derstanding other team´s needs and objectives, which actually were expected to be similar
to ours, so an agreement (integrative negotiation) could be reached.

As agreed in the next four weeks both stores remained closed so we change the initial
lose into a total gain of 20K after the eight week.

For this next negotiation our emissary had the objective to emphasize that both teams
were doing great, that both were trustworthy so it was in both best interest to remain
closed for the next 4 weeks in order to continue gaining profits.

At this stage we also said to our emissary to get the agreement in written as a contract to
avoid any last minute change that could affect our store.

We also emphasize that doing what would be fair and acceptable for both parties will be
the way to continue in business, and later on we could join forces and negotiate with the
 government to avoid fines for opening on Sunday while the people do not need to go out of
town to make any purchase.

At this time we had some of our team members considering not keeping our word and fi-
nally change our opinion in the last moment to get as much profit as possible, but by votes,
the winner option was to keep our word as established in the contract (the one we were
the only store having a copy).

III. SOLUTION

The final result was a net profit of 160K after 12 weeks having opened the first four weeks
and remain closed the rest of the weeks, so we considered that it was our best alternative
to this negotiated agreement, compared to the goal of maximization we made 160K in-
stead of the 260K that we could achieve if both stores were closed all the time, but since
we didn´t believed that the other store would remain closed before the initial agreement,
that was our BATNA and we can live with the result, thinking that in business gaining the
trust of the other party since the beginning is really important and make a difference.

If we were able to negotiate prior the initial stage we could get a better outcome for both
parties, but unfortunately we were not allowed to do it.

IV. PERFORMANCE

In the planning stage some members and I were thinking in remain closed in the first week
to show a good will and then get into the first negotiation and tell the other store that we
lost money because of our good will, but after reviewing all scenarios we agreed to remain
open because if one of the weeks we were closed and the other store open then in the ini-
tial agreement we would have a disadvantage, so we finally agreed to remain open to
have same leverage at the initial negotiation.

I was trying to convince all members that the best solution would be a collaborative solu-
tion, so I made some internal alliances (since our interests were aligned) and start con-
vincing all other members but even this was not totally possible because one member con-
tinued to believe that we should have a hard position in order to defeat the opponent, we
finally told him that the final position would be based on the interest and decision of the
majority of the team, so we voted for which would be the best alternative and we came to
an agreement to remain closed after week four and keep our word to the other team in
 order to earn profit taking in consideration not only the final economical outcome but the
how, the mean to an end.

V. LESSON LEARNED

The Pemberton’s Dilemma negotiation gave great insight into the choices one makes
when faced with this situation, we could take a strategy and tactics based on a distributive
negotiation or integrative negotiation.

Defeating our competition was not our final goal, and the satisfaction with the negotiation
during the process beside the final result was also worthy because we accomplished the
confidence of the other team and therefore we reached an agreement mutually satisfactory.

I learned that greed can make someone miss out the goal, and also dismiss great oppor-
tunities and end up hurting you in the long run. People do not like to do business with peo-
ple they perceive untruthful or liars and in this exercise I realized how easily one could be-
come that through excessive competition (even some members of our team had that posi-
tion, taking the problem as something personal). I learned that competing is not what ne-
gotiation is about. It is about getting the outcome that you desire and the means of getting
the outcome and how the other part fells about the outcome are just as important as the
outcome in itself.

Conclusions

By both store remaining closed they both can maximize their profits. The best scenario
would be for both stores to approach the city and try to change the mind of the ma-
jor/government in order to modify the law by demonstrating that they could generate
a %200 increase in revenue ($360,000.00 per store assuming each store would profit
$30,000 a week if allowed to open on Sunday without any fines) by remaining open result-
ing in a %200 increase in tax revenue. This settlement would be the ultimate form of col-
laboration in the fact that all of the involved parties would profit. Both stores would have
increased revenue, the city would increase revenue through income tax, and the citizens
of Pemberton would benefit by having their local store open on Sunday and not having to
go into the city to shop.