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Business Negotiation

Q-3) In the negotiation between Fiji government and FIJI water over the proposed tax increase on water extraction, which party is in a stronger position? Why? In what ways can each party leverage power to force a deal on favorable terms? Provide examples of power based moves that each party could employ. Ans. Fiji government is in a stronger position in the negotiation between Fiji govt. and Fiji water. Alternate Invertors- if Fiji water does not operate in Fiji, then govt. will call for international tenders from reputed international companies which will pay the extraction tax demanded by govt. Even some business council meetings happened with Australia and New Zealand to invest in the Fijian economy.

Both the parties can leverage its power in order to force a deal on negotiable terms: Fiji govt. Extraction tax- Fiji water is exploiting natural resources and contributing very little in taxes. It can easily afford to pay additional tax as last year companies export earnings of company was F$ 150 million and it has marketing budget of F$18 million. Transfer pricing- In order to save taxes, Fiji water has underpriced its water exports and was selling them at higher price in other countries. While other local competitors were exporting comparable bottles water at higher price. Alternate Investors- if Fiji does not pay additional taxes government can ask them to stop their operations and many foreign international private players will be ready to invest in the economy.

Fiji Water Welfare of the society- Fiji water was involved in various CSR activities in FIJI i.e. Employment- Fiji water provided employment to nearly 400 workers in Fiji and workers earned highest salary in the country. If plant closes all of them will get unemployed.

Environmental initiatives- Fiji water plant was certified to ISO 14001 (committed to reducing waste from production facility and drawing water at sustainable rate). It also announced a plan to go carbon negative- using more efficient transportation modes, relying on renewable sources of energy. FIJI WATER FOUNDATION- Fiji water supported various healthcare programs and quality education through its foundation in FIJI. Discriminatory taxes- Taxes were discriminatory as it would impact only one company while other companies will be paying $0.001 per liter. Alternate source- Fiji water purchased second water purifier in New Zealand which could be used as alternate source.

Q-4) FIJI water relies on the Fijian govt. to access Fijian water. How can the company build a trusting relationship with a government that has been unstable and is likely to continue being unstable? Ans. Fiji water can do one or more of the following things to build trusting relationship with Fiji government: Pay the taxes as demanded by government Invest more Fiji economy in terms of procurement from suppliers, more employment, more educational initiatives Encourage government investment in Fiji water and share fixed amount of profits with them.

Q-5) Was the tax increase fair/ethical? How would you describe the negotiation in the broader negotiation context (impact on other parties who are not at the bargaining table?) Ans. No, it was not ethical as it was only impacting one company. Tax should have been increased in such a way that each water purifying company in Fiji pays some increase in their tax amount according to their revenues and exports. But Fiji government was accused of corruption i.e. financial mismanagement, tax evasion, bribery and nepotism. So, there is a possibility that Fiji water must have paid bribery to government officials in order to evade taxes. In that case tax increase was ethical.

If Fiji water denies to pay the increased taxes, Fiji government would ask them to stop the operations. It might help the other players to increase their market share by tapping on those areas where Fiji water was operating in Fiji If Fiji water agrees to pay the taxes and is able to convince the government to increase the taxes for other parties also, then it will also have to pay increased taxes.