Answer For Cas Mannx_OTC: Identifying ZOPA

Your Group’s Name: Group 2

Members of your group who participate in this assignment:

No Name

1 Winda Kartika / 29120006

2 Nadya Ariana Dewi / 29120109

3 Djati Priambada / 29120226

4 Muhammad Nabil Ulwan / 29120133

5 Ayustina Giusti / ​29120295

6 Audilia Samantha / 29120014

Assignments:
1. Answer ZOPA by filling the ​? ​by numbers in the above picture!
- Tr (Thompson Reservation Price) : $ 12 Million.
- NNr (Northcraft Reservation Price) : $ 30 Million.
2. Explain the reasons or assumptions of the answer!
 - Tr (Thompson Reservation Price) : $ 12 Million.
The NN analysts estimate the profitability of betaMANNx by $ 12 million if it
remains exclusively a prescription drug. Even if Thompson doesn't join the
venture, they still could gain profit of at least $ 12 Million. So, ​Thompson will not
enter a joint venture if they do not receive this level of benefit.
- NNr (Northcraft Reservation Price) : $ 30 Million.
The NN analysts predict that NN Company can ​expect a $30 million net profit
over the remaining six year period in which Thompson ​maintains exclusive
manufacturing rights​ to betaMANNx products.

Discussion:

1. How much pie will be obtained by the JV if Thompson does not do active marketing for 6
years?
If Thompson does not do active marketing for 6 years, the JV’s profit will reduce by an
estimated $ 9 Million. But, if Thompson does active marketing, the profit of the JV is $ 30
million which will continue to reduce by 2 million per year (for 6 years) if direct competition
occurs between betaMANNx and MANNx-OTC and Thomson still does active marketing.
2. What is the opportunity cost of Thompson if it can not do active marketing for 6 years?
How much will Thompson get from Betamanxx if it can not do active marketing for 6
years?
The opportunity cost of Thompson is $ 9 Million. Because if they fail to actively market the
product for 6 years, they would reduce their profitability by an estimated $9million.
Thompson will get at least $ 12 Million from betaMANNx even if they can not do active
marketing for 6 years. But if they join the JV, Thompson will gain profit $ 21 Million. Because
if Thompson joins the JV, Thompson will gain $ 30 Million minus the opportunity cost $ 9
Million, so they will get $ 21 Million.
3. What is the BATNA (​Best Alternative to a Negotiated Agreement​) of NN?

The BATNA for NN is $ 18 Million. Because if Thompson actively markets the drugs, NN will
not gain the profit of $ 30 Million. Other than that, NN will reduce the profit by $ 2 Million
every year. So, the BATNA for NN ($ 30M - ($ 2M * 6 years) is $ 18 Million. This is the best
alternative for NN because it is still in the range of the ZOPA.
4. What is the BATNA of Thompson? How much is Thompson's BATNA?
The BATNA for Thompson is $ 21 Million. Because if Thompson joins the JV they will get $
30 Million. But if Thompson does not actively market ke product, there will be an
opportunity cost by an estimated $ 9 Million. So, the BATNA for Thompson ($ 30M - $ 9M) is
 $ 21Million. This is the best alternative for Thompson because it is still in the range of the
ZOPA.
5. Tr: How much minimum share should Thompson get from the pie of JV? It is the border of
“go” or “not go” for Thompson to join the JV. If less than the minimum share, then
Thompson will get agreement bias.
From the ZOPA, the minimum share should Thompson get from the pie of JV is $12 million.
If the minimum share is less than $ 12 Million, Thompson better not go with the JV.
Because $ 12 Million is the border of “go” or “not go” for Thompson to join the JV. As we
know, Thompson could gain $ 12 Million itself even if they don't join the JV.
6. NNr: How much maximum share from the pie of JV should NN give to Thompson? It is the
border of “go” or “not go” for NN to realize the JV. If more than the maximum share, then
NN will get agreement bias.
The NN analysts predict it could be expected to make a $30 million net profit over the
remaining six year period in which Thompson maintains exclusive manufacturing rights to
betaMANNx products. So, from the ZOPA, the maximum share NNr (Northcraft Reservation)
should give to Thompson is $30 million. If the maximum share is more than $30 million, NN
better not go with the JV.