Value creation with Multiple issues

Satish Duryodhan
 Puzzle

17 camels and 3 sons

1/3
1/2 1/9

Value creation approach?

 $2MN Tax benefit of acquisition
23M
-Additional Value

ease
Big Pharma (BP) acquirer (Buyer)

22M
W
21M

T 20M
SP BATNA-MP Offer 21 M

19M BP BATNA- Valuation 18.5M

I 18.5M

TP

WA 21.5M 22M Ideal 23M

Small Pharma (SP) target (Seller)

 Distributive
Compete Explore

H
Value claiming opportunity

Balance
M

Integrative

Avoid Problem solving

L

L M H
Value creation opportunity
What if diff. Parties have diff. Perceptions?
 The Negotiator’s Dilemma
More Value Claiming More Value Creating

Pure Jt. Prob.

Integrative
Distributive Solving

Salt Harbor Complete

Creative thinking mutual trust
Adding New variable

Distributive bargaining
 Multiple
Single issue Issues-
Fixed Pie expand Pie

Motivation: Motivation:
Self interest Mutual interest

Compete - Collaborate
behaviour -behaviour

Distributive negotiation Integrative negotiation

 DEAD BEAT DEAD END:
A CRITIQUE OF THE NEW U.S. PLAN FOR PAYMENT OF U.N. ARREARS

Breakout room
UN and US role:
Agree on two “Negotiation issues”
Each party to get one argument acknowledged in your favour
 US UN dispute 2000- In favour of UN

What US wants What US

owes UN
25%
22% 1.0 B
US share of UN
54M
1.8BN budget

US GDP EU GDP
27% 27%
US share 25% EU share 36%

Y-2000 Y-2000
 US share of UN peacekeeping budget

What US owes UN
What US wants

31% UN Budget
25% $0.6 BN
0.6 B
36M 31%

Y-2000
 US UN dispute 2000- In favour of US

UN Budget
$1.8BN
50%
40%
30%
25% 25%

L-1940’s L-1950’s M-1960’s E-1970’s Y-2000

US share of UN budget
 What should Holbrooke do?

UN did not accept

Helm-Biden bill
Pay US100MN
to keep vote 926M over 3 years
800M contested
 Japan-wanted
Proportionate
reduction
20%

Holbrooke first
round of
negotiation
189 countries
refuse to ratify US

US side-lined
Can you UN meetings
guess “Why”
 Impact of new variable

Holbrooke asked each country why they can not raise their
contribution and gain more influence in UN?

2000 2001

Budgets frozen Budgets available

Can not increase Can increase UN
UN contribution contribution

Who will pay the 3% in 2000?

Who Paid the cut?
Who Pays UN’s regular Yearly budget
 Intolerable cruelty movie

100+ countries US

01 02
Range-not fixed value Range – not fixed value

Negotiation
Variable

02 04
Willing to admit for Willing to admit for
negotiation negotiation

Anchor case-Hexware-DL Negotiation variable Example

 Strategy: Making Package Value (PV) Offer

Customer to seller: Start Time Price

July ?

Seller to Customer Start Time Price USD

Approach A: July 650K
Seller to Customer Approach B:
Start Time Std. Service Premium Package
Price USD Services Value (PV)
July 650K No 650K
July 650K Yes-50K 700K
March 635K Yes-45K 680K
Buyer seller Negotiations Creating Package Value (PV) Offer

Value Price
01
Schedule delivery
02

Negotiation 03 Product Quality

Variables
04 Support Warranty

05 Terms Payment
 ( 15-13.5) / 1.5 (11.5-13) / 1.5

0.5 0.3

0.3 + 0.9

0.2 +.5

0.4 0.5

PV1: Price + Delivery (15.5-14) (11.8-13.3)

PV2: Price + Delivery+ Specs (15.8-14.3) (12.7-14.2)
PV 3: Price + Specs (15.3-13.8) (12.3-13.9)
 04 01
ISSUES ONE BY ONE

ISUUES TOGETHER
03 02

Promotes Promotes trust

competition

Many win lose some win-win

outcomes outcomes

Supports distributive Supports integrative

negotiation negotiations
 Negotiation Challenges due to uncertainty

Buyer- Construction company in residential and commercial projects

Plot value for commercial construction USD 150k

Plot value for Residential construction USD 100k

Chances estimated that Property will be eligible for commercial

construction based on info. Available

Seller 20% Buyer 80%

 Potential uncertainty, mistrust..

Plot value for commercial construction USD 150k

Plot value for Residential construction USD 100k

Expected Value
Buyer 0.8*150+0.2*100= 140K
Seller 0.2*150+0.2*100= 110K

agreement value USD 110K

Value left on the table by seller USD 30K

Seller suspects Buyer leading to potential walkout..

 contingency contract

Does happen
a contract to do or not to do something if
some event, collateral to such contract occurs.
does not happen

The event must be occurrence of the event

minor to the.. is not controlled by the
promising party’s..
contract
will or desire
 Framing contingency contracts

If plot is eligible for If plot is not eligible for

commercial within “X” yrs.. commercial within “X” yrs..
Buyer will pay $30K to seller
Seller will pay $10K to Buyer

Contingency contracts can be risky if both parties are not in

agreement of how to measure objectively.
Team paid 9M salary in 96 to NBA star
Year Total Missed Payment for
Games game % missed games
1996 82 27 $3M
Reason: unpredictable, disdain for professional norms

Strategy: contingency laden contract

Component Amount $M
Guaranteed money 4.5
Per game played above 59 0.185
Winning title 0.5
Play all playoff 1.0
Total max. possible earnings 10.5
Frameworks to select Negotiation generic strategy
 Five Generic strategies for buyer seller negotiations
Assertive ness Segmented Negotiating
H Behavior Matrix

Dominating / Collaboration
Competing (win /Win)
(Win / Lose)

L Compromising H Cooperation

Avoiding Accommodating
(Lose / Lose) / Yielding
(Lose / Win)

L
 Kraljik matrix as basis of buyer negotiation strategy development

High
( Impact of Purchasing )
( Impact on profits )

❖Scarcity
❖New Technology
S ❖Difficult to produce
❖Monopoly / Oligopoly

Low

Low ( Complexity of Supply Market ) High

Fasteners -bolts, screws, studs..
Car Bodies

Rare Earth Material High tech Windshield

 Kraljik matrix as basis of Car Manufacturer negotiation strategy

Fasteners Std. Parts Rare Earth Mtl. High tech Windshield

Q2 Q4
Profitability impact
( Impact of Purchasing )

Leverage Items Strategic Items

“Negotiate Low prices” “Form partnerships”

Q3
Q1
Non Critical Items Bottleneck items
“Efficiency” “Contracts”

Low ( Complexity of Supply Market ) High

 Kraljik matrix as basis of Car Manufacturer negotiation strategy

Abundant Supply Natural Scarcity

Strategic Items
Profitability impact
( Impact of Purchasing )

Leverage Items “Form partnerships”

“Negotiate Low prices” ((High Tech
(car Bodies) windshields)

Product standardization Unique products

Bottleneck items
Non Critical Items
“Contracts”
“Efficiency”
(Rare raw materials)
( Fasteners )

Low ( Complexity of Supply Market ) High

 Supplier preference Table

Provide superior service and quality

Willing to Invest time and Keep customer at all cost
( Attractiveness of account )

Effort in the relationship

Development Core Business

( Get further business ) (Retain and Expand)

Low Priority No Reason to Develop

No Development Potential relationship, No Priority

Nuisance Exploitable
(Withdraw) (Maximize profits)

Low ( Relative value of account) High

 Negotiation Strategy selection for buyer

H Assertive ness

Dominating /
Competing Collaboration
(Win / Lose) (win /Win)
L H
Compromising
Cooperation

Avoiding Accommodating
(Lose / Lose) / Yielding
(Lose / Win)
L
If supplier is powerful and dominant and relationship is very
important (Bottleneck), then use a yielding strategy for that particular negotiation.

For negotiating on highly important category where the supplier relationship is

low-importance (Leverage), it might be appropriate to use a competing style
Negotiation Strategy selection for buyer
 The Myers-Briggs Personality Type Indicator (MBTI)

Favorite world
Mind
I
E interact with surroundings

Extrovert Introvert

• action-oriented • thought-oriented

• feel energized by • feel recharged after

spending time with others spending time alone

• enjoy frequent social • enjoy deep meaningful

interaction social interactions
The Myers-Briggs Personality Type Indicator (MBTI) scale-1

Ambi vert

Personality
continuum scale Extrovert
Introvert
 The Myers-Briggs Personality Type Indicator (MBTI) scale-2

Information
Energy
S N

Sensor INtuition

• hands-on experience • patterns and impressions

• Reality-learning from • think possibilities,

their own senses imagining future, and
abstract theories.
 The Myers-Briggs Personality Type Indicator (MBTI) scale-3

Decisions F
T Nature

Thinker Feeler

• facts and objective data • personal value system

and social considerations

• consistent, logical, and • Feelings and emotions

impersonal
 The Myers-Briggs Personality Type Indicator (MBTI) scale-4

J Structure P
Tactics

Judger
Perceiver

• want things to be neat, • wants things to be

orderly and established flexible and spontaneous

• want things settled • want thing open-ended

The Myers-Briggs Personality Type Indicator (MBTI) scale-5

Pass ive

AT-Identity
Assertive continuum scale Turbulent
(A) (T)

self-assured, even- self-conscious,

tempered, resistant to stress sensitive to stress
The Myers-Briggs Personality Type Indicator (MBTI) scales
Favorite world Information Decisions Structure
Mind Energy Nature Tactics

S T J
E

Extrovert Sensor Thinker Judger

I N F P

Introvert INtuition Feeler Perceiver

Check understanding
Group-Roles (goals, interests, and preferred activities)

Analysts Diplomats Sentinels Explorers

N N S S

INtuition INtuition Sensor Sensor

T F J P

Thinker Feeler Judger Perceiver

Rationality Rationality Guard / Rule spontaneou

impartiality sensitive Hierarchy s
 Group-Strategies (preferred ways of doing things)

People Improvement Social

Confident
Mastery Engagement

I E I E

Introvert Extrovert Introvert Extrovert

A A T T

Assertive Assertive Turbulent Turbulent

Private /alone Outgoing improve Like in Group

Self communicatio Self doubt People
concern
 Confident 16 Personalities Constant
Individualism Improvement
Assertive Turbulent
People Mgmt.
Social
Engagement

A/T
 Poll on your personality
Take 16 personality test using the link https://www.16personalities.com/personality-types
Link Also available in salary negotiation template. Take poll on what is your personality
after test

Which personality is most common

Which personality role group is most common

Which personality strategy group is most common

Your observation on your personality

 NT Analyst 10.4%
(SJ)
(SJ)
NF Diplomats 16%
(SJ)
(SP)
(SJ)
(SP) I S T J
(NF) E N F P
(SP)
(NF)
(SP)
(NT)
SJ Sentinels 46.4%
(NT)
SP Explorers 27%

Roles Group