Alpha-Beta
General Information and
Confidential Information for Beta
By Thomas Gladwin
Profile of Alpha, Inc.
Alpha, Inc. is a large, diversified electrical company
based in the nation of Alpha. The company plans to
become a leader in equipping the “factory of the
future” and is already one of the leading producers of
numerical control equipment. It has recently spent
hundreds of millions of dollars developing a factory
automation capability, including robotics and
computer aided design and manufacturing. Alpha,
Inc. has been acquiring companies, investing heavily
in new plants, and spending considerable sums on
product development. It has its own innovative robots
under development, some equipped with vision.
However, to meet its objective of quickly becoming a
global supplier of automation systems, Alpha, Inc.
has found it necessary to link-up with foreign firms
that are further down the robotics learning curve.
Robotics in nation of Alpha
There are 30 robotics manufacturers in Alpha. Use
and production of robots in Alpha is only about a
third of what it is in the nation of Beta. One survey
reported that 1,269 robots were produced in Alpha in
1990; the survey also revealed that 4,370 robots were
in use in Alpha in 1990, mainly in the auto and
foundry industries. Robot sales in that year were
estimated to be $92 million, with a significant share
accounted for by imports. The industrial automation
market in Alpha is growing at well over 20% a year.
The robotics portion of it is expected to become a $2
billion a year domestic market by 2000.
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Profile of Beta, Inc.
Beta, Inc. is the leading manufacturer of integrated
electrical equipment in the nation of Beta. The
company has been run by scientists since its founding
and is Beta's most research-oriented corporation: it
employs more than 9,000 researchers and its R&D
spending equals 5.9% of corporate sales. Beta, Inc.'s
strategy is to become the world's largest producer of
robotics in the next few years. To meet this goal,
Beta, Inc. will have to double its manufacturing
capacity and develop a strong export market. To date,
nearly all of Beta, Inc.'s robotics production has been
sold domestically. The company's deep commitment
to robotics is reflected in the recent formation of a
large task force to develop a universal assembly robot
with both visual and tactile sensors. Beta, Inc.
expects to be using the new robots for some 60% of
its in-house assembly operations within three years.
Robotics in nation of Beta
1) There are 150 companies making or selling
robots in Beta. The nation has “robot fever” and a
government that has declared automation to be a
national goal. An estimated 12,000 to 14,000
programmable robots are already on the job in Beta,
representing 59% of those in use worldwide. Betan
firms churned out nearly $400 million worth of
robots in 1990 (approximately 3,200 units). The
nation exported only 2.5% of its production and
imported less than 5% of its robots. Industry analysts
see robot production in Beta rising to $2 billion in
1995 and $5 billion in 2000.
 Alpha-Beta
Role of Beta
By Thomas Gladwin
Five months ago, your firm was approached by and
held preliminary discussions with Alpha, Inc. on a
possible robotics manufacturing and marketing
relationship. Some tentative understandings have
been reached regarding the general nature of a
collaborative arrangement, but a number of specific
details still need to be worked out. The Alpha, Inc.
bargaining team will be arriving in Beta to discuss
these points with you.
Beta, Inc.'s strategic plan calls for significantly
boosting overseas sales of robots so as to attain
greater scale economies in production. You
especially want to develop a presence in the currently
small but rapidly growing Alphan market. This
requires a high quality industrial sales, distribution,
and service network. You have considered the
options of exporting directly to, or establishing a joint
venture with, or wholly-owned subsidiary in, Alpha.
However, given the large cultural differences
between Alpha and Beta, the difficulties of servicing
robots from overseas, and the rapid technological
change in robotics, Beta, Inc. has decided (as have
other Betan robot producers) that the Alphan market
at this time can probably best be served via a
licensing arrangement with a local Alphan company.
You can offer that company proven, high quality
robotics, either in the form of fully assembled units
or the technology and components needed to
assemble them.
Alpha, Inc. looks like an ideal candidate to become
your licensee -- it has the desired technical
competence, industrial marketing expertise, service
network, quality control, distribution system, general
management and business reputation. You are a bit
concerned, however, that by helping Alpha, Inc. you
may create a competitive monster that may come
back to haunt you in the future.
In preliminary talks with Alpha, Inc., it was agreed:
1) that the relationship will be for 5 years; 2) that
initially Alpha, Inc. will receive fully assembled
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DRRC/KTAG teaching materials are protected by copyright law. DRRC requires a per person royalty for use of its exercises.
Each purchase of an exercise authorizes copying or electronic distribution of that exercise equal to the quantity purchased.
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robots from Beta, Inc.'s current model lines which
will be sold under Alpha, Inc.'s name; 3) that later on
Alpha, Inc. will begin to assemble robots using Beta,
Inc. technology and components; 4) that the
agreement will be non exclusive, meaning that Beta,
Inc. can enter Alpha, Inc.'s markets directly at any
time and can also enter into relationships with other
firms in Alpha.
Four issues still need to be decided:
1) The number of different models to provide to
Alpha, Inc. You currently have eight models in
production. You would like to provide Alpha with
only four of them for the following reasons:
Supplying Alpha, Inc. with robots will require
increasing production capacity. You would like to
control capital expenditures by phasing in the
increased capacity. You are also concerned about
increasing capacity to service Alpha, Inc.'s sales and
then losing the need for that capacity when Alpha
begins to assembling robots itself. If Alpha insists on
more than four models, the volume of each model
purchased must be sufficient to realize economies of
scale and utilize increased production capacity.
2) The number of Beta, Inc. units to be imported
by Alpha each year. In order to realize economies of
scale you would like the number to be 300 of each
model. Your reason for entering into this licensing
agreement with Alpha, Inc. is to implement your
strategy of rapid growth and deep penetration. If
Alpha, Inc. cannot meet these strategic objectives,
they are not a strategic fit.
3) The matter of technology sharing. You very
much want access to Alpha, Inc.'s artificial vision
technology. You are certain that with your
manufacturing expertise and your line of universal
assembly robots, you and Alpha, Inc. could be the
first to market low cost, universal robots with vision.
This is the most important issue for you.
At the prior meeting you agreed with extreme
reluctance to help Alpha develop its own robotics
manufacturing processes. Just when this transfer of
technology will occur was left open. If Alpha, Inc.
does not mention it, you will not bring it up. You will
only make a firm commitment regarding the transfer
of manufacturing technology if you get access to
their artificial vision technology and you are able to
hold down the number of models provided to Alpha,
Inc. thereby controlling capital expenditure costs.
4) The royalty rate. You believe a rate of 5% on
gross sales is just and reasonable. If absolutely
necessary you might consider a royalty rate as low as
3% in order to get access to the artificial vision
technology.
While there are other potential distributors for your
robotics, no other organization in the world has
adopted Alpha, Inc.'s strategy of being a full-service
supplier of automation equipment. If no agreement
with Alpha, Inc. is forthcoming, you will have to
reach distribution agreements with several other
organizations in order to have the distribution
capacity that your strategy requires. This will delay
the implementation of Beta, Inc.'s strategy, since to
date no negotiations have been held with other
distributors.
The Betan Negotiating Style
Negotiators from the Betan culture typically employ
a style (i.e. a set of behaviors) that is collective,
formal, indirect, patient, unemotional, and passive.
Your team should exhibit this style in your
bargaining with Alpha, Inc. Guidelines for how to do
so are provided below. Discuss each guideline as a
group and plan how each will be followed in the
negotiating session.
In your negotiations you must:
1) Behave Collectively: Betans work together as a
group. All Betan decisions must be reached
collectively. In preparation for negotiation, Betans
agree as a group about their interests and priorities.
They also decide who is to speak for the group on
what topic. One team member may open the
negotiation (see below), another lead the questioning,
another indicate that acceding to Alpha's proposals
would be difficult, and another make the final
commitment to agreement. Team members only
speak on their topics. However, all decisions are to be
made collectively. If all of the members of the Betan
negotiation team cannot agree, then the team will
defer making the decision.
3 Alpha Beta/Beta
2) Behave Formally: Beta is a hierarchical,
status-oriented culture. Betans attach considerable
importance to customs, rules, and ceremonies. They
bow in greeting rather than shake hands. They use
last names only. They exchange business cards.
During the negotiation, they sit erect, eyes looking
down.
3) Behave Indirectly: Betans prefer to start
negotiations with a presentation which discusses the
Betan company, its general goals in the market,
agreements made to date, and optimism for the future
relationship. (The purpose is to convey the
importance of their organization and its commitment
to the issues under negotiation.) At this point, Betans
would be likely to inquire about the comfort of the
other side, the quality of their accommodations, their
experience sightseeing, and the difficulties the trip
may be placing on their families. (The purpose of this
is to begin to build a relationship with the other side.)
Betans are then likely to begin to ask questions about
the negotiation issues. Betans are information
hungry, but not very forthcoming with information.
After the other side has answered the question,
Betans may respond by asking another question,
repeating the question, or just remaining silent. They
are unlikely to offer information in return. Betans
often ask for information to be repeated. (Betans are
searching for areas of agreement between the two
sides. In the Betan culture, it is inappropriate to
promote your own positions; rather, Betans listen
until they hear where positions come together.)
Betans often use the word "yes" and nod to indicate
not agreement, but understanding. They seldom use
the word "no", but might say “that would be
difficult”. (Betans value relationships and to be
completely negative would not be relating
sympathetically to the other side.)
4) Behave Patiently: Patience is a virtue in Beta.
Since it is culturally inappropriate to promote ones
own ideas, Betans will wait patiently until the other
side suggests something that is acceptable. Betans'
patience is fortified by their strong belief that they are
a moral people, and that their goals are both right and
fair. As a result, Betans seldom make any
concessions except at the very end of the negotiation.
5) Behave Unemotionally: Betans value highly
self-control, and are trained from childhood not to
show emotion. Public display of emotion is believed
to lead to confrontation and conflict, which may
interfere with normal, cooperative social relation-
ships. Betans do not show their frustration with or
distaste of others' negotiating behavior. Their faces
will be immobile and impassive.
6) Behave Passively: Betans consider the When confronted with such a negotiator, or one using
aggressive, persuasive negotiator, skilled in threats or other crude tactics, Betans retreat to
argumentation, as superficial, insincere, and vulgar. silence.

4 Alpha Beta/Beta