Introduction to Negotiation Strategy
At Oak Spring University, we provide corporate level professional Negotiation Strategy and other business case study solution. Knights Apparel and the Alta Gracia Factory: Paying a Living Wage case study is a Harvard Business School (HBR) case study written by Paul Brest, Debra Schifrin. The Knights Apparel and the Alta Gracia Factory: Paying a Living Wage (referred as “Knights Gracia” from here on) case study provides evaluation & decision scenario in field of Strategy & Execution. It also touches upon business topics such as - negotiation strategy, negotiation framework, Budgeting, Compensation, Emerging markets, Manufacturing, Social responsibility, Supply chain.
Negotiation strategy solution for case study Knights Apparel and the Alta Gracia Factory: Paying a Living Wage ” provides a comprehensive framework to analyse all issues at hand and reach a unambiguous negotiated agreement. At Oak Spring University, we provide comprehensive negotiation strategies that have proven their worth both in the academic sphere and corporate world.
What’s my BATNA (Best Alternative To a Negotiated Agreement) – my walkaway option if the deal fails?
What are my most important interests, in ranked order?
What is the other side’s BATNA, and what are his interests?
In 2014 The Alta Gracia clothing factory in the Dominican Republic was doing something quite unusual in the industry; it was paying its employees a living wage, which was 350 percent higher than the country's minimum wage. Knights Apparel, which owned the four-year old factory, also provided benefits, health care, and allowed the workers to unionize. Most apparel factories paid employees a minimum wage, which in some places was not enough to pay for workers' basic needs and the needs of their families. Knights Apparel founder and CEO Joe Bozich, the driving force behind Alta Gracia, came to this decision from both business and personal motivations. Knights Apparel was the number one provider of licensed collegiate logo apparel, and Bozich saw the opportunity presented by the growing number of college students unhappy with the working conditions of the people making their schools' branded apparel. Personally, Bozich said he wanted to provide "hope and a pathway out of poverty for generations to come." However, Alta Gracia's production costs were 20-30 percent higher than at Knights' other factories, and Alta Gracia was losing over half a million dollars a year. Knights was able to keep Alta Gracia open only by subsidizing it with funds from its profitable business units. Knights was a private company, but Bozich was still accountable to his board and the company's large multi-billion-dollar institutional investors. Over time, Bozich had convinced many of them to back Alta Gracia, but he needed to pull the factory into profitability soon in order to prove it was a viable business model. If Alta Gracia was successful, Knights would have to decide if it should be expanded. There was also the question of whether Knights would be able to replicate Alta Gracia, and if it could, should it? Other companies had tried and failed to offer a living wage and become profitable. Would Knights be different?
By interests, we do not mean the preconceived demands or positions that you or the other party may have, but rather the underlying needs, aims, fears, and concerns that shape what you want. Negotiation is more than getting what you want. It is not winning at all cost. Number of times Win-Win is better option that outright winning or getting what you want.
Options are the solutions you generate that could meet your and your counterpart’s interests . Often people come to negotiations with very fixed ideas and things they want to achieve. This strategy leaves unexplored options which might be even better than the one that one party wanted to achieve. So always try to provide as many options as possible during the negotiation process. The best outcome should be out of many options rather than few options.
When soft bargainers meet hard bargainers there is always the danger of soft bargainers ceding more than what is necessary. To avoid this scenario you should always focus on legitimate standards or expectations. Standards are often external and objective measures to assess the fairness such as rules and regulations, financial values & resources , market prices etc. If the negotiated agreement is going beyond the industry norms or established standards of fairness then it is prudent to get out of the negotiation.
Every negotiators going into the negotiations should always work out the “what if” scenario. The negotiating parties in the “Knights Apparel and the Alta Gracia Factory: Paying a Living Wage” has three to four plausible scenarios. The negotiating protagonist needs to have clear idea of – what will happen if the negotiations fail. To put it in the negotiating literature – BATNA - Best Alternative to a Negotiated Agreement. If the negotiated agreement is not better than BATNA then there is no point in accepting the negotiated solution.
One of the biggest problems in implementing the negotiated agreements in corporate world is – the ambiguity in the negotiated agreement. Sometimes the negotiated agreements are not realistic or various parties interpret the outcomes based on their understanding of the situation. It is critical to do negotiations as water tight as possible so that there is less scope for ambiguity.
Many negotiators make the mistake of focusing only on the substance of the negotiation (interests, options, standards, and so on). How you communicate about that substance, however, can make all the difference. The language you use and the way that you build understanding, jointly solve problems, and together determine the process of the negotiation with your counterpart make your negotiation more efficient, yield clear agreements that each party understands, and help you build better relationships.
Another critical factor in the success of your negotiation is how you manage your relationship with your counterpart. According to “Paul Brest, Debra Schifrin”, the protagonist may want to establish a new connection or repair a damaged one; in any case, you want to build a strong working relationship built on mutual respect, well-established trust, and a side-by-side problem- solving approach.
According to
Harvard Business Review
, there are three types of negotiators – Hard Bargainers, Soft Bargainers, and Principled Bargainers.
Hard Bargainers – These people see negotiations as an activity that they need to win. They are less focused less on the real objectives of the negotiations but more on winning. In the “Knights Apparel and the Alta Gracia Factory: Paying a Living Wage ”, do you think a hard bargaining strategy will deliver desired results? Hard bargainers are easy to negotiate with as they often have a very
predictable strategy
Soft Bargainers – These people are focused on relationship rather than hard outcomes of the negotiations. It doesn’t mean they are pushovers. These negotiators often scribe to long term relationship rather than immediate bargain.
Principled Bargainers – As explained in the seven elemental tools of negotiations above, these negotiators are more concern about the standards and norms of fairness. They often have inclusive approach to negotiations and like to work on numerous solutions that can improve the BATNA of both parties.
Open lines of communication between parties in the case study “Knights Apparel and the Alta Gracia Factory: Paying a Living Wage” can make for an effective negotiation strategy and will make it easier to negotiate with this party the next time as well.
Paul Brest, Debra Schifrin (2018), "Knights Apparel and the Alta Gracia Factory: Paying a Living Wage Harvard Business Review Case Study. Published by HBR Publications.
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