Introduction to Negotiation Strategy
At Oak Spring University, we provide corporate level professional Negotiation Strategy and other business case study solution. Applied Materials: Managing Product Costs case study is a Harvard Business School (HBR) case study written by Antonio Davila, Marc Wouters. The Applied Materials: Managing Product Costs (referred as “Sigmax Etching” from here on) case study provides evaluation & decision scenario in field of Finance & Accounting. It also touches upon business topics such as - negotiation strategy, negotiation framework, Manufacturing, Product development.
Negotiation strategy solution for case study Applied Materials: Managing Product Costs ” 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?
SigmaX is the latest generation of manufacturing equipment for integrated circuits (semiconductor chips). SigmaX is used to perform one of the manufacturing steps called etching. As it usually happens at Applied Materials and because of the time pressure and the complexity of the technology involved, any other considerations--including product cost--are eclipsed during its development. But when SigmaX reaches the manufacturing stage (Worldwide Manufacturing Operations), product cost management becomes key to ensure adequate profits. At this point, Bill Finday and his team are in charge of managing product costs down. To achieve their objective, first they need to understand why actual costs are above expected costs. Next, they need to explore the various alternatives open to them to manage costs down initially to the planned level and then below it in an effort to maintain margins as competition drives prices down. Furthermore, a new generation of etching equipment will be developed soon and Bill and his team have to make recommendations regarding how to change the product development process to enhance the visibility of cost considerations.
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 “Applied Materials: Managing Product Costs” 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 “Antonio Davila, Marc Wouters”, 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 “Applied Materials: Managing Product Costs ”, 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 “Applied Materials: Managing Product Costs” can make for an effective negotiation strategy and will make it easier to negotiate with this party the next time as well.
Antonio Davila, Marc Wouters (2018), "Applied Materials: Managing Product Costs Harvard Business Review Case Study. Published by HBR Publications.
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