Negotiation Wal-Mart - Procter and Thesis
- Length: 12 pages
- Sources: 15
- Subject: Business
- Type: Thesis
- Paper: #11724449
Excerpt from Thesis :
They both serve the purposes of the stakeholder category formed from clients, they just do this with different understanding.
Then, the well-being of the stockholders was constantly on the minds of the negotiating CEOs at Wal-Mart and Procter and Gamble. In this order of ideas, all their endeavors were focused on increasing shareholder value. Basically, this materialized in an ongoing desire to increase profitability. Higher profits would result in larger funds to be distributed in the form of dividends, leading therefore to increased satisfaction from stock owners of P&G or Wal-Mart shares.
The discussions also considered how the legislation would apply to various potential endeavors. Foremost, one important category of stakeholders analyzed was formed from the employees at Wal-Mart and Procter and Gamble. It was known that given the tense past between the organizations, the employees could find it difficult to interact and efficiently collaborate. This was however necessary for the achievement of the mutual goal and emphasis was placed on the measures to be taken in order to increase the performances of the personnel.
Ultimately, the negotiations did not regard all categories of stakeholders - or at least the information available to the public indicates this. The palette of stakeholders is extremely large, including not only the customer, the shareholders and the employees, but the totality of individuals and groups of individuals who "can affect or are affected by the achievement of the organization's objectives" (Friedman and Miles, 2006). They could include governmental and non-governmental institutions or simple community members.
As it has been revealed before, the relationship between Wal-Mart and P&G prior to the year 1987 was rather tense. When negotiations emerged in '87, the executives at the two corporations seat down and brought their matters to the actual negotiation table. In the beginnings, the issues were identified in a rather elusive manner. Both parties were aware that their relationship was not a fruitful one and identified what they believed at the time to be the cause of the problems.
The most impending issue was their "lowest common denominator" (Hanna, 2008), or the discrepancy they saw in the implementation of the proper pricing strategy. While Wal-Mart desired low prices, P&G wished for higher prices. However the issue was clear from the beginning, the arguments were strong on both sides and a compromise could not be reached.
Most of the issues were brought to the negotiation table by Wal-Mart, "the ultimate non-negotiable partner" (Hanna, 2008). Since the retail giant had the upper hand, they got to make the most demands. Other issues highlighted by Wal-Mart referred to the lack of flexibility from the part of Procter and Gamble, a lack of trust and difficulties in properly communicating with the manufacturer. These issues were addressed and resolved as best as possible in 1987. As time went by, they re-occurred and were better handled, with the aid of more expertise, increased trust, the emergence of mutual goals, and most importantly, with the aid and incorporation of the latest technologies.
As time went by and the negotiations between Wal-Mart and P&G continued, other issues also emerged. In the beginning they were simply mentioned, by in time, the negotiators better comprehended them, more clearly addressed them and more efficiently resolved them. An example in this instance is the efficiency of the supply chain, in the resolution of which both CEO were directly involved. "Sam Walton was personally involved in structuring the terms of the relationship with senior vice president from Procter & Gamble. He saw this type of arrangement as a way to improve both the efficiency and the effectiveness of the supply chain as a whole in that close co-operations could lead to less inventory, faster response and lower costs which supported the fundamental Wal-Mart strategy of 'Everyday Low Prices'" (Egan and Thomas, 1998)
Value Creation and Claiming
Creating and claiming value may easily reveal conflicting situations and the outcome of a negotiation in this direction depends highly on the nature of the relationship between the parties - competitive or collaborative. In both cases, the negotiation is welcome and it already reveals previous efforts made in sitting down and trying to find common goals and mutual benefits (Spangler, 2003).
The executive and Wal-Mart and Procter and Gamble created value through the process of integrative bargaining; this is also called interest-based bargaining and reveals that despite the shared goals, the parties also share differences. Value was therefore created through an increased attention to the demands of the other party. In this case, P&G had to make most of the compromises, such as relocating their headquarters or increasing the openness and flexibility of their operations.
In terms of claiming the value, the retailer and the manufacturer used the strategy of distributive bargaining. Also called win-lose situation, it is a part of the negotiation process in which both parties try to take as much as possible from the gain. The tactics used to resolve this dispute are undisclosed to the public, but they must have been extremely efficient. This statement is backed by the currently fruit relationship between the two and by the fact that Wal-Mart, the "non-negotiable partner" must have made some concession to maintain the relationship with Procter and Gamble.
Positions and BATNAs
An important part of any negotiation is that of identifying the position taken by each of the involved parties. The specialized literature is rather elusive on this aspect of a negotiation process, suggesting that a position is more of an implied stand a party takes in resolving the conflict. It could be an extreme position, in which one party simply refuses to bargain - this is most common in position-based negotiation, where the strategy is win-lose (Watnik, 2003). Wal-Mart and P&G however implemented an interest-based negotiation, of a win-win strategy. They both took cooperative and realistic positions. Equality in the process was however not achieved, with Wal-Mart detaining the strongest position throughout the entire course of the discussions.
However any discussions referring to BATNAs were not disclosed to the public, it is possible that these occurred between the representatives of the two organizations. The Best Alternative to a Negotiated Agreement is the course of action the parties would implement if the respective discussions were to fail - the stronger the BATNA of a company, the stronger its negotiating position (Venter, 2008). Given that the agreement materialized, it means that both retailer and manufacturer were focused on achieving a mutually beneficial solutions and made several concessions in this instance. Otherwise put, their increased efforts to make the discussions materialize could easily have meant that their Best Alternatives to a Negotiated Agreement were rather weak.
Strategies and Tactics
The strategies and tactics used by each party to ensure the success of the process were clearly explained to the other party. The effective and efficient communication played a tremendous role. The representatives of the two organizations often discussed various approaches to an identified solution. They would present the benefits and limitations of each strategy and/or tactic presented as resolution and they would reside on the best course of action. In order for the final decision to be made then, the strategies and proposed practices were discussed in detail so that they are clearly understood by both parties.
A relevant example on how well the two organizations communicated their strategies and tactics is presented by the success registered with the improvements made to their supply chain. "The supply chain between P&G and Wal-Mart has adopted a much better customer focus through the channel partnership. And it is mutually beneficial. This integration of the supply-chain information systems will become increasingly important both for enhancing business-to-business electronic commerce and for supporting the increasing volume and customization in business-to-consumer electronic commerce" (Grean and Shaw, 2003)
Agents and Third Parties
The two organizations tried to involve as few people as possible in their negotiation processes. Tertiary parties and other agents were only introduced when absolutely compulsory. And when this occurred, they would be asked to sign confidentiality agreements, based on which they would not disclose to anybody what they had been made aware during the Wal-Mart - P&G meetings. "This cemented the group's commitment to total discretion and unleashed greater creativity, since members could try things out without fear that proprietary data would be shared outside the alliance team" (Fortgang, Lax and Sebenius, 2003).
5. Conclusions and Recommendations
In today's dynamic environment, organizations must make use of all techniques available in order to succeed. Negotiation is a powerful weapon in the corporate world and those companies which possess high negotiation skills stand increased chances of achieving their goals.
Negotiation is most simplistically defined as a means of achieving a goal, whenever this implies getting the collaboration of another individual or group of individuals. There are numerous features to be addressed through the discussions, such as the positions assumed by the parties, the goals to be achieved or the alternative courses of action to be implemented in case the agreement does not materialize. To…