Negotiation, the company needs to have a set of objectives with which to focus negotiations. First, the company cannot afford a labor-related shutdown. If competition has intensified, the last thing Molloy needs is to give its customers an excuse to switch to someone else. A shutdown was eviscerate the business. The second thing is that the contract has to fit with the strategy that the company is going to undertake. The idea of shifting to cheaper, less-experienced workers would undermine a critical competitive advantage, and would not result in Molloy being cost-competitive with overseas companies anyway. So the key is to determine overall strategy and then fit the negotiations within that context. Matthews needs to sit down with the CEO, before even formulating further objectives at this point. Ultimately, it is expected that Molloy needs to compete on the basis of being the best in the business, and should focus on holding the line on wages. The company also has to have a good sense of what the objectives of the union are going to be, so that it can anticipate some of the key issues, and the areas that might be more flexible (Richards, 2015).
Formulating strategy does require understanding the dynamics of the market at present. The company will need to have a firm grasp on the cost dynamics of the overseas competitors. They need to understand what those companies are offering customers in terms of both cost and quality -- this information will be critical to determining how competitive...
What might need to happen from a strategy perspective is that Molloy might need to actually become even more specialized. This is because if foreign companies are significantly more cost-competitive, that may be because they have advantages in many areas, not just in labor costs. Such a scenario would mean that Molloy cannot make up the cost gap on wages alone, and thus should not even pursue a cost leadership strategy. If it cannot be a cost leader, the last thing it wants to do is be in the middle -- Molloy might need to go with a smaller shop dedicated to only high end production. So the company, in order to know what it needs in terms of strategy and this negotiation, has to understand where it fits in the marketplace going forward -- that is the information that will drive this negotiation (Myhre, 2010).
The other thing that the company needs to know is what its BATNA, or best alternative to a negotiated agreement is (Negotiations.com, 2015). This is dependent on what strategy the company thinks it will need to pursue in the future. For example, suppose the company is thinking that the only way to compete going forward is to match costs with the rest of the industry. Well, the rest of the industry is located overseas for cost reasons. The BATNA here might end up being that the company will close up shop and set up a new factory overseas. But Molloy definitely needs to know that before it enters into the negotiation, and it must be prepared to do that…
