Company presentation and nature of project.The global company is the basis of this assignment. Dell Computer Corporation, which faces an unforeseen situation affecting its decision and tries to negotiate an agreement in Brazil to locate its first production plant in Latin America. Dell Maxwell led the site selection team in early 1998, which visited twenty-six states in Brazil. There are 5 states that in the final discussion which is Sao Paolo, Pranha, Minas Gerias, Rio de Janeiro, and Rio Grande do Sul.
They were looking for specific qualifications such as an attractive market, low tax reduction and well-educated population to maintain their rapid growth. Dell realized then that all these five states had their own structure and style of organization. Maxwell made a final recommendation to Michael Dell in June 1998, after the team confirmed its initial findings and concluded its negotiations: the plant should be built in Rio Grande do Sul, the southernmost state of Brazil. This is also because the Rio Grande do Sul government has offered the best financial incentives and understands Dell’s unique requirements.
By mid-March 1999, Dell had already signed agreements on investment terms with the local government, the process of recruiting local staff to manage the plant had begun and construction on the plant itself was scheduled to begin soon. But the political climate of Rio Grande do Sul changed suddenly. A new governor, Olivio Dutra of the Partido dos Trabalhadores (Workers’ Party), took office in Rio Grande do Sul on January 1999 and appeared likely to rescind the entire agreement. The situation, which had arisen from this change in the political climate within the preferred state of Rio Grande do Sul, had left the company with three options; (1) They must leave Brazil entirely, (2) move the plant to another state, or (3) try to renegotiate with the newly elected governor. This assignment seeks to highlight and examine the right negotiation strategy for Dell Inc to negotiate at the level state in Brazil.Dell ” The CompanyDell was founded in 1984 by Michael Dell a freshman of University of Texas in Austin. He purchased parts wholesale, built the machines to closely resemble IBM models and sold them by mail order to customers who did not want to pay the higher prices charged by computer stores. After being renamed “PCs Limited “to “Dell Computer Corporation, “the company grew internationally with the opening of its first operations in Ireland in 1987, followed by 11 other countries over the next four years. Four years later, the company that began with $1,000 capital sold stocks for $8.50 per share. It became the second biggest computer manufacturer after Compaq in 1999. Dell used low-cost direct marketing to distribute the better-known computers sold via such high-cost networks. Dell placed advertisements in computer magazines for buyers who were sufficiently sophisticated to recognize high-quality goods at low prices. From its conception, Dell was based on a simple idea where it could do its best to understand the consumer’s needs and provide the most effective computer solution to meet the requirements efficiently by directly selling the computer system to the customers. The customer can place orders to Dell by dialling a toll-free number. This direct business model simply eliminated the retailers, the one who added unnecessary cost and time. Dell introduced the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory, on average, every four days. In less than two decades, Dell became the number one retailer of personal computers outselling IBM, Hewlett-Packard, and Compaq. Dell became the number one retailer of personal computers that outsell IBM, Hewlett-Packard and Compaq in less than two decades (Achtmeyer, 2002). The maintenance of a direct operational model requires intensive organization. The company outsourced all components but set up its own systems. It has eliminated retailers and sent them directly to end customers from its factories. Customized orders for hardware and software have been placed on the phone or on the Internet. And it designed an integrated supply chain linking Dell’s suppliers very closely to its assembly factories and order-intake system (Achtmeyer, 2002).Negotiation StrategyNegotiation is something that happens almost every day for a number of reasons, such as solving a problem or dispute between the parties, whereas strategy is a plan, a “how” and a way of moving from here to there, a pattern of action over time.Format in NegotiationThere are two negotiating formats, positional negotiations and principled negotiations. Positional negotiations are also referred to as distributive negotiations because they involve arguments based on a position. In this format, only one party can “win” the deal.The second format is the main negotiation, also known as integrative dialogue. This format is in which both parties negotiate together to forge a value-creating agreement that results in both parties being agreed and satisfied with the relationship status and results. The format of negotiations also creates a collaborative environment in which both parties work together to develop mutually beneficial solutions for both parties. Both parties understand each other and trust each other where they can be characterized by a pie analogy in which both parties work together to create a larger, mutually beneficial pie. The best negotiation format for this case study is the principle negotiation, the second format. This is because in order to have a good relationship between Dell Computer Corporation and Brazil, both sides should work together to reach an agreement that benefits both sides rather than one side only. In this case, it is important for both parties to maintain a long-term relationship and gain benefits that will benefit not only Dells and the state, but also the people of the state. A full understanding of the case is needed in order to obtain the best negotiation strategy. This section explains the strategic analyzes in this case. Key steps are involved in developing an ideal negotiation strategy.Keys to Develop an Ideal Negotiation StrategyIn Phase 1, it is necessary to identify the objectives of the negotiations and how you work with the other party. The next stage is Phase 2, the relationship building process with the understanding of differences and similarities. Commitment to a mutually beneficial set of results should also be built. Phase 3, collecting information means you have to learn and understand all the problems or issues that have occurred. Step 4, use the data. Put the case together to get a better and clearer picture of the case. Next, the bidding phase 5. Each party will state its opening offer and the situation will be involved. Phase 6 in which the deal is agreed and closed and finally phase 7, the last phase in which the agreement is implemented by both sides.The Dual Concern ModelNext is the negotiation strategy. The appropriate negotiating strategy for this case study is the “Dual Concern Model.” The “Dual Concern Model” offers flexibility because of the simplicity of the model, which benefits the negotiator during the negotiations, as the negotiator can easily analyze the situation and respond to the strategy of the counterparty if he has an overall negotiation strategy (Lewicki & Hiam, 2007, page 35). There are five overall strategies in this model that accommodate, work together, avoid, compete and compromise. The simplicity and clarity of the model has its advantages and disadvantages and will contribute to a consistent strategy for negotiations. Not all five styles can be used for this case study. “Accommodating” is a submissive strategy in which a high level of relationship and a lower level of income are desired. Compliance is mainly due to the fact that the dealer who is’ accommodating’ meets the demands of the counterparty and is willing to provide information to make concessions in order to strengthen or maintain the relative outcome of the negotiations. This often happens at the expense of the benefits of the negotiations. In Dell’s case, Dell could attempt to negotiate with the governor by showing how keeping Dell in the state could help him, or at least would not be inconsistent with his own goals and agenda. For example, Dell has undertaken to develop joint research and development projects with local universities in its current agreement. Avoiding’ is a strategy in which no relationship or negotiation yield is important for the dealer. It’s a passive aggressive style that tends to skirt things instead of confronting them. Lewicki describes it as; “You implement this strategy by withdrawing from active negotiation or avoiding negotiation entirely.” (Lewicki & Hiam, 2007, page 33). Based on this case, this strategy might be not applicable to the situation as Dell has to show and convince the new governor to accept the early agreement. This style could affect communication between Dells and the government, which could lead to impasse and resentment and tense relations.Collaborating’ is a strategy in which a high level of relationship and dividend is desired as a result of the negotiations. A positive outcome for this negotiation strategy should only be possible if this strategy is used by the counterparty itself or if the counterparty is an accommodator. The need of both parties will be met by using this negotiating style. The’ accommodator’ also wants a good relationship and wants to compromise a claim for the benefit of negotiations that can lead to the Collaborator.In this case, this strategy would be able to use as the company’s $128 million investment in the plant would create work opportunities for the state through construction and maintenance contracts for the facility. In addition, the company promised to employ 260 staff locally, rising to 700 in five years. These benefits from foreign direct investment for the state, coupled with Ford’s decision to leave the state’s unfavourable position, should give Dell a strong financial incentive to start its business in Rio Grande do Sul. Competition’ is a strategy in which relationships are not necessary but a high level of dividend is desired as a result of negotiations. It’s the most antagonistic style. This strategy is usually dominant and focuses on the advantages of negotiations. The counterparty may want a good relationship to be rejected by the competitor. If the counterparty is also a competitor, there is a high risk of conflict. Fundamentally, this strategy also does not apply to this case. Compromising’ is a strategy in which dividend and relationship are important and involve a halfway meeting, but the actual outcome of the negotiations is less important than a decision can be taken. Lewicki describes it as the case when there is a time pressure to reach an agreement and’… Each party will give something in order to find a common ground. “(Lewicki & Hiam, 2007, page 33). From Rio Grande do Sul ‘s perspective, the state had just lost the investment in a major international company in Ford. This loss of investment has caused the state and its people to be dissatisfied and has even protested. The Workers ‘ Party of Dutra is a socialist party that believed in an honest and effective government. They aimed to promote development for the people of the State by creating jobs and opportunities for development. Following the loss of the Ford investment, politically, Dutra did not stand in good stead with his voters in remaining true to his campaign promises. This leaves the governor in a vulnerable position from which Dell could negotiate to set up a similar and better business in Rio Grande do Sul. This style will help to strengthen Dells’ relationship with the new Governor and the agreement will be successful.
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