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Preparation Document: El-Tek Your name and role: Sam Xia & Chris Carlson What are your interests (in order of importance) in the upcoming negotiation? The primary interest is to maximize the profit for my division due to the development of Z-25. In terms of maximizing the profit, I need to recoup the developmental costs for Z-25, make a considerable profit, but most importantly, preventing distribution of the new technology to our Audio competitors. Because this directly have a significant impact on our divisions sales in the future.

What is your goal? My goal is to have M.A produces and is prohibited from selling to any El-Tek competitors for 20 months with P being 40% of M.A annual profit.

What is your BATNA? How can you improve upon it? In this particular situation, I feel like the optimal BATNA would be keeping the technology of Z-25 within A.C division. So that we can sell the product internally within our company (makes profit) and prevent our competitors to have access to Z-25(less competition). A possible improve I can do is to request the authority of selling Z-25 externally since it has such a huge commercial potential.

What is your reservation price? My reservation price is to have M.A produces and is prohibited from selling to A.C competitors for 12 months with P being 30% of M.A’s annual profit.

What arguments can you provide the other side for preferring the option that is best for you? What fairness norms or standards may be applied? • A.C developed the technology so that we have absolute control of making the decision of what to do with it • We invested $1.2M for developmental cost • We could keep the technology and sell it internally to o make profit o Save us from purchasing magnets from M.A that would cost us $1M/year o Prevent our competitors from having the technology • But since M.A and A.C are within the same company, I want what’s best for El-Tek(fairness norms) • But if M.A obtain the technology from us, we need to o Purchase Z-25 annually o Losing the profit we can make internally o Facing hard competitions externally

What do you need to learn in your conversation with the other side? How will you inquire?

I will need to inquire how much a commercial potential that Z-25 has in M.A’s perspective and approximate how much more profit can they generate. Therefore, I can make reasonable assumptions about what’s the maximum they are willing to offer.

Describe the strategy you will take in the negotiation: First one could be hardball, since my division developed the technology, I feel like I have the total advantage or the high ground. M.A desire this technology badly to make a huge profit because they are aware of the huge commercial potentials. Therefore, I can make an extreme offer and refuse to make concession for a while. Or I can exploit the shared interest of having M.A have the Z-25 technology. Because this negotiation does not necessarily have to be a zero-sum game since we are in the same company but different division. We all want what’s best for the company.

What is the other party’s interests? Purchase Z-25 from us as low as possible by convincing me that we are in the same company. Exploit is all commercial possibilities. Sell them both internally and externally.

Other party’s goal? M.A produces, and no limitations are put on their distribution efforts.

Other party’s BATNA? If they have a strong BATNA, how might you raise doubts about how realistic they are being about their BATNA, and/or make their BATNA less attractive? Their BATNA would probably be inventing a similar technology compare to Z-25. But it cost time and funds. Besides, there is reason to compete within the company.

Other party’s reservation price? M.A produces and is prohibited selling to A.C competitors for 6 months

References: Lewicki, Roy J, Hiam, Alexander and Olander, Karen Think before you speak : the complete guide to strategic negotiation. J. Wiley, New York, 1996....