In August Stan Hu and 3 other members of the Rinto Tinto Iron Ore negotiation team were detained in Shanghai for their activity in negotiations with the Chinese Gov't on Iron Ore prices. Intial charges were 'stealing state' secrets. Stan Hu, Austalian Citizen is still detained.
The Chinese Gov't announced in Nov that the investigation will continue for another two month and charges will be made public at trial. In Australia, this story continues to be a National Headline and diplomatic issue between the country's.
http://www.abc.net.au/news/video/2009/11/12/2741444.htm
http://news.asiaone.com/News/Latest%2BNews/Business/Story/A1Story20091025-175799.html
How does this relate to game theory? Certainly a game. Two players, pie, and strategic moves galore. I'll concentrate on rationality, specifically the Chinese Government.
Rational Irrationality - Adopting a strategy that is not optimal after the fact, but serves a rational strategic purpose of lending credibility to a threat or a promise.
The above definition is a valuable academic thought of Chinese Gov't action in this case. There is no doubt they have and will use punishment if they believe a negotiating party has not acted fairly.
Will the Chinese Gov't punishment of Rinto Tinto impact there position with other companies who supply valuable raw materials? A intriguing subject to keep our eye on.
Sunday, December 13, 2009
Friday, December 11, 2009
Buyer Integrated Bargaining Strategy - Create Value and Deny Suppliers Who Try to Claim It
I'm a buyer, integrated bargaining is my professions craft. Now that I have some knowledge of few bargaining concepts, it's time to dole out some advice.
Business negotiation is the sexy part of being a buyer: real money, decisions that impact a business. Reading an academic thought that ' the real-world dilemma is how to manage the tension between these two concepts, creating value vs claiming value, of bargaining' (Patrick S. Noonan) is deep.
If you find your self observing a supplier doing any of the following, they are claiming value and the best deal has not been reached.
- misleading comments on costs
- changing preferences, risk level, time fences
- maximizing their utility w/o regard to the buyers
- changing the joint benefit possibilities (ZOPA)
Advice
Two choices to consider. Propose creating value so both parties benefit or find another supplier who will.
A supplier who is claiming value needs to have a chance to join the buyer in creating value, there must be a win-win solution (creating benefit for both parties).
The second choice is to have a second source or one that will jointly supply the benefit. It is important to work this alternate source strategy when you know there is a integrated bargaining opportunity.
Don't be intimidated and concede by Suppliers who demonstrate claiming value acts. Use it to your advantage to figure out how much benefit there is for all, then make your move.
Business negotiation is the sexy part of being a buyer: real money, decisions that impact a business. Reading an academic thought that ' the real-world dilemma is how to manage the tension between these two concepts, creating value vs claiming value, of bargaining' (Patrick S. Noonan) is deep.
If you find your self observing a supplier doing any of the following, they are claiming value and the best deal has not been reached.
- misleading comments on costs
- changing preferences, risk level, time fences
- maximizing their utility w/o regard to the buyers
- changing the joint benefit possibilities (ZOPA)
Advice
Two choices to consider. Propose creating value so both parties benefit or find another supplier who will.
A supplier who is claiming value needs to have a chance to join the buyer in creating value, there must be a win-win solution (creating benefit for both parties).
The second choice is to have a second source or one that will jointly supply the benefit. It is important to work this alternate source strategy when you know there is a integrated bargaining opportunity.
Don't be intimidated and concede by Suppliers who demonstrate claiming value acts. Use it to your advantage to figure out how much benefit there is for all, then make your move.
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