CASE STUDY Bea García Silveira
“GAMING IN SHANGHAI” by Dr Bob March
This case is typical of what vendors face in a competitive, hi-tech environment, and illustrates the opportunity they have to reduce their price. Handled appropriately, a win-win outcome is not difficult to achieve. This negotiation case is published with permission from Dr BobMarch's excellent book "Chinese Negotiator".
1. Case study:
Negotiations to Date
Evaluation of Negotiations
OverviewHyperHawk, one of the world’s major providers of global supply management software and services, helps companies reduce costs through efficient product and services sourcing. It has handled more than $50 billion worth of products and servicesin the oil and gas, other natural resources, retail, transport, finance, and industrial sectors for customers including General Motors, Nestlé, Shell, Japan Energy, Mitsubishi, and Cadbury Schweppes.
Shanghai-based JJM, one of the biggest gaming and hospitality companies in Asia, is owned by Chinese businessman Tan Wu Bo. We take up the story when JJM has been a HyperHawk client for six months,and the companies have signed an agreement to conduct two projects. The first, completed in March 2005 and tremendously successful, saved JJM some $1 million, and the second one is set to start. Impressed with the results, JJM wishes to explore the possibility of other joint endeavors with Hyper-Hawk.
To this end, a meeting is arranged between JJM’s Senior Vice-President of Finance Iris Ma andHyperHawk’s Regional Managing Director Drake Dubois, and attended by JJM’s Vice-President for Procurement Henry Chow and HyperHawk Sales Group Director Layton Pang.
Ma is keen to explore more projects with HyperHawk and has tasked Chow to follow up with HyperHawk as soon as possible. The managing director of HyperHawk suggests that a session be arranged with key stakeholders from both companies todiscuss and assess possible opportunities for other JJM projects.
The SceneMa and Chow agreed to the suggestion and asked that a proposal be submitted to JJM after the opportunity assessment meeting that was attended by Chow, his assistant Mary Xie, who is also the purchasing manager, and two members from HyperHawk. Both parties identified ten possible projects.
Xie asked for a proposal to besubmitted to JJM through her, and HyperHawk provided a competitive price package that included services over a twelve-month period. As is to be expected from a Chinese company like JJM, Xie asked for a reduction in the licensing fee, additional program management days (at no extra cost), and an extension of the software term from twelve months to twenty-four months.
In reply, HyperHawk put inwriting its discussions to date with JJM:
JJM had agreed that HyperHawk could add value to the projects identified.
JJM would sign for a ten-project package to get a competitive price.
If HyperHawk could meet JJM’s demands, the latter would sign the contract by May-end 2005.
Xie agreed to point one above, but was noncommittal on points two and three. After much discussion, HyperHawk agreedto lower its fee and provide JJM additional program management days at no additional cost. However, HyperHawk said it could not agree to extend the twelve month term for use of the software without charging extra.
Then, to complicate matters further, Xie suggested that JJM could not commit to an agreement even if all the issues were resolved. The most recent negotiations were conducted quitehastily, since HyperHawk knew that Xie was not the decision maker and approval had to come from her top management. Many Chinese companies put in place a structure whereby the foreign negotiator deals with multiple tiers of negotiators before working through the final deal with the senior key decision maker.
Negotiations to DateHyperHawk’s primary concern was how likely JJM would be to enter into...