Simple Cross-Cultural Negotiation

This is a contract negotiation involving the purchase of communications equipment (personal handy phones ("PHPs") for hotel personnel to be used by Asahi Hotels in its new 5,000-room Beijing luxury convention and tourist hotel. Northwest Communications ("Northwest") is a major west coast supplier of communications equipment. The two companies have never done business with each other but are familiar with each other's presence in the market.

Today's meeting was arranged by telephone when Asahi's U.S. attorney called Northwest's attorney earlier this week to inquire about Northwest's capacity to provide equipment quickly for the new hotel.

Participants are assigned to assume the role of counsel (or businesspersons) and should negotiate a contract between Asahi and Northwest.

You are a United States attorney (executive) representing Asahi Hotels, a large Japanese hotel chain which is building a major convention and tourist hotel in Beijing. The new hotel is scheduled to open in 13 weeks, and it will employ six hundred people. Personal handy phones for the staff (for instant communications throughout the resort) were ordered three months ago from Four Stars Electronics Industries ("Four Stars"), a Chinese company which previsouly supplied all your PHP communications devices at other resorts in China.

Four Stars was chosen by Asahi Hotels as its PHP supplier on the basis of competitive bidding and relationships. Four Star's price quotation was approximately fifteen percent lower than its competitors, mainly because it was a non-union company and therefore had lower labor costs. Although Asahi frequently had quality problems with Four Stars and had considered changing suppliers, the price was right, and the relationship continued. Last year Four Stars was unionized.

You learned last week that Four Stars' Singapore factory has been closed for three weeks due to a strike. You called Four Stars to inquire about your order for new PHPs for the Beijing hotel. You were informed that due to the strike Four Stars could not guarantee delivery on the Beijing order and that it had no objection to your contracting with another company. Further checking with sources both in and out of the company has revealed that Four Stars is on the verge of bankruptcy or at least reorganization because of the strike.

Your company cannot open its premier hotel in Beijing without PHPs for the staff (everything has been organized around instant point-to-point data and voice communications). You were instructed by Asahi's president to find another supplier who can guarantee to meet the delivery deadline of thirteen weeks with no change in the technical specifications. Inquiries of all potential suppliers has located only one, Northwest Communications, Inc., which is willing to even discuss production of the six hundred needed PHPs within the required time limit. You spoke with Northwest yesterday and will meet with its representative today.

Northwest was one of the disappointed bidders for Asahi's business five years ago. It has a reputation for high quality goods but also for high prices. Nonetheless, you have been instructed by the president of Asahi Hotels to meet with Northwest and to come back with a contract for PHPs for the Beijing hotel at any cost. Unless it is absolutely necessary, Asahi would prefer not to enter into a long term deal with Northwest on such a short notice because it would like to survey the market before making a commitment. Northwest, of course, would be considered for future contracts, especially if it helped out in this crisis.

The contract with Four Stars was for three hundred voice only PHPs at $165.00 a piece, and three hundred voice and data PHPs at $265.00 a piece. Because of the high volume of business between Asahi and Four Stars, these prices reflected a discount from regular prices of $20.00 per PHP on the voice PHPs (down from $185.00 per unit) and a $25.00 per PHP discount on the voice and data PHPs (down from $290.00 per unit). Delivery was to be made within six months of the order, which is standard for an order of this size.

It is the custom in the industry for there to be a surcharge for rush orders, which is defined as any order of this size to be filled in less than six months. With regard to a long term relationship with Northwest, you may contract for a period of up to two years if it is absolutely necessary but, again, Asahi would prefer to keeps its future options open. You currently order approximately three thousand PHPs from Four Stars each year. Do the best you can, but it is absolutely necessary to get there PHPs on time. You are authorized to agree to any deal, at any price, in order to obtain the required PHPs in time.