Read the case study and Lee profile and do the preparation and answer 2 questions.  For the exclusive use of K. Alaklabi, 2021. A university consortium dedicated to developing the theory and practic of negotiation and dispute resolution. Harvard | MIT | Tufts MedLee: In Pursuit of a Healthy Joint Venture General Instructions MedDevice, Inc. MedDevice, Inc. is a U.S.-based Fortune 500 company that manufactures high-tech medical equipment and devices like CAT Scanners, MRIs and pacemakers. Currently, MedDevice earns more than 80% of its annual revenue from U.S. sales. Strategic studies indicate that MedDevice’s greatest growth potential in the next decade is in developing its Asian and Southeast Asian markets. MedDevice has investigated the possibility of opening a wholly-owned branch office in Southeast Asia. However, logistical problems, the complexity of local laws, and the difficulty of breaking into a foreign market that relies heavily on relationships and connections suggests that forming a joint venture may be necessary to gain access to key distribution channels in the region. Lee Medical Supply Lee Medical Supply is a family-owned company employing about 30 people, located in Bangkok, Thailand. Lee Medical specializes in the distribution and sales of medical products including operating tables, hospital beds, X-ray machines, ultrasounds, and a variety of disposable medical supplies like bandages and syringes. Lee Medical Supply has been in operation for 30 years under the ownership and direction of An Lee, who is now 64 years old. To date, Lee Medical Supply has focused its business on distributing equipment and supplies for overseas (mostly American and European) companies. Under such distributorship arrangements, Lee Medical purchases supplies and equipment from manufacturers and then sells them in Thailand. Lee Medical profits from the difference between the prices it charges its customers and the wholesale cost it pays its suppliers. Over the years, Lee Medical Supply has experienced steady growth and strong financial results. However, as the demand for high-tech medical technologies has increased in Thailand, Lee Medical has been seeking opportunities to partner with a major U.S. manufacturer. Such a partnership would allow Lee to share in the greater profit margins associated with high-ticket items (as opposed to low-cost items like bandages) and to have some equity in the company’s profits (as opposed to acting just as a middleman). This case was written by Candace D. Lun under the supervision of Jeswald W. Salacuse at The Fletcher School of Law and Diplomacy and generously donated to the Program on Negotiation for distribution. Copies are available from the Teaching Negotiation Resource Center (TNRC), online at www.pon.org, by email: [email protected], or by telephone at 800-258-4406. This case may not be reproduced, revised or translated in whole or in part by any means without the written permission of the TNRC, Program on Negotiation at Harvard Law School, 501 Pound Hall, Cambridge, MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) This document is authorized for use only by Khalid Alaklabi in TGM 478 & TGM 506 SPRING 2021 taught by DENIS LECLERC, Thunderbird School of Global Management from Jan 2021 to Jun 2021. For the exclusive use of K. Alaklabi, 2021. MedLee: General Instructions A Resort Encounter Mr. An Lee (owner and President of Lee Medical Supply) and Mr. Ralph Thompson (CEO of MedDevice) met while both men were vacationing with their families at a luxury resort on Phuket Island, an exclusive vacation spot in Thailand. They met over drinks at the pool one evening, and finding that they had much in common in terms of business interests, had several meals together over the next few days. They became fast friends with great respect for each other’s intellect, business acumen, and sense of humor. Mr. Lee and Mr. Thompson were intrigued by each other’s respective businesses in general and by the complementary nature of their core competencies and needs specifically. MedDevice had cutting-edge technology and products, but no access to distribution channels and the medical customer base in Thailand. Lee Medical Supply possessed a strong distribution network, a well-trained sales force, relationships with most of the major hospitals and doctors in the country, and an intimate knowledge of the protocol, legal issues, and eccentricities of the Thai market. Lee Medical lacked access to some of the newer, more sophisticated technologies like CAT Scanners, MRIs and pacemakers, the demand for which had been increasing exponentially in the increasingly affluent Thai market. Lee and Thompson spent many hours chatting about the potential synergy between their two companies. The vacation ended, but at Mr. Lee’s invitation, Mr. Thompson visited Lee Medical Supply in Bangkok before returning to the States. The two solidified their friendship and respect for each other by signing a Memorandum of Understanding to pursue a joint venture between Lee Medical Supply and MedDevice (attached in Exhibit A), the purpose of which was to establish a sales office in Bangkok under the name of MedLee, Ltd. and to develop the market for MedDevice equipment in Thailand and throughout Southeast Asia. Initial capital would be U.S. $2 million. MedDevice would provide 60% of the capital, and Lee Medical Supply, 40%. Mr. Lee and Mr. Thompson are delighted by their new venture. In particular, Mr. Lee was impressed by Mr. Thompson’s ability to forge a relationship, while Mr. Thompson was impressed by Mr. Lee’s thorough approach to business. Both fully expect to be in business together very soon. They parted, agreeing that they would have their subordinates work out the details of the arrangement in preliminary negotiations. Specifically, they agreed their subordinates should discuss the following issues for the joint venture: 1) Decision-making 2) Staffing 3) Profit Distribution 4) Conflict Resolution Mechanism Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 2 This document is authorized for use only by Khalid Alaklabi in TGM 478 & TGM 506 SPRING 2021 taught by DENIS LECLERC, Thunderbird School of Global Management from Jan 2021 to Jun 2021. For the exclusive use of K. Alaklabi, 2021. MedLee: General Instructions Mr. Lee and Mr. Thompson would meet at MedDevice headquarters in three weeks (when Mr. Lee would be in the States on other business) to review the results of the preliminary negotiations. You will be conducting preliminary negotiations as either a representative of MedDevice, Inc. or Lee Medical Supply. You recently read an article stating that 60% of all joint ventures fail within four years. How would you prepare for your discussion with your counterpart? In particular, what concern might you have about cultural differences between MedDevice and Lee Medical Supply? Profiles of the two companies are attached in Exhibits B and C. ________________________ EXHIBIT A Memorandum of Understanding Following our cordial conversations over the last few days, it is in our mutual interest to establish a joint venture to be called MedLee, Ltd. in Thailand to undertake the sale and distribution, in Thailand and Southeast Asia, of high-technology medical equipment manufactured by MedDevice. The initial capitalization of the joint venture will be U.S. $2,000,000, and the initial period of the venture will be five years. MedDevice, Inc. will contribute 60% of the capital and Lee Medical Supply will contribute 40%. We agree that representatives of our two companies will meet within 30 days to negotiate the details of this arrangement. An Lee President Lee Medical Supply Ralph Thompson CEO MedDevice, Inc. Golden Sands Resort Phuket Island Thailand Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 3 This document is authorized for use only by Khalid Alaklabi in TGM 478 & TGM 506 SPRING 2021 taught by DENIS LECLERC, Thunderbird School of Global Management from Jan 2021 to Jun 2021. For the exclusive use of K. Alaklabi, 2021. MedLee: General Instructions EXHIBIT B MedDevice, Inc. Company Profile A Fortune 500 company with over 30,000 employees, MedDevice is known for its organization, precision, and efficiency. A rules-oriented company whose culture has been shaped by the highly regulated nature of the medical equipment industry, MedDevice prides itself on its structured systems, data-driven approach to making decisions and merit-based evaluation of employees. All rules apply to all, and the best ideas and results win out. These are the qualities that have made the company successful. Company strategy is to be the first to market with the most advanced and safest medical technologies. The specific means and timelines for implementing this strategy are codified into a set of company principles. These principles must be followed exactly so that each project that is undertaken is uniform, in terms of the processes that are carried out and in the way that its success is evaluated. All projects are given specific goals and objectives, including strict deadlines that must be adhered to. Without constant focus on deadlines, MedDevice would be unable to maintain its ability to be the quickest to market with superior technology. There is a “MedDevice Way” of doing things, and that is considered to be the right way. A common language is spoken and written across divisions of the company. Standardized processes also help the bureaucracy work efficiently and help with the measurement and evaluation of performance. The organization is large, so some bureaucracy and some hierarchy are necessary. The company, however, is moving away from this and is trying to flatten out layers of the organization to simplify processes. The CEO is concerned that the organization has become so large that upper management is out of touch with the employees. There has been a significant attempt to make the company more egalitarian; there is little differentiation until you reach the highest management levels in terms of offices (most people work in cubicles) and perks such as secretaries and personal stationery. MedDevice prides itself on treating its employees equally and is proud of the fact that most decisions are made on the basis of data. Thus, an idea can win out if it is sound and backed up by good business data and results—whether the idea comes from the CEO or from the newest hire. This is not to say that the CEO doesn’t have any power, but ideas and rational thinking (including having sound data to back up your ideas) are the key to decision- making. Decisions are made through persuasion and consensus building, and at the highest levels, by voting, in which each person gets one vote (i.e., on the senior executive committee and with the board of directors). Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 4 This document is authorized for use only by Khalid Alaklabi in TGM 478 & TGM 506 SPRING 2021 taught by DENIS LECLERC, Thunderbird School of Global Management from Jan 2021 to Jun 2021. For the exclusive use of K. Alaklabi, 2021. MedLee: General Instructions Performance and business results on an individual basis are measured and rewarded. MedDevice operates on an “up or out” policy. That is, employees are evaluated annually, and are retained or promoted if their performance is up to par. Those who do not make the cut are counseled out or moved to other divisions. While much of the work is performed in teams, an individual’s achievement is rewarded in accordance with his or her specific contribution to team effort. Everything, it seems, is quantified and measured. The saying goes at MedDevice, “If you cannot measure it, it will not (or even did not) happen.” This policy ensures that the best workers are retained and promoted and that they are evaluated on the basis of agreed-upon objective standards, rather than on subjective factors. This dedication to ensuring merit-based evaluation of employees manifests itself also in an anti-nepotism rule. Close relatives of any employee who is in upper management (General Manager level and above, including General Managers, Vice Presidents, CFO, and CEO) cannot be hired by MedDevice. If members of upper management have relatives who were already working at MedDevice prior to their promotion into upper management, their relatives can continue their employment, on the condition that someone to whom they are related will never evaluate them. In some cases this has required people to quit or to transfer to divisions far from the purview of their relatives. This further ensures fairness within the organization and equality of opportunities. (Close relatives in this context include spouses, children, sisters, brothers, uncles, aunts, cousins, nephews, and nieces of the employee in upper management). ________________________ EXHIBIT C Lee Medical Supply Company Profile Lee Medical Supply is fairly typical of the small, family-run and owned businesses in Thailand and other parts of Southeast Asia. The Company was started 30 years ago by An Lee, who remains owner and President. His seniority and experience is well respected—after all, he built the company from the ground up and has nurtured its development and growth into a profitable venture. What Mr. Lee says generally goes; employees respond, for the most part to both the letter and spirit of his directives. Decisions are made from above and executed with little discussion or dissension by the subordinates. The key to Lee Medical Supply’s success and growth over the years has been its cultivation of long-term relationships with its suppliers and customers. Mr. Lee sees himself as a partner to suppliers and customers, and he maintains close and frequent Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 5 This document is authorized for use only by Khalid Alaklabi in TGM 478 & TGM 506 SPRING 2021 taught by DENIS LECLERC, Thunderbird School of Global Management from Jan 2021 to Jun 2021. For the exclusive use of K. Alaklabi, 2021. MedLee: General Instructions ties with them. He even hired the son of one of his best customers when he could not find work. Mr. Lee takes these relationships very seriously and attributes his ability to grow from a one-man business into a solid and steady profit-making company of 30 employees to: 1) the quality of these relationships; 2) patience; 3) a long-term outlook towards profits and business planning; and 4) loyalty/low turnover of employees. The structure of the office seems loose because there are few official titles; however, employees know where they stand with respect to everyone else at any given point in time. Many of Mr. Lee’s relatives and close family friends work at Lee Medical Supply. The choice positions are generally reserved for Lee’s sons and close male relatives. Indeed, 50% of employees at Lee Medical are either related to Lee or have a long-term association with the Lee family. For example, Mr. Lee’s eldest son is Vice President, his nephew is Chief Financial Officer, his cousin is head of Sales, and his daughter is Office Manager. Such is the nature of a family-run business and Mr. Lee feels that the interconnectedness of everyone employed at Lee Medical helps the business because all are working towards the same goal. In addition, Mr. Lee trusts his relatives’ motives and loyalty more than he would anyone else. Since there are few people working in similar positions, there is little competition among employees. Training is done by apprenticeship rather than through formalized programs. Employment usually spans decades. No formal performance evaluations are done, mostly because there is no need for them. Mr. Lee’s philosophy is that over time, people will learn the skills they need to complete the job if they are loyal to the company and to the family. Standard procedures have evolved over time, but there is no need to formalize them in such a small organization. Suggested changes in procedures may come from employees, but they are implemented only with the approval of Mr. Lee. Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 6 This document is authorized for use only by Khalid Alaklabi in TGM 478 & TGM 506 SPRING 2021 taught by DENIS LECLERC, Thunderbird School of Global Management from Jan 2021 to Jun 2021. Negotiation Preparation Name(s): Role in the negotiation: Context of Negotiation Who are the parties interested in the negotiation? What are the issues? (i.e price, contract terms, etc..) (For parties, list individual(s) or entity that cares about the outcome of the negotiation. For issues, focus on subjects that need to be addressed during the negotiation.) Communication and Culture Your cultural orientation ? ? ? ? Cultural Differences and Similarities Theirs ? ? ? ? What do you need to learn from the other side? What questions will you ask? (Think about how, not just what you will communicate) Relationship and Commitment How is it now? Where would you like it to be? What can you do to close the gap? What authority does the other party have to negotiate and make the decision? (Separate the people from the problem. Are there any relationship problems to address? What can you do in the negotiation to improve the relationship)? Interests List your interests for each issue Issue 1 Issue 2 ? ? ? ? ? ? ? ? ? ? Issue 3 ? ? ? ? ? List their interest for each issue Issue 1 ? ? ? ? ? ? ? ? ? ? Issue 2 ? ? ? ? Issue 3 (Prioritize interests. Circle shared interests and identify differing and opposed interests) Goal Settings • Offers and options setting for issue 1: • Offers and options setting for issue 2: • Offers and options setting for issue 3: Value- Creating Options: (List options even if you think that you may reject them later) Alternatives What is your BATNA (Best Alternative To Negotiated Agreement): Ways to improve your BATNA What is their BATNA? Ways to test or, if appropriate, worsen their BATNA (Consider how you might improve your leverage in the negotiation; how to share your leverage-related information (BATNA), or communicate it?) Cross-Cultural Communication and Negotiations Integrative Negotiation MEDLEE Joint Venture Negotiation MedDevice, Inc • • • • US Fortune 500 Company 80% US sales Manufactures high tech medical equipment Growth in Asian/Southeast Asian markets Joint venture to gain access to distribution Lee Medical Supply, Family, Thailand • Distribution and sales medical products • Owned and directed by An Lee, 64 • Lee purchases supplies and equipment from manufacturers and sells in Thailand Joint Venture MEDLEE MedDevice ,Inc Lee Medical Resort Encounter Mr. An Lee and Mr. Ralph Thompson were on vacation on Phuket • Intrigued by complementary nature of core competencies Technology/ Products MEDDEVICE Distribution network LEE MEDICAL Memorandum of Understanding • Establish a sales office in Bangkok to develop market for equipment in Thailand and Southeast Asia • Initial capital would be US $2 million and Med Device would provide 60% of capital and Lee 40% • Subordinates to work out the details: • Decision making • Staffing • Profit distribution • Conflict resolution Negotiation Team T.S. Lee • Lee Medical Supply • Vice President Pat Armstrong & • MedDevice • Director International Strategy Prenegotiation • Negotiation Process • Integrative/ distributive • Individual/community aspirations • Protocol • Relationship • Language/context Context of Negotiation Communication Relationship Interests Goal Settings Alternatives Interests in Global Negotiation 1st List your interests for each issue Issue 1 Issue 2 Issue 3 2nd List your interests for each issue Issue 1 Issue 2 Issue 3 Prioritize interests: Circle shared interests and identify differing and opposed interests Goal Settings • Offers and options setting for issue 1 • Offers and options setting for issue 2 • Offers and options setting for issue 3 Value Creating Options (List options even if you think that you may reject them later) Alternatives • What is your BATNA (Best Alternative To Negotiated Agreement)? • Ways to improve your BATNA? • What is their BATNA? • Ways to test or, if appropriate, worsen their BATNA? Consider how you might improve your leverage in the negotiation; how to share your leverage-related information (BATNA), or communicate it? Negotiation Steps 1 2 3 4 How to open negotiations? Carefully plan your opening moves and make them fit your goals Reading the other party? Managing internal and external negotiations Closing the deal Purchase answer to see full attachment Tags: cultural difference Negotiations skills Healthy Joint Venture Negotiation and Its Strategies MediLee negotiations User generated content is uploaded by users for the purposes of learning and should be used following Studypool’s honor code & terms of service.