Alpha-Beta

Role of Beta

By Thomas Gladwin

General Information capacity and develop a strong export market. To date,

nearly all of Beta, Inc.'s robotics production has been
Profile of Alpha, Inc. sold domestically. The company's deep commitment
Alpha, Inc. is a large, diversified electrical company to robotics is reflected in the recent formation of a
based in the nation of Alpha. The company plans to large task force to develop a universal assembly robot
become a leader in equipping the “factory of the with both visual and tactile sensors. Beta, Inc.
future” and is already one of the leading producers of expects to be using the new robots for some 60% of
numerical control equipment. It has recently spent its in-house assembly operations within three years.
hundreds of millions of dollars developing a factory
automation capability, including robotics and Robotics in nation of Beta
computer aided design and manufacturing. Alpha, There are 150 companies making or selling robots in
Inc. has been acquiring companies, investing heavily Beta. The nation has “robot fever” and a government
in new plants, and spending considerable sums on that has declared automation to be a national goal. An
product development. It has its own innovative robots estimated 12,000 to 14,000 programmable robots are
under development, some equipped with vision. already on the job in Beta, representing 59% of those
However, to meet its objective of quickly becoming a in use worldwide. Betan firms churned out nearly
global supplier of automation systems, Alpha, Inc. $400 million worth of robots in 1990 (approximately
has found it necessary to link-up with foreign firms 3,200 units). The nation exported only 2.5% of its
that are further down the robotics learning curve. production and imported less than 5% of its robots.
Industry analysts see robot production in Beta rising
Robotics in nation of Alpha to $2 billion in 1995 and $5 billion in 2000.
There are 30 robotics manufacturers in Alpha. Use
and production of robots in Alpha is only about a
third of what it is in the nation of Beta. One survey
reported that 1,269 robots were produced in Alpha in Confidential Information for Beta
1990; the survey also revealed that 4,370 robots were
in use in Alpha in 1990, mainly in the auto and Five months ago, your firm was approached by and
foundry industries. Robot sales in that year were held preliminary discussions with Alpha, Inc. on a
estimated to be $92 million, with a significant share possible robotics manufacturing and marketing
accounted for by imports. The industrial automation relationship. Some tentative understandings have
market in Alpha is growing at well over 20% a year. been reached regarding the general nature of a
The robotics portion of it is expected to become a $2 collaborative arrangement, but a number of specific
billion a year domestic market by 2000. details still need to be worked out. The Alpha, Inc.
bargaining team will be arriving in Beta to discuss
Profile of Beta, Inc. these points with you.
Beta, Inc. is the leading manufacturer of integrated
electrical equipment in the nation of Beta. The Beta, Inc.'s strategic plan calls for significantly
company has been run by scientists since its founding boosting overseas sales of robots so as to attain
and is Beta's most research-oriented corporation: it greater scale economies in production. You
employs more than 9,000 researchers and its R&D especially want to develop a presence in the currently
spending equals 5.9% of corporate sales. Beta, Inc.'s small but rapidly growing Alphan market. This
strategy is to become the world's largest producer of requires a high quality industrial sales, distribution,
robotics in the next few years. To meet this goal, and service network. You have considered the
Beta, Inc. will have to double its manufacturing options of exporting directly to, or establishing a joint

© 2010-2018 Dispute Resolution Research Center (DRRC), Kellogg School of Management, Northwestern University.
All rights reserved.

DRRC teaching materials are protected by copyright law. DRRC requires a per person royalty for use of its exercises. Each
purchase of an exercise authorizes copying or electronic distribution of that exercise equal to the quantity purchased.

Access DRRC materials at www.DRRCexercises.com Contact DRRC at [email protected]

venture with, or wholly-owned subsidiary in, Alpha. Alpha, Inc. cannot meet these strategic objectives,
However, given the large cultural differences they are not a strategic fit.
between Alpha and Beta, the difficulties of servicing
robots from overseas, and the rapid technological 3) The matter of technology sharing. You very
change in robotics, Beta, Inc. has decided (as have much want access to Alpha, Inc.'s artificial vision
other Betan robot producers) that the Alphan market technology. You are certain that with your
at this time can probably best be served via a manufacturing expertise and your line of universal
licensing arrangement with a local Alphan company. assembly robots, you and Alpha, Inc. could be the
You can offer that company proven, high quality first to market low cost, universal robots with vision.
robotics, either in the form of fully assembled units This is the most important issue for you.
or the technology and components needed to
assemble them. At the prior meeting you agreed with extreme
reluctance to help Alpha develop its own robotics
Alpha, Inc. looks like an ideal candidate to become manufacturing processes. Just when this transfer of
your licensee -- it has the desired technical technology will occur was left open. If Alpha, Inc.
competence, industrial marketing expertise, service does not mention it, you will not bring it up. You will
network, quality control, distribution system, general only make a firm commitment regarding the transfer
management and business reputation. You are a bit of manufacturing technology if you get access to
concerned, however, that by helping Alpha, Inc. you their artificial vision technology and you are able to
may create a competitive monster that may come hold down the number of models provided to Alpha,
back to haunt you in the future. Inc. thereby controlling capital expenditure costs.

In preliminary talks with Alpha, Inc., it was agreed: 4) The royalty rate. You believe a rate of 5% on
1) that the relationship will be for 5 years; 2) that gross sales is just and reasonable. If absolutely
initially Alpha, Inc. will receive fully assembled necessary you might consider a royalty rate as low as
robots from Beta, Inc.'s current model lines which 3% in order to get access to the artificial vision
will be sold under Alpha, Inc.'s name; 3) that later on technology.
Alpha, Inc. will begin to assemble robots using Beta,
Inc. technology and components; 4) that the While there are other potential distributors for your
agreement will be non-exclusive, meaning that Beta, robotics, no other organization in the world has
Inc. can enter Alpha, Inc.'s markets directly at any adopted Alpha, Inc.'s strategy of being a full-service
time and can also enter into relationships with other supplier of automation equipment. If no agreement
firms in Alpha. with Alpha, Inc. is forthcoming, you will have to
reach distribution agreements with several other
Four issues still need to be decided: organizations in order to have the distribution
1) The number of different models to provide to capacity that your strategy requires. This will delay
Alpha, Inc. You currently have eight models in the implementation of Beta, Inc.'s strategy, since to
production. You would like to provide Alpha with date no negotiations have been held with other
only four of them for the following reasons: distributors.
Supplying Alpha, Inc. with robots will require
increasing production capacity. You would like to The Betan Negotiating Style
control capital expenditures by phasing in the Negotiators from the Betan culture typically employ
increased capacity. You are also concerned about a style (i.e. a set of behaviors) that is collective,
increasing capacity to service Alpha, Inc.'s sales and formal, indirect, patient, unemotional, and passive.
then losing the need for that capacity when Alpha Your team should exhibit this style in your
begins to assembling robots itself. If Alpha insists on bargaining with Alpha, Inc. Guidelines for how to do
more than four models, the volume of each model so are provided below. Discuss each guideline as a
purchased must be sufficient to realize economies of group and plan how each will be followed in the
scale and utilize increased production capacity. negotiating session.

2) The number of Beta, Inc. units to be imported In your negotiations you must:
by Alpha each year. In order to realize economies of 1) Behave Collectively: Betans work together as a
scale you would like the number to be 300 of each group. All Betan decisions must be reached
model. Your reason for entering into this licensing collectively. In preparation for negotiation, Betans
agreement with Alpha, Inc. is to implement your agree as a group about their interests and priorities.
strategy of rapid growth and deep penetration. If They also decide who is to speak for the group on
what topic. One team member may open the

2 Alpha Beta/Beta
negotiation (see below), another lead the questioning, often ask for information to be repeated. (Betans are
another indicate that acceding to Alpha's proposals searching for areas of agreement between the two
would be difficult, and another make the final sides. In the Betan culture, it is inappropriate to
commitment to agreement. Team members only promote your own positions; rather, Betans listen
speak on their topics. However, all decisions are to be until they hear where positions come together.)
made collectively. If all of the members of the Betan Betans often use the word "yes" and nod to indicate
negotiation team cannot agree, then the team will not agreement, but understanding. They seldom use
defer making the decision. the word "no", but might say “that would be
difficult”. (Betans value relationships and to be
2) Behave Formally: Beta is a hierarchical, completely negative would not be relating
status-oriented culture. Betans attach considerable sympathetically to the other side.)
importance to customs, rules, and ceremonies. They
bow in greeting rather than shake hands. They use 4) Behave Patiently: Patience is a virtue in Beta.
last names only. They exchange business cards. Since it is culturally inappropriate to promote ones
During the negotiation, they sit erect, eyes looking own ideas, Betans will wait patiently until the other
down. side suggests something that is acceptable. Betans'
patience is fortified by their strong belief that they are
3) Behave Indirectly: Betans prefer to start a moral people, and that their goals are both right and
negotiations with a presentation which discusses the fair. As a result, Betans seldom make any
Betan company, its general goals in the market, concessions except at the very end of the negotiation.
agreements made to date, and optimism for the future
relationship. (The purpose is to convey the 5) Behave Unemotionally: Betans value highly
importance of their organization and its commitment self-control, and are trained from childhood not to
to the issues under negotiation.) At this point, Betans show emotion. Public display of emotion is believed
would be likely to inquire about the comfort of the to lead to confrontation and conflict, which may
other side, the quality of their accommodations, their interfere with normal, cooperative social relation-
experience sightseeing, and the difficulties the trip ships. Betans do not show their frustration with or
may be placing on their families. (The purpose of this distaste of others' negotiating behavior. Their faces
is to begin to build a relationship with the other side.) will be immobile and impassive.
Betans are then likely to begin to ask questions about
the negotiation issues. Betans are information 6) Behave Passively: Betans consider the
hungry, but not very forthcoming with information. aggressive, persuasive negotiator, skilled in
After the other side has answered the question, argumentation, as superficial, insincere, and vulgar.
Betans may respond by asking another question, When confronted with such a negotiator, or one using
repeating the question, or just remaining silent. They threats or other crude tactics, Betans retreat to
are unlikely to offer information in return. Betans silence.

3 Alpha Beta/Beta