E-Commerce Development Project
1.1 The significance of this negotiation
The significance of this negotiation is that it provides Red with an opportunity to in-source its online
retail channel in Negoland by launching its own e-commerce site (EC site). For the past two years, theEC market in Negoland is rapidly expanding and Red cannot ignore this trend. However, Red does notown its online retail platform. If Red continues to use Blue Village, Red would have to put up withdisadvantages such as ①inability to conduct in-depth analyses of customer data, as they areinaccessible on Blue Village, ②payment of commissions to Blue, which lowers Red’s profitability.
Therefore, it is crucial for Red to launch its own EC sites and its in-source online retail channel. As thisEC site is required to have high ability to attract customers, it should be equipped with functions thatcan lead to integration of Red’s online and offline channels (Omni-channel strategy). Since Blue isacquainted with Red’s business from its long business relationship and also is skilled in development ofEC site, Blue is expected to be the partner for EC site development that fulfills Red requirements.
1.2 The goal of this negotiation
In this negotiation, there is the need to achieve following goals, while adjusting the interests of both
Red and Blue for a successful negotiation.
(1) Develop an EC site that can lead to coordination of online and offline channels (omni-channel).
(2) Keep the fees (development fee of the EC site, fee for ongoing support service, “OSS”) low.
Since the second goal (2) will be against Blue’s interest, we must be flexible during the negotiation.
1.3 Priority of Topics and Overall Strategy
The topics can be categorized to two categories: (1) the content of the EC site, (2) Fees (development
fee of the EC site, fee and duration for OSS). Red cannot decide the amount that can be paid to Blue
unless the actual content of EC sites is agreed. Thus, in the negotiation, Red must first agree upon thecontent of the EC site (1), and then flexibly adjust the fees (2).
(1)

It is necessary that the EC site is equipped not only with the retail function, but also with functions
that can lead to coordination of online and offline channels. We will try to reach an agreement on
this point with Blue by suggesting an increase on the development fee of the EC site.

(2)

Fees can also be categorized into “Fixed Fee” (development fee of EC site) and “Variable Fee”
(fee for OSS). Since the variable fee bears the risk of drastic increase depending on the sales andduration, it is important that we limit the fee and duration for OSS. As Blue is expected to be on atable of negotiation demanding a certain amount of revenue from this EC site development project,
we will make this project attractive to Blue by making a concession to development fee inexchange of fee for the OSS fee.
【BATNA】
If we cannot reach an agreement onthe coordination of online and offlinechannels, or the fees become
excessive, we would exit thisnegotiation and hire Yellow Corp. todevelop the EC site.

11.4 Strategy for each topic
I. Details of coordination between the Red’s online and offline channels【Top】Agree on at least one idea on Omni-channel【Strategy】
We will actively present detailed ideas about the coordination between EC site and Red’s physicalstores such as ①System that enables customers to check the inventory of physical stores through theEC site, ②System that enables customers to reserve of a try-on at Red’s physical stores through theEC site. When other ideas are presented from Blue, we will examine them with deep consideration ofcost effectiveness and respond flexibly. Although we are still in the process of gathering and generatingideas, it is necessary to specify on the contract on what system will be included in the EC site. If Blue isreluctant to accept this commitment, we use the development fee (Ⅱ) as a concession to Blue.
II. Development Fee of the EC site
【Top】Development fee of US$10million【Bottom】Development fee of US$30million【Strategy】
We will compromise on this topic in order to get a promise on the contents of EC site (Ⅰ). If any
promise on the contents of the EC site were given by Blue, Red can afford up to US$30million
according to the system and service. As written in the Overall strategy, we would like to keep thevariable fee as low as possible. Thus, in order to acquire Blue’s compromise on fee(Ⅲ) and duration(Ⅳ) of the OSS, we will make a further compromise on the development fee.
III.

Fee for the ongoing support service【Top】20%【Bottom】25%【Strategy】
The percentage for the fee of the ongoing support service is an important factor in deciding thevariable fee. Furthermore, a high percentage for the fee will decrease the profitability of thee-commerce site, going against the aim of developing our own EC site. Therefore, we will aim to keep
the percentage of the fee at 20%, and negotiate on a firm stance so that it will not go over 25%.
We will appeal to Blue that Blue will still be able to gain large profit from this EC site even with a low
fee percentage, using Red's outstanding performance in with Blue's EC site in the past years asevidence. In addition, we can seek for a concession from Blue on this point by compromising on thefixed development fee (III) and the duration of the OSS (IV).
IV.

Duration of the ongoing support service for e-commerce【Top】1 year renewable contract【Bottom】3-year renewable contract【Strategy】
With the use of the OSS, Red can expect an increase in profit and will be able to gain the know-how
on online retail. Therefore, there is significance in using Blue’s OSS. On the other hand, the duration forthe support service is a factor in deciding the variable cost, and furthermore, Red plans on in-sourcing
all online retail channels in the future. Therefore, we would want to keep the term as short as possible.
Thus, we would want to first agree on a one-year contract, and renew it each year considering the costeffectiveness of the service. We will negotiate on a firm stance that a contract longer than 3 years is not
acceptable. In addition, in the case the duration is 3 years, we will aim to lower the fee (III).

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Development of Robots for the Elderly
1.1 The significance of this negotiation
The significance of this joint development negotiation is that it allows Red to over come problems andexpand its elderly care business by utilizing Blue’s high technical skills in robot development. InNegoland, while the need for the nursing care business continues to expand, caregivers are resigningat a very high rate due to poor working conditions. Red has sufficient number of caregivers at thecurrent moment, but it is a matter of time until workers start resigning and Red faces a shortage ofworkers. To combat this problem, Red needs to develop care support type robots, which will help
alleviate the physical and mental stress burdening the workers, and thus improve working conditions.
On the other hand, Negoland is also facing the increase in numbers of dementia patients, and thus thedemand for communication/security robots (“CS robots”) is in the rise. Red plans on starting ahome-visit nursing care service from January 2018, and has in mind the introduction of CS robots todifferentiate from competitors. Therefore, there is also significance in developing CS robots.
1.2 The goal of this negotiation
In this negotiation, there is the need to accomplish the following goals while adjusting the interest ofboth Red and Blue for a successful negotiation.
(1)

To develop a robot that can be used in Red’s nursing care business. Specifically speaking, there
is a need to agree on the development of the care support type robots or the CS robots. In thecase priority is placed on the development of the CS robots, there is a need to get a firm
agreement to develop the care support type robots next.

(2)

To set a period in which Red can use the developed robots exclusively in Negoland, in order toassure that Red gains a competitive advantage from the use of the developed robots.

1.3 Priority of topics and overall strategy
The key issues in this negotiation are (1) the type of robot to be jointly developed, (2) Ownership ofintellectual property rights, and (3) the length of the period of Red’s exclusive use of the robots inNegoland. The flow of the overall negotiation is as follows.
(1)

Firstly, Red and Blue must share its aim of the joint development. When doing this, we will stressthat Red is entering the joint development negotiation with the aim to improve working conditions
for caregivers in the nursing care business. It is assumed that Blue, who shall be paying for thecosts in development, is entering the negotiation with the aim to expand its robot businessoverseas, but this aim shall be checked if it is correct.

(2)

Next, we will propose the priority development of care support type robots, with theaforementioned-shared aim in mind. If Blue disapproves to this proposal, we will try to get anagreement for the development of care type robots with the proposal that in the case the care
support type robot is developed, we will agree to install the robots in Red’s facility, leading togreater profit in Blue’s challenge for overseas expansion.

(3)

After the type of robot to be developed is agree
upon, Red will demand for a exclusive usage
period for over 3 years (2 years at the minimum).
If Blue disapproves of this proposal, we will seek
concession by compromising on the ownership ofintellectual property rights and gradually
proposing the installation of the developed robots
in all of Red’s facilities.

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[BATNA]In the case the prospects for the development of the care support type robots cannot be seen, or theexclusive usage period of over 2 years cannot be agreed upon, Red will exit the negotiation with Blueand opt to lease care support type robots from Orange Inc.
1.4 Strategy for Each Topic
I. Type of robot to be jointly developed<Top> Develop the care support type robots first<Bottom> Develop the CS robots first (On the condition there is a firm agreement to develop
the care support types next)<Strategy>
It is important that Red comes up with measures to solve the future shortage of caregivers. Therefore,
we would want to agree on the priority development of care support type robots, even if it means
concession on other negotiation issues. On the other hand, Blue is looking to develop CS type robots
first. The aim of this is probably to enter the Arbitria’s CS robot market that is rapidly expanding. Thus,
we will propose Blue’s merits in developing the care support type robots. To put in detail we willpropose the following: (1) If the care support type robots are developed, Red will immediately installthem in Red’s nursing care facilities, (2) in the long term, the demand for the care type robots inNegoland will be twice the size of that of CS type robots in Arbitria, (3) Blue can PR its care support
type robots in preparation for the expansion of the market in robots for the elderly in Negoland.
On the other hand, there is also sufficient significance in developing the CS type robots. As statedabove, the demand for the CS type robots is gradually increasing in Negoland, and Red has in mind theinstallation of said robots. In addition, it is still unclear when the worker shortage will actualize, andeven if it were to actualize, Red can deal with this by leasing care support type robots from Orange.
Still, because the leasing costs are very expensive, Red must work to avoid or minimize the period of
the lease. Therefore, we must gain a firm agreement from Blue that the development for the care typerobots will start immediately after the CS type robots are developed.
II.Ownership of intellectual property rights in and to the developed robots<Top> If there is an exclusive use period, Blue has full ownership<Strategy>
Red has no know-how on the R&D, manufacture or sale of robotics, so there is no use in gaining
ownership for the intellectual property rights. Therefore, we will compromise on this point to have Blueagree on a exclusive use period of over 2 years (Ⅲ).
III. The period during which Red may use the robots exclusively in Negoland<Top> 3 years<Bottom> 2 years<Strategy>
If Red’s competitors were able to use the jointly developed robots in Negoland, Red will not be able tosatisfy its goal to gain competitive advantage. Thus, we will need to agree on an exclusive use period ofat least 2 years. By compromising on the ownership of intellectual property rights (Ⅱ), we will seek forconcession from Blue on this point. In addition, we will seek for an exclusive use period of 3 years byproposing to make up for the profits that could have been made from selling the robots to other
Negoland businesses by installing the developed robots to all of Red’s facilities in Negoland.

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