I.

Overall Strategy

1.

What Blue is

Our business conditions are not ideal. In particular, the Metals & Energies sector, which has been themain business of our company, has been declining. Revenue of this sector decreased by 56% from2012. Moreover, net income decreased by 89% from 2012. We recorded a large deficit in 2015 .
However, we do not intend to withdraw from the resource business. On the other hand, the Machinery& Infrastructure sector has been performing well. We are considering making new investments todevelop our business, and business relating to tourism is one of the key sectors.
Accordingly, it is necessary for us to strengthen the Machinery & Infrastructure sector whilerebuilding the Metals & Energies.
2.

Overview

In this negotiation, it is important for us to conclude the agreement for Negonium Project that isbeneficial for us. Negonium could be a new core of our resource business and we would like to be
successful in the negonium mining project. Also, the Geopark Project has the potential to contributeto the further development of our tourism business, and we would like to work on it positively. So wewould like to secure profit by compromising the Geopark Project. Specifically, we want to gain thestable and large profit by Negonium, while we cooperate with Red in Geopark Project.
3.

How we proceed with the negotiation

We will start the negotiation by answering to the three questions concerning the national park asked
by Red during the last negotiation. We will not easily reach an agreement on these topics at this stage,
because we are hoping to negotiate these topics to gether with the negonium project. If we get stuckat the Geopark project, we will move on to negotiate the negonium project. When we negotiate thenegonium project, we will use our concession in the geopark project as a bargaining chip to achieve
our goals in the negonium project.
II. Project National Park Development
4.

The goal of this negotiation

Our goal is to achieve connecting two areas: the Negoland national park and the existing resort areain Arbitria, while investing actively to the development and constructions which may bring Blue
profit.
5.

Priority of each topic and overall strategies

Important topics for us are (2) Ideas for luring tourists to the area, and (3) Building facilitates fortourism development. This is because these topics determine our initial investment to this development
project. These topics are related to each other since the idea to lure tourist will influence the facilities
we build. We will describe this in more detail below. (1) Donations is less important compared to othertwo topics.

16.

Strategy for each topic(1) Donations for national park enhancements【STRATEGIES】
We would like to decide whether Blue donates to Red or not and how much Blue donate by looking
into what Red is thinking about. Blue only has a vague picture about how Red locates Blue’s
donations in a whole negotiation. For Blue, donations are small in gain, so Blue basically will not
donate to Red. However, if there is a great merit as a return gift for Blue, Blue will make donations.
Thus, it is important for Blue to get information from Red about donations .
【BOTTOM】
Donate to Red (the maximum amount is $10,000 each year)(2) Ideas for luring tourists to the area
【STRATEGIES】
Blue would like to suggest the geotourism plan which includes traveling to Negoland Mountain, Nego
Lake, Lake Arbitria. In negotiation, Blue will show detailed business plan to Red. We would like Red
to understand the great meaning of creating a connection between Negoland national park andresorts area in Arbitria. By doing so, Blue will persuade to construct facilities which are beneficialfor Blue.
【IDEA】
Blue would like to suggest Red an idea of Geotourism, a sightseeing tour enjoying transboundary
geographical features. To achieve this, Red and Blue should cooperate for the application of geopark
as an integral area including lake Arbitria. Geotourism project will bring Blue a lot of merits: anexpansion in scale of geopark, a broad publicity and advertisements, and luring a number of tourists.
These merits will positively contribute to the designation to Geopark.

(3) Building facilitates for tourism development【STRATEGIES】
Blue puts a priority on construction of ⑤ &⑥, because Blue’s tourism business will gain about
US$500 million net profit over a 10 -year period, if we succeed in the integrated development of theNegoland national park, Lake Arbitria and Aub-Nea district. Thus, Blue will firstly suggest theconstruction of ⑤&⑥ and get Red’s understanding and an agreement by emphasizing that ⑤&⑥
will help the realization of the geotourism idea and Blue will invest more if we construct ⑤&⑥. If
Red refuses to construct both ⑤&⑥, construction of one of them is fine. In a case that the nationalpark project completes within the domestic construction ( ① ~ ④ ), Blue’s maximum amount ofinvestment would be US$200 million.
【Advertisements】
Blue would like Red to list up the name of Blue on the advertisements about the National Park as asupporting company, so that Blue will be publicly known for contributing to a development of the park.
【BOTTOM】
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Blue are ready to make an initial investment of up to US$200 million for this tourism related project,but if we could reach an agreement that could be beneficial to our existing tourism relating business,
the amount of investment could be increased to US$400 million. The amount Blue can invest is
estimated by calculating and dividing the maximum amount of invest ment on the basis of the ratio of
the initial cost.
（Unit: US$1million, B = Blue）※ This is only a rough estimation, so in negotiation.

III. Project Negonium
7.

The goal of this negotiation①To maximize the Blue’s allocation of Negonium, while to minimize the the risk to be borne
by Blue, for instance, investment by cash, additional payment and so on.

8.

Priority of Topics and Overall Strategy

In this project, what is important for us is to continue to earn more than a certain level of return on
investment amount. In this negotiation, our key mission in the negotiation with Red is to maximize
returns while minimizing risks. Then, we want to get as much allocation as possible, while keeping as
much investment as possible by cash. On the other hand, Blue and Red have agreed that, as a generalrule, the investment ratio utilized at this stage will be applied even after the full -scale operationcommences. Thus, it is necessary for us to revise the agreement or have Red highly estimate thevaluation of our technology.
9.

Strategy for Each Topic(1) Amounts to be invested in the Project【Strategy】
We would like to hold down the investment by cash as much as possible. Specifically, by negotiatingwith other negotiating items or development projects in Negoland National Park, it is necessary torevise the principle that Negonium produced will be distributed at the share of ownership ratio, or to
obtain high evaluation of our technology as spot investment. Meanwhile, we would like to respond to
the responsible project participation that Red Company is seeking. Therefore, we may promisecommitment to the project in a method other than investment by cash. Specifically, the agreement notto withdraw from the project for a certain period is included in the contract, and so on.
By the way, if additional investment is necessary, the upper limit is 20 million US dollars. Therefore,

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after consulting with Red Corporatio n about the possibility of additional investment, we would like todecide final cash contribution amount.
【Bottom Line】
The capital contribution by cash is US $ 30 million and the capital contribution of additional cost is
upper limit of 20 million USD. It is necessary to ensure 20% of the distribution ratio of Negonium.
【BATNA】
In case the amount of additional investment borne by the Company exceeds 20 million US dollars,
we get agreement to withdraw from Negonium resource development.
(2) Valuation of Blue’s Technology【Strategy】
Taking into consideration the purpose of "suppressing investment by cash and acquiring a highdistribution ratio of Negonium", this topic is very important for us. On the other hand, from theviewpoint of dilution of ownership, for Red Company, it is expected that this it em is not an easy
concession item. Therefore, I would like to withdraw Red's concessions in this topic by conceding theabove-mentioned commitment guarantee or selling destination of output or Negoland National Park
development project.
【Bottom Line】
If Red do not evaluate the technology of Blue Corporation as a spot investment, we will conclude theLisence Agreement with Red to pay a license fee of US $ 2 million a year.

(3) Sale of the Products【Strategy】
We will compromise on this topic in order to get other topics. However, given the availability and rarityof Negonium, an easy compromise is not allowed. Therefore, in principle, it is necessary to ask themarket price to be added according to the specified supply rate. Howe ver, if Red Corporation's big
concessions are obtained regarding the allocation ratio of Negonium to the contribu tion by cash, it may
not be based on this principle. Even in that case, the specified supply is up to 30%.
【Bottom Line】
30% of the allocated Negonium is promised to sell to Red Company or a company in Negoland at a
price of 30% of the market price when red company requests it.
10. Offers
To summarize the above, we will make the following proposals on the amount of investment bycash, the evaluation of Blue's technology and the allocation ratio of output.
Investment by Cash

Valuation of Technology

Allocation of Negonium

Ideal Line

2000million USD

2000million USD

40％Middle Line

1000million USD

500～1000million USD24%～27%

Bottom Line

2000million USD-(Lisence Contract)20%4