Ⅰ. Overview(1) Overall strategy of Red Corporation (“Red”)
Red, as the Trade Development Public Corporation of Negoland, hopes to grow its tourism industry into oneof its main industries, as well as making further advancements in areas of resource development.
Regarding the Negonium project, considerable demand is expected for Negonium. However, it is impossible
to make an accurate forecast of output, price, and mining expenses without going through full-scale
investigations and feasibility studies. Therefore, it is crucial to collaborate with Blue Inc. (“Blue”) in order todisperse risks, and to establish the Negonium market ahead of the rest of the world.
Regarding the Geopark project, Red hopes to obtain the Geopark status by 2025 by conserving the nationalpark and delivering successful results in attracting tourists, especially from Arbitria. At present, facilities andinfrastructure for tourists are not sufficiently developed in the vicinity of the national park, so it is necessary toproceed with the construction as quickly as possible with Blue’s cooperation and support.

(2) Overall goal of negotiations
In the field of resource development, Blue possesses very high technology and know-how. Therefore it is anindispensable partner in this resource development project.
Moreover, in order to obtain the status of Geopark, increasing the number of tourists from Arbitria, aneighboring country with a large population, is crucial. Therefore, it is important that we obtain the cooperationof Blue, which is active in the tourism industry in Arbitria.
Specifically, we will try to achieve our goal to obtain the Geopark status before 2025 by accepting Blue’s ideas
for luring tourists, as well as its assistance and cooperation in the construction of facilities.

(3) The order of the negotiation
Red’s priority is placed on the Negonium project, because it is possible for Red to enlist cooperation fromdomestic companies (a railway company and a hotel chain) instead of Blue regarding the Geopark project. Since
we are not yet sure how positive Blue will be toward it, it may be difficult to reach an agreement just bydiscussing the Geopark project alone. Therefore, after we first identify each other’s basic positions regarding theresource development project, we will move on to discussing the Geopark project.
In addition, if necessary, we will try to obtain a larger degree of cooperation from Blue by effectively making
concessions on the issues of the resource development project or by offering Blue a bonus distribution ofNegonium.

Ⅱ. The Negonium Project(1) Negotiation target
Since this is the world’s first Negonium mining project, it is possible that we may have to terminate the projector that unexpected additional expenses may arise. Therefore, it is necessary to have Blue invest in the project andbear the risk to a certain degree. However, we also wish to secure a certain proportion of the produced Negonium

1for Negoland’s manufacturing sector, in the case that we proceed to the full-scale development. Specifically, weaim to secure about 65% of the Negonium, and in order to do so, we would like Blue to promise to sell a portionof the Negonium distributed to Blue to Red or other Negoland companies when requested by Red.
Regarding the valuation of Blue’s technology, we would like to valuate it in the form of a license fee, sincetreating it as an investment in kind would lead to a dilution of Red’s share of Negonium.
We will try to manage the risks involved in this project by including provisions such as a termination conditionin the contract.
(2)Negotiation Strategy① Amounts to be invested in the project
TOP: Red assumes 60% of the costs for the project
BOTTOM: Red assumes 80% of the costs for the project
Since the investment ratio is directly related to Blue’s degree of responsibility and commitment in this project,
we will request Blue to assume more than 30% of the total investment. However, the more Red invests, the more
Negonium Red will be able to obtain, so it may be beneficial for Red to increase its investment. Therefore, if
discussion stalls in other issues, we may try to extract concessions from Blue by offering to increase Red’sinvestment.
② Valuation of Blue’s technology
TOP: A license fee of US$1 million per year (for 2 years)
BOTTOM: A license fee of US$3 million per year (for 2 years) OR US$5 million as an investment in kind overthe 2-year period
Red wishes to valuate Blue’s technology in the form of a license fee while Blue wishes to treat it as aninvestment in kind. For Red, treating it as an investment in kind would lead to a dilution of Red’s share ofNegonium. Therefore, we will try to persuade Blue to accept our offer to pay a license fee by discussing otherissues together and making proposals that are beneficial to both parties. However, if Blue strongly insists ontreating the technology as an investment in kind, we will accept to do so for an appropriate amount, and try to
extract concessions in other issues.
③Sale of the Products
TOP: Get Blue’s promise to sell 30% of their Negonium to Red or other Negoland companies
BOTTOM: Try to obtain concessions in other issues
It may be difficult to obtain Blue’s consent regarding this issue, since Red would be restraining Blue’s discretion
about their sale of Negonium. Therefore, we will offer to pay an extra price over the average sales price as apremium for the additional supply and consider making concessions in other issues. First, we will request Blueto sell 30% of their Negonium, and considering Blue’s interests, we will make further proposals regarding the2amount and price of the additional supply, combining other issues as well if necessary. If Blue strongly objects
to Red’s request, we will not persist and aim to obtain Blue’s concessions regarding issues ① and ②.
If Red goes below the bottom line stated above, we will in principle move on to negotiating with our BATNA,
the other 6 companies that we have shortlisted.
(3) Risk hedge provisionThis project has to be terminated if the expenses for Red exceed US$200 million (within the first 2 years at thestage of research). Moreover, since Red can only invest US$35 million in the first year, expenses that exceed thatamount shall be discussed with Blue. If Negonium is discovered in other countries such as Arbitria, there is arisk of Blue exiting this project to join other business which is more profitable, after gaining the know-how
during the 2-year research and feasibility study. In order to avoid these risks, we will suggest to include riskhedge provisions in the agreement.
If following risk hedge provisions are discussed, they shall be added to the agreement.
・Renegotiation: The specific business strategy shall be decided in further negotiation.
・Exit clause: When one party intends to cancel the contract, they shall inform to the other party beforehand.
・Avoid competition: Applying similar projects shall be prohibited for a certain period of time.
・Secondary use of information: Secondary use of information obtained shall be prevented in this project forother projects for a certain period of time.

Ⅲ. The Geopark Project(1) Negotiation target
Red’s goal is to obtain cooperation from Blue, which is "experienced in the tourism industry in Arbitria", for theconstruction of facilities in order to attract many tourists, especially from Arbitria. We will also ask for theircooperation in the PR of the national park. We will try to obtain as much cooperation as possible by making
concessions in the issues of the resource development project if necessary. Overall, we will focus on 4 issues:
donations from Blue, development of transport infrastructure, construction of accommodation facilities, andpublic relations.

(2) Negotiation strategy① Blue’s donation for the enhancement of facilities at the national park
TOP: To obtain Blue’s donation of US$100,000 per year for 3 years.
BOTTOM: To obtain Blue’s cooperation in the construction of facilities instead of donations
The donation shall be the symbol of Blue's cooperation in the Geopark project. We will try to diminish Blue’sreluctance toward donations by presenting the donations as being beneficial on Blue’s part as well, because it
will lead to an increase in Blue’s recognition in Negoland. We will also clarify the use of donations, for example,
installing information boards and promenades in the park.
However, if Blue can actively support the construction of facilities, obtaining donations is not a must.
② Construction of Facilities to attract more tourists3

TOP: Have Blue finish the construction of hotels by 2020 and develop domestic transport infrastructure
BOTTOM: Obtain Blue’s cooperation in the construction of hotels
We will proceed with the discussion by taking into account Blue’s interests in developing Negoland’s transport
infrastructure and hotels. However, since Red prioritizes the international transport infrastructure between
Arbitria Lake and the national park as stated in issue ③, it is not necessary to persist with domestic
infrastructure if we can obtain cooperation there.
Regarding the construction of railways inside Negoland, due to the budget limitation of the Geopark project of
US$200 million, we will request Blue to make the full investment. We can agree to a partial investment, but onlyon condition that Red promises to construct fully funded hotels.
Because the construction of hotels is an urgent issue, if Blue can guarantee their construction by as soon as 2020,
we will be able to compromise on issues of the Negonium project and the distribution ratio of Negonium.

③ Ideas for luring tourists to the area
TOP: Obtain cooperation in developing infrastructure between the national park and Arbitria Lake, and forpublic relations
BOTTOM: Obtain cooperation for public relations
In order to increase the number of tourists from Arbitria, we will first aim to raise the national park’s recognition
among Arbitrians. For example, we will propose the branding of the park, spreading information through media,and holding study trips in the park. Next, we will suggest to plan a tour in order to make the national park more
attractive. We will ask Blue for ideas that meet the content we wish to promote and can also utilize the knowhow that Blue earned through the resort development business in Abu-Nea.
Furthermore, we will request Blue to cooperate in constructing the transportation between Arbitria Lake and thenational park so that people in Arbitria will have less physical obstacles to visit the park.
If Red goes below the bottom line stated above, we will in principle move on to negotiating with our BATNA, ahotel chain and a railway company in Negoland.
(3) Risk hedge provision
If following risk hedge provisions are discussed, they shall be added to the agreement.
・Delay of the performance: The compensation of the delay of the opening date of the facilities shall be decided.
・Environmental assessment research: The environmental effect of construction shall be researched.

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