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Negotiation for Twin Lakes Mining Company, Case Study Example

Pages: 6

Words: 1539

Case Study

Once a decision has been made that there is need for negotiation with other party, a plan of action should be developed (Craig Boryswich, 2007). The foundation for succeeding in a negotiation lies in the planning (Alain Burrese, n.d.).  According to Lewicki, Saunders, and Barry (2011), the steps in effective planning for negotiations as discussed below:

Step 1: Defining Issues

The number of issues will dictate the strategy to use in negotiation. In negotiating for the Twin Lakes Mining Company, the issues to be discussed are:

  • The Twin Lakes Mining Company to get into a joint venture with Tamarack Town Council in constructing the filtration plant.
  • The Twin Lakes Mining Company to control the dust generated immediately around the “benefication plant”.
  • The Twin Lakes Mining Company to carry out periodic oil spray on the roads around the outskirts of town.

Step 2: Defining the Bargaining Mix

The identified issues will be discussed in the following order (from the most important to the least important):

  1. Sharing the cost of constructing the filtration plant
  2. Controlling of dust generated immediately around the “benefication plant”.
  3. Periodic oil spraying on the roads around the outskirts of town

The issues will be negotiated separately.

Step 3: Defining Interests

The interests of the Twin Lake Mining Company are as discussed below:

  1. A joint venture with the town council is necessary because the cost of constructing a filtration plant is high hence it cannot afford to build the plant with its own revenue.
  2. A great amount of dust can be controlled, at a cheaper cost, immediately around the plant.
  3. Periodic spraying of the roads with oil is a cheaper option to paving them.

Step 4: Knowing Limits

According to Burrese (n.d.) limits are the point where no negotiations should continue.  In this case the limits will be if the cost of clean-up demanded from the company exceeds the funds available for the process.

Step 5: Knowing E Alternatives

The alternative to constructing a filtration plant will be sinking a bond.

Step 6: Setting Targets and Openings

The target will be a cost not exceeding $16 million plus $2.6 million annually. I will set the lowest bid of $10 million plus $2 million annually.

Step 7: Assessing Constituents

As the negotiator for the Twin Lakes, I will involve the service s of an accountant of the company. The objectives of the town council will be analyzed against those of Twin Lakes and the managers of the Company must be consulted at all levels of negotiation to ensure that no unacceptable offers are from the town council are taken. The local citizens and the environmental agency will also be consulted on what they expect to achieve from the negotiation.

Step 8: Analyzing the Other Party

I will conduct a broad interview with the town council officials to learn what they have to offer. Further, I will analyze the town council based on previous negotiations that they have ever been involved in with the company.

Step 9: Presenting Issues

I will present facts to support my argument to the council officials and consult previous negotiators to determine which arguments were successful and which ones were not.

Step 10: Protocol to Be Followed

I will discuss with the other party, in advance, on the agenda, the venue, the time period of the negotiation, what to be done in case the negotiation fail, how to keep track of what will be agreed on and how to assess the suitability of the decision.

According to Devereaux et al, it is difficult to initiate, maintain and conclude negotiations, so it is important to link this process to something with momentum (as cited in Crump 2009, p. 199).

Pre-negotiation Memorundum

Subject: Pre-negotiation Objectives for Cleanup Operations

Introductory Summary

A serious conflict between the Twin Lakes Mining Company and the government of Tamarack town has ensured prompting for a negotiation between the two. The problem is about an environmental cleanup. This is a pre-negotiation memorandum that will be used in the negotiation

Background Information

The Twin Lakes Mining Company was established in 1961 and is located in Tamarack town, Minnesota. The company is into iron mining and uses open-pit mining. The Twin Lakes Mining Company has a “benefication plant” in the outskirts of the town and as a result of the growing of the residential areas, the summer home development and the operations of the company; the plant has posed a major problem to the residents. Over a long period of time, Twin has come under pressure by the Tamarack Town Council to clean up the major problematic operations.

Twin lakes has not met the cleanup standards to solve the major issues although there have been amicable discussions. However, as a result of strict environmental laws and regulations, both the state and the federal Environmental Protection Agency have imposed environmental controls on the Company. According to Twin Lakes Mining Company’s estimates, the total cost for the cleanup operations is over $36 million. Compliance to the environmental standards by the company may affect its profitability.

On the other hand, local citizens are putting pressure on the local government to help Twin Lakes Mining Company in carrying out the environmental cleanup operations. They have done this as individuals and through the government.

Owing to the pressure from both the state and the federal Environmental Protection Agency on the Company, and the pressure of the community on the town council, renewed discussions between the Company and the Town Council have been initiated.

Negotiation Situation

The negotiation is between the Twin Lakes Mining Company and the Tamarack Town Council. It is as a result of the imposition of the environmental controls over the Twin Lake Mining Company and the pressure on the town council (by the local citizens) to assist the company in its cleanup exercise.

Negotiation Objectives

The Twin Lakes Mining Company can raise $16 million + $2.6 million annually while the Town Council will have to increase taxes in order to support the operations. The cost analysis of the cleanup operation is as illustrated in the table below:

Cost Analysis Summary

Element Without bond With bond
Capital Costs
Filtration Plant $20,000,000
Plant Improvements $8,000,000 $8,000,000
Paving Roads $4,800,000.00 $4,800,000.00
Sub-total $32,800,000 $12,800,000
Annual Costs
Bond Interest $2,000,000
Road Maintenance $600,000 $600,000
Sub-total $600,000 $2,600,000
The Bond
Bond Sinking Fund $1,848,740

Relative Strengths and Weaknesses of Both Sides

Below is an analysis of the relative strengths and weaknesses of both sides:

Twin Lake Mining Company

Strengths:

  • The company has the support of the local community.
  • It is the largest contributor of taxes.

Weaknesses:

  • It is being pressurized by the environmental agency to comply with the environmental laws and regulations.
  • The Town Council has a better bargaining position than the company.

Tamarack Town Council

Strengths:

·       It is under no obligations to support the operations as far as the environmental agency is concerned.
·       It is in a better position to pressurize the company to comply with the environmental laws and regulations.

Weaknesses:

·       Has been pressurized by the local citizens to support the cleanup operations
·       Its operations will be crippled if the company withdraws from the town

Negotiations and Potential Tradeoffs

The negotiations will be:

  • Getting into a joint venture with the Town Council to build the filtration plant which will be multi-purpose. First it will be used in environmental cleanup and then it will be a secondary source of water for the Town Council.
  • Controlling a great deal of the dust generated during mining and crushing immediately around the plant.
  • Carrying out periodic oil spraying of all the roads, to keep the dust down, instead of paving them (paving is a costly exercise).
  • Taxes on the land, where the “benefication plant” lies, are already excessive hence the Town Council should not increase them.
  • The Town Council should reduce the selling price of the town land where railroad spurs cross the town land.

The potential tradeoffs are:

  • Agreeing to keep the mine open if a satisfactory agreement on the current situation is resolved.
  • Paving all the roads in the town.
  • Continue paying the flat rate of $400,000 annually for right-of-way use instead of buying the land.
  • Choosing to sink a bond instead of constructing the filtration plant.

Argument and Counterarguments

The table below illustrates the potential arguments by the Town Council against the arguments to counter them:

Argument Counter-argument
Funds are not available The council collects taxes
Taxes will have to be increased if money is to be available to support the environmental cleanup Already, the council collects excessive taxes
Periodic oil spraying of the roads is not lasting solution to keep dust down The problem of dust is seasonal (intense only during the dry months of summer)
The “benefication plant” is not necessary Benefication minimizes transportation costs of gangue, it is useful in the purification and blending of ores and fine ore materials can be briquetted and pelletized to increase their value.

Tactics to Use

The tactics to use in this negotiation will be:

  • Concession and compromise
  • Agenda
  • Questions and answers
  • Commitment
  • Threat

Signatures

Prepared by:

 

Name                                                                                               Date

 

Title

 

Approved by:

 

Name                                                                                                Date

 

Title

 

References

Lewicki, R. J., Saunders, D. M., & Barry, B. (2011). Essentials of negotiation. Boston: McGraw-Hill Irwin.

Borysowich (2007). Planning Your Negotiation. Retrieved from < http://it.toolbox.com/blogs/enterprise-solutions/planning-your-negotiation-15389> [Accessed on 1st October 2012]

Burrese (n.d.). Negotiation Success is in the Planning. Ezine. Retrieved from < http://ezinearticles.com/?Negotiation-Success-is-in-the-Planning&id=1433583> [Accessed on 1st October 2012]

Crump (2009). Negotiation Process and Negotiation Context. International Negotiation. Retrieved from < https://ecampus.phoenix.edu> [Accessed on 1st October 2012]

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