Transcript of Luna Pen: Negotiation Strategy

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Her first two messages were effective, but I disagreed with the approaches she took after the CEO had finally acknowledged the seriousness of the matter. Erika's next move was a short message that essentially let Mr. Feng make the first offer, which he responded by offering a very low percentage of future sales. Although waiting and letting the other person make the next move can be effective, I thought Erika should have made more of an effort to set the tone since she had finally gotten Mr. Feng's attention and had the advantage. This was also ineffective because he had already stated his desire to pay a small nominal fee and by allowing him to make an offer, she could not expect him to come back with a very high amount of money. I also like how Erika was able to hold back any emotions or reactions when she was clearly facing a difficult situation. In the fourth situation when Mr. Feng continued to ignore her and contact her superior, she was able to go to the balcony and set aside her frustrations in order to continue the negotiations and ultimately come to an agreement.

There was conflict in this negotiation and the different cultures were undoubtedly a major factor. Based on Mr. Feng's constant replies to Erika's superiors, he was either uncomfortable negotiating with a woman or uncomfortable with Erika's status in the company. While there was a noticeable difference in culture, another issue was the very different legal system in China because they do not respect trademarks and copyrights as much as other countries. However, Erika was finally able to realize this cultural difference and complete an agreement in person.

My own negotiating style on the matrix was both accommodating and asserting. I do not think this is always my usual style because I usually tend to be more accommodating. In this scenario, I chose more assertive options after the brush off by Mr. Feng. I felt that the threat was fitting in this situation because it was necessary to grab his attention. I am unsure if I would have been more effective in this negotiation because Erika was very diligent and clearly had done a lot of detailed research about negotiating, interests, and their BATNAs. It is always beneficial to do a lot of research and preparation and it was obvious that she did. This helped because she knew that her BATNA was not very strong and it was unlikely that they would receive any money in a lawsuit so it would be best for both companies to negotiate. However, it took a lot of time and messages until Erika realized the cultural differences and I think she could have gotten more money for the use of the Luna name. I think Erika's main mistake was in situation three when she let Mr. Feng make the next move and offer, but she was still able to keep in control of her emotions in a difficult situation and come to an agreement.

Luna Case Analysis

DGG’s BATNA and Interests

The Luna Pen Case was an interesting piece to read and discussed in class. After a week-long analysis, both parties have different BATNAs and interests in play. DGG’s alternatives were to “bring suit against Feng and Global Service to recover damages for past trademark violations, negotiate settlement with Feng in respect to prior royalties and right to future use of the Luna name, [and] find other enterprise that would be interested in buying Luna.” DGG’s BATNA in this case, was to negotiate a settlement with Feng. DGG does not want to bring a suit against Feng and Global Service because a law suit is expensive and time consuming. DGG’s legal expert, Gunther Schmidt, advised Erika that it would not be as expensive to file trademark infringement suit. However, the best DGG would get from this suit is a court order prohibiting Global Service from using the Luna name in the future. Moreover, DGG does not want to find another interested enterprise to buy the Luna name and manufacture it. DGG do not want to enter the fountain pen market as DGG will not be able to market it and plus, they got out of that market 6 years ago for a reason.

With the best strategy set, DGG’s interest is basically to get anything out of this windfall. By negotiating for a settlement, DGG is not going to lose anything, but gain only (if Erika negotiates correctly). On a more personal level, Erika’s interest in this process is to create a good impression upon her boss, Wilhelm Mann. Also, this was her very own first project requested by Mann. She could not let her new boss at her new job down.

Global Service’s BATNA and Interests

From the other perspective, Luna represents 25% of Global Service’s sales. Global Service is successful mainly because of Luna and furthermore, plans to expand. Their primary response to Erika is to offer a nominal fee for their use of the Luna name. However, DGG must release all rights to Global Service. This is their best alternative in this negotiating process. Their later offer, a 1% royalty fee for all future sales, will only allow them to take 24% of their Luna sales. Also, they would not get all the rights to the Luna name as requested. Mr. Feng’s interest in this process is to avoid a lawsuit as much as possible, even if he does not seem to be afraid. He does not want to discontinue manufacturing and distributing this product because it’s ¼ of his company’s sales. Moreover, if he has to make a deal with DGG, he is not going to do so without a fight. He will negotiate the lowest deal he can get.

What do you Think?

In my opinion, I would have to agree with Mr. Feng. DGG had discontinued with Luna and should not be asking for any royalty fee for future sales, as this was a generous offer. On the other hand, I do believe that Erika got the best deal at the end. She was able to go to the balcony and think things through before making any final decision. She got Global Service to compensate for past trademark violations and another huge payment for the release of the Luna name to Global Service. Given that DGG had lost hope in Luna, this is the best offer they could have got from Feng and Global Service.

Negotiating Style

After analyzing the Luna case, we were able to discover our own negotiating style. On the matrix, I lean towards “Concern for other party’s interest.” I believe this has some truth in it. I like to make decisions that are the best for both parties. I do not want the other to be left in the dust given that I will be the winner. There has to be some give and take on both sides. If I was to play Erika’s roll, I would have used a different method to contact Mr. Feng (i.e. phone call).