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Negotiation and Decision Making 62
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Chapter 9 Decision Making Advice
9.1 Key Principles to Guide Your Decision-Making
9.1.1 Collect Key Information
The following is a series of questions to answer in the search for necessary decision-related
information. The questions aim at creating efficiency and productivity in your pursuit of
information.
First: Information Gap
Is there information I lack? What information?
Must I have that information to make an informed decision?
By what date / time to I need that information?
How might I direct my questions to gain the needed information on time?
Second: Answering Party
To whom will I refer for answers?
Are they likely to answer?
Third: Timing
When should you ask the party your question(s)?
Is it necessary to ask it immediately?
Does it need to be asked at all?
Fourth: Method of Inquiry
Should I ask the questions or should another party?
How can I create questions and pose them in ways that are most likely to be answered efficiency
and effectively?
Fifth: Analyzing Answers
Did all questions get answered? If no, determine those that were unanswered.
Is the information accurate or can I seek confirmation elsewhere?
Are all received answers clear?
Did I create good rapport with the party questioned?
Be sure to thank all who offered you assistance.
Six: Moving Forward
Am I now ready to proceed with the decision?
Did my questions assist in preparing for action? If not, what must I do now to prepare myself to
act?

9.1.2 Meet with Others
Once you have all necessary data available, organize a meeting with a group of principal players
in your decision. This group should not exceed four people. With this group, brainstorm
decision possibilities, analyze those decisions and then select your chosen path. You may also
consider expanding the conversation beyond this small group in an effort to discover different
possible approaches to it. You may have others, possessing different backgrounds or expertise, to
give you their ideas and opinions on the decision.
9.1.3 Evaluate Options and Be Creative
Make sure you analyze the information and feedback collected thoroughly and correctly. This is
key to arriving at a spectrum of options you need to decide on. Be creative with coming up with
new options by varying a few parameters. Talk to involved parties to ask them about their
flexibility on certain issues. You will be surprised on how your options may be extended if one
or few factors can be changed.
Cross out all the options that are not viable and ill-times. These are non-options. The more time
you mull over those non-viable options, the more time you will waste. However, if you can
develop a non-viable option into a viable one within reasonable time, then go for it. It may be
your best option after all. Just do not miss the timing by inappropriately prioritizing your options.
9.1.4 Do Not Procrastinate
Perform any additional research required and allot yourself a small amount of time in which you
intend to complete the work. Send emails or calls essential to making a speedy but informed
decision. Good decision makers act, not just think all the time.
9.1.5 Don’t Rush if There is Still Time
If there is time, if there are a few days before a deadline, there is no need to rush into a hasty
decision. Though time is always a factor, often just one night’s rest provides greater resolve and
confidence in a decision.
9.1.6 Avoid Self-Doubt
In decisions, many find themselves hindered from doing what they really want by doubt and
preconceived notions of what ought to be done. These largely debilitating thoughts hamper
success. In order to fight them:
- Communicate With Yourself Directly And Honestly

This may mean being honest with yourself not only about where you have failed but also
where you have succeeded. When considering where you failed, recreate these issues into
questions of how you can improve, etc.
- Think Positively
Don’t be shy. Remind yourself of the progress you’ve made, things you learned, ideas you
came up with, and visualize future successes.
- Remind Yourself That There are Other Sides Of Life
Sometimes we forget there is much more. And occasionally we need to remind ourselves
there are others and other things beyond and above daily work related decisions.
9.1.7 Monitor the Outcome
Once you make a decision, you need to follow up by executing it wisely and monitoring the
subsequent developments closely. You may need to take corrective actions if time and situation
allow. Even if your decision works well, you need to analyze which set of factors were the main
contributors to the great outcome. If you come across similar situations in the future, make sure
that you consider any changed variables and fine-tune your decision-making process.

9.2 Selecting a Leadership Method
How to handle decisions on small and large scales involves choosing the method by which
decisions will be made, in other words, the leadership strategy you choose.
Some methods include
Autocratic: The leader makes decisions, not necessarily consulting others in the process
Collective: The leader includes others in process, but in the end makes the decisions
Democratic: The members vote. Decision is made according to a pre-determined majority. The
leader is not directly responsible for the decision reached.
Consensus: All members agree on a decision.
Though there are positive and negative sides to all of these methods, for most decisions
especially large ones the notion of singular decision-making is not as effective. Good decisions
rest on at least some measure of consultation with others.
In all decisions, devising ways to solve problems before they get out of hand is essential to wise
solutions.
• Locate the dilemma
• Conduct investigative research into the difficulty
• Brainstorm approaches to solving, or possibly, not solving problem
• Analyze the possibilities and then discuss the pros and cons
• Arrive at a decision
• Create a plan of implementation

9.3 Making Ethical Decisions
The creation of an ethical code in a business creates principles which should guide corporate
decision making. It requires determining what beyond profit is important to you and your
colleagues. As ultimately an ethical work environment based on firm principles creates profit,
improved productivity and increased product satisfaction, it not only makes you more dedicated
and confident in the quality of your product, but also leads to a stronger business.
The creation of an ethical code involves the following steps.
§ Develop foundational principles
§ Consider other options.
§ Conduct research on other options
§ Consider risks involved
§ Write the ethical principles.
A large part of the difficultly in establishing foundational ethical principles is the difficultly in
coming to an agreement. It is usually a wise option to include respect for the following
endeavors or individuals:
Basic Human Rights, in your corporation and in other areas you work. (Life, Liberty, Property)
§ Vacation
§ Family
§ Older people
§ Equality
Yet, there are many more and they should be discussed by a broad group of staff in order to
ensure not only executive commitment but full commitment to establish ethical principles.
Prior to implementation, staff should be aware of the need for the code. Why has it been
established? Why was it necessary? Corporate audits tend to provide useful specific examples to
explain the development of ethical codes.
Through strict executive command, the leadership of human resources, or the creation of an
executive council, many companies implement their ethical codes. Yet, often the best method of
ethical code implementation is rooted in cooperation and open discussion on implementation and
purpose between corporate executives and managers.

Chapter 10 Cultural Sensitivity & Etiquette
10.1 Overview
Culture can be defined as views and values possessed by people who have common experience
and/or similar education. That shared experience may relate to a variety of spheres: Social,
Educational, Geographic, Religious, Political, Corporate, etc. Thus, all these factors that
influence culture determine expectations, views, and values. Oftentimes culture is the basis for
self-identity and community.
We need to be aware of the complicated nature of culture. It takes time, observation, study,
reflection, communication and exploration for you to get to know a new culture well. It is a
repeated yet progressive process.
An infinite variety of factors affect cultural beliefs and practices.
§ The religion practiced, the language spoken, the roles of men and women, the sense of
humor, the perception of Nature, the importance of individual pursuits, the importance of
the group and the meaning of gestures are but some of the elements that define a culture.
§ Within every classroom in a given culture, a different micro culture also dictates levels of
formality and prestige accord students and faculty outside and within the classroom, and
student and teacher roles and behaviors.
§ Within corporate culture too, there is another set of factors influencing interaction and
these may differ from corporation to corporation. How you greet a colleague, how you
write and the purpose of that writing, how you present in a meeting, and whether you
meet co-workers outside of work reflect some of the ways in which a corporation
develops its own mode of interaction within a given broader culture.
Just as culture plays an important role in human relationships and behavior, it also plays an
important part in international business. The need to overcome cultural differences becomes
more apparent when we consider the unfortunate consequences of neglecting the importance of
other cultures:
1) Financial losses.
2) Missed chances for beneficial business relationships.
3) Awkwardness, embarrassment, or even humiliation
4) Inefficiency and frustrations as a result of miscommunication.

10.2 Cross Cultural Communication
Culture is not stagnant; it changes over time. And though culture is such a broad, dynamic term,
we can work to understand a corporation’s or individual’s cultural context better and thus better
communicate with them.
1. Identify the cultural context.
i. What religious, corporate, socio-economic community are you engaging?
ii. What does that community value?
iii. What are those unconscious biases and assumptions?
2. Identify cross-cultural differences.
General Differences
i. How do you differ from them? How are you similar to them?
ii. Do you consider the culture to be economically and culturally conservative or liberal?
iii. What is a typical family relationship? Do family members stay close all the time and
provide financial means for each other? Do parents make key decisions for children?
Does extended family exert a strong influence in the decision-making process?
iv. What is the traditional level of formality in interactions?
v. What seems to matter most: individual achievement or group achievement?
vi. How much cultural diversity or homogeneity exists within a culture?
vii. Do words have the same meaning? Does, for example, tomorrow mean tomorrow, or
next week?
Specific Differences Related to Business
viii. Does the culture stress developing trust before joint collaboration on specific
projects? Is it goal-oriented or relationship-focused?
ix. How are business presentations and meetings conducted?
x. What are the most commonly accepted after-work social events?
xi. Are there specific male and female roles within business or within the home?
For example, are women in upper management positions? Are men often subordinate
to women or vice versa?
xii. Are directors, presidents, or those in upper management to be accorded special
respect?
xiii. Are key decisions made by one or a few people behind the scene? Or is it more of a
group consensus in public?
Specific Differences Related to Education
xiv. What is the main goal of education? Is it to foster innovation or to reinforce tradition?
Does it advocate depth of a chosen major or breadth of both science and literal arts?
How much emphasis is given to ethics and values?
xv. Does education confer social status or prestige? Are certain degrees highly coveted?
Is there a different benchmark for different genders in the same culture?

xvi. What is the typical relationship between teacher and student? What kind of social
status and respect are accorded a teacher? How long does such a relationship last?
How difficult is it to become a teacher? How permanent is a teaching position at a
given school?
xvii. What are classroom dynamics? Are there mainly lectures by teachers? Is active
student involvement valued or not? Are all students or only certain selected members
of the class encouraged to voice their opinions? Do students ask questions in public or
in private? Is a challenge from a student to the instructor viewed positively or
negatively?
These questions are not intended to be all inclusive. Rather, they represent some often
encountered cultural differences. Most of them do not result in absolute answers, but rather
through addressing them, you will become aware of possible areas of misunderstanding between
your own culture and the culture with which you are seeking to do business.
In sum, the key factors in cultural differences include:
§ Perception of Gender Roles
§ Perception of Space
§ Perception of Time
§ Perception of Success
§ Perception of Change/Risk
§ Individualism Vs. Collectivism
§ Directness Vs. Indirectness
§ Emotion Vs. Logic
§ Importance of Hierarchies
§ Verbal Vs. Non-Verbal Communication Behaviors
§ Role of Humor
§ Different Ways of Saying “No”
Special Notes on Perception of Space
Research suggests that there are four major zones of personal space which carry meaningful
importance in cross-cultural communication. The categorizations below exclude various factors
such as availability of the space, the type of settings, the emotion of the surroundings, etc. It also
does not factor into the involving nature of culture.

• Intimate zone (for close relationships) - less than 18 inches (about 0.5 meter)
• Personal zone (for friends) - 18 inches to 4 feet (0.5 to 1.2 meters)
• Social zone (for work) - 4 feet to 10-12 feet (1.2 to 3+ meters)
• Public zone (for formal interaction) – 10-12 feet and greater (3+ meters and more)
The diagram below represents a general view of the varying perceptions of personal space
among selected countries. The list is not meant to be all inclusive. Rather, it serves only for
illustrative purposes.
CLOSE DISTANT
LATIN AMERICA UNITED STATES
CHINA JAPAN
ARAB STATES GERMANY
INDIA
↑
RUSSIA
KOREA
FRANCE
ITALY
SPAIN
PORTUGAL

3. Identify direct and indirect communication styles.
It is generally accepted that Eastern cultures prefer greater indirectness in business
engagements than Western Cultures, especially North American and Germanic cultures. In
order to identify whether directness or indirectness is favored, it is useful to ask the
following:
i. Is communication simple and broad or complex and detailed?
ii. Does communication involve a clear logic?
iii. Is emotion a key factor?
iv. What degree of informality?
The diagram below provides a preliminary view of the broad cultural tendencies of certain
countries.
DIRECT INDIRECT
UNITED STATES JAPAN
CANADA CHINA
SWITZERLAND ARAB STATES
GERMANY GREECE
AUSTRIA RUSSIA
↑
UNITED KINGDOM
FRANCE
ITALY
SPAIN
LATIN AMERICA
4. Identify effective communication practices.
i. When is oral communication appropriate?
ii. When is written communication appropriate?
iii. What is the most popular way to conduct a business presentation?
iv. Is it a constructive or negative approach in facilitating interactions if the objectives
are explicitly stated in the beginning?
v. Other practices include:
§ Patterns of reasoning and argumentation
§ Level of formality in inter-personal communications

10.3 Tips for Cultural Sensitivity & Etiquette
The most effective means of cross-cultural communication is to stay open-minded, flexible and
adaptable to the other culture. That means:
§ Avoid ethnocentrism and go beyond stereotypes.
§ Always seek common ground.
§ Be observant. Pay close attention to non-verbal cues such as facial expression, body
language, and reaction from other members of the same group.
§ Be diligent. Study your own and other cultures. Study the corporate culture of the
company which will interview you or make you a job offer.
§ Ask someone you trust about common or most effective practices. Discuss your
confusion, doubts or even fears.
§ Last but not least, be patient, be tolerant and be accommodating!
Specifically, you can follow the spectrum below to devise your own strategies in achieving most
effective communication when dealing with a different culture within a limited time period.
If BOTH you and your counterpart have little knowledge of each other’s culture,
consider using a mediator or a mutual acquaintance with excellent knowledge of both
cultures and the situation at hand.
↓
If you have substantially greater knowledge about your counterpart’s culture,
consider accommodating the other’s culture practices to reach a most time-effective
resolution.
↓
If you have substantially less knowledge about your counterpart’s culture,
consider asking your counterpart to accommodate your cultural practices in the interest of
time while you proactively learn about the other culture.
↓
If BOTH you and your counterpart have excellent knowledge of each other’s culture,
just improvise and adapt to each other’s verbal and non-verbal cues creatively.

Chapter 11 Simulation Exercises
11.1 Job Offer
You received a job offer from a medium-sized firm after multiple, grueling rounds of interviews
with about 5 people. Now it is time to sit down with the campus recruiter to finalize the nitty-
gritty of the employment terms. Remember, depending on the company policy and size, these
terms may be standardized and you may not have much leeway in making a particularly
customized contract. This exercise is purely designed for simulation purpose only.
Task Summary
Negotiation Category:Distributive (for the purpose of this exercise)
Negotiation Subject: Terms of Employment
Number of Parties: 2
Role-play: Yes (Recruiter vs. Candidate)
Handout: Separate payout schedule for each party
Information-Keeping: Do not share with the other party your payout schedule and your total
score at any time of the negotiation
Goals: 1) Reach an agreement within allotted time (15-30 mins recommended)
2) Score higher based on payout schedule for each party

Negotiation Mix (9 Items in Total)
- Annual Salary
o US$80,000 – US$90,000
- Bonuses (agreement can include one or more choices - results can be cumulative)
o Sign-on bonus
o Guaranteed year-end bonus
o Additional performance bonus
- Designation
o Rotational Program across Groups
o Direct Placement into a Group
- Office Location
o New York
o London
- Relocation Package
o Fixed amount payout of $5000
o Reimbursement under $4000
o Pre-arranged package by the company
- Benefits (agreement can include one or more choices - results can be cumulative)
o Health care insurance, dental, vision, 401K, life insurance
- Vacation Time
o 4 weeks
o 3 weeks
o 2 weeks
- Vacation Time Carryover
o Accrued within 3 years
o No carryover from year to year
- Starting Date
o September
o August

Negotiation Exercise (Job Offer) Payout Schedule - Recruiter
Item Recruiter
Annual Salary
US$80,000 60
US$82,000 50
US$84,000 40
US$86,000 30
US$88,000 20
US$90,000 10
Subtotal – Maximum 60
Bonuses
Sign-on bonus -5
Guaranteed year-end bonus 0
Performance bonus 15
Subtotal – Maximum (cumulative) 15
Designation
Rotational Program across Groups 10
Direct Placement into a Group 30
Office Location
New York 5
London 20
Relocation Package
Fixed amount payout of $5000 5
Reimbursement under $4000 10
Pre-arranged package by the company 15
Benefits
Health care basic insurance 15
Dental 0
Vision 0
401K 0
Life insurance 5
Vacation Time
4 Weeks 5
3 Weeks 10
2 Weeks 20

Vacation Time Carryover
Accrued within 3 years 0
No carryover from year to year 20
Starting Date
August 40
September 10
Total – Range 40 - 240

Negotiation Exercise (Job Offer) Payout Schedule - Candidate
Item Candidate
Annual Salary
US$80,000 10
US$82,000 20
US$84,000 30
US$86,000 40
US$88,000 50
US$90,000 60
Bonuses
Sign-on bonus 30
Guaranteed year-end bonus 25
Performance bonus 15
Designation
Rotational Program across Groups 10
Direct Placement into a Group 5
Office Location
New York 25
London 10
Relocation Package
Fixed amount payout of $5000 30
Reimbursement under $4000 20
Pre-arranged package by the company 10
Benefits
Health care basic insurance 15
Dental 20
Vision 25
401K 10
Life insurance 5
Vacation Time
4 Weeks 20
3 Weeks 10
2 Weeks 5

Accrued within 3 years 20
No carryover from year to year 0
Starting Date
August 5
September 10

Negotiation Exercise (Job Offer) Payout Schedule - Summary
Item Recruiter Candidate
Annual Salary
US$80,000 60 10
US$82,000 50 20
US$84,000 40 30
US$86,000 30 40
US$88,000 20 50
US$90,000 10 60
Subtotal – Maximum 60 60
Bonuses
Sign-on Bonus -5 30
Guaranteed Year-end Bonus 0 25
Performance Bonus 15 15
Subtotal – Maximum (cumulative) 15 70
Designation
Rotational Program across Groups 10 10
Direct Placement into a Group 30 5
Office Location
New York 5 25
London 20 10
Relocation Package
Fixed amount payout of $5000 5 30
Reimbursement under $4000 10 20
Pre-arranged package by the
company
15 10
Benefits
Health care basic insurance 15 15
Dental 0 20
Vision 0 25
401K 0 10
Life insurance 5 5
Subtotal – Maximum (cumulative) 20 75
Vacation Time
4 Weeks 5 20
3 Weeks 10 10
2 Weeks 20 5

Accrued within 3 years 0 20
No carryover from year to year 20 0
Starting Date
August 40 5
September 10 10
Total – Range 40 - 240 65 - 320

11.2 Office Lease
You are asked to start a New York office for a Los Angeles-based consulting company. You
shopped for 4 weeks with a broker’s assistance and finally located a space you feel is suitable for
the next few years. You are about to meet with a manager in the leasing office of that building
and discuss the final terms of the lease. Remember in such situations attorneys are typically
present as well. However, it is really up to you to make all the decisions related to major terms as
you know your business plan and resources the best.
Task Summary
Negotiation Category:Distributive (for the purpose of this exercise)
Negotiation Subject: Terms of Office Lease
Role-play: Yes (Leasing Officer vs. Prospective Tenant)
Information-Keeping: Do not share with the other party your payout schedule and your total
score at any time of the negotiation
2) Score higher based on payout schedule for each party

Negotiation Mix (9 Items in Total)
- Base Rent
o US$40 – US$50 per square foot
- Annual Increase in Rent (Escalation)
o 2%-5%
- Move-in Date
o August 1 – Sept 1
- Lease Terms
o 3-5 Years
- Pre Move-in Build-out
o 3-5 Offices
- Property Insurance Coverage
o 3-5 Millions
- Number of Rent-Free Months
o 2-4 Months
- Deposit Required
o 4-7 Months
- Personal Guarantee Required
o Yes/No

Negotiation Exercise (Office Lease) Payout Schedule – Leasing Officer
Item Leasing Officer
Base Rent (per sq. ft)
US$40 0
US$43 20
US$47 35
US$50 50
Annual Increase in Rent (Escalation)
2% 5
3% 10
4% 15
5% 20
Move-in Date
August 1 15
August 15 10
September 1 5
Lease Terms
3 Years 0
4 Years 10
5 Years 20
Pre Move-in Build-out
3 offices 15
4 offices 5
5 offices 0
Property Insurance Coverage
$3 millions 0
$4 millions 10
$5 millions 15
Number of Rent-Free Months
2 months 40
3 months 20
4 months 0

Deposit Required
4 months 10
5 months 20
6 months 30
7 months 40
Personal Guarantee Required
Yes 50
No 0

Negotiation Exercise (Office Lease) Payout Schedule – Prospective Tenant
Item Prospective Tenant
US$40 60
US$43 40
US$47 30
US$50 0
2% 20
3% 15
4% 10
5% 5
Move-in Date
August 1 5
August 15 20
September 1 30
Lease Terms
3 Years 15
4 Years 10
5 Years 5
3 offices 5
4 offices 10
5 offices 15
$3 millions 25
$4 millions 10
$5 millions 0
2 months 5
3 months 15
4 months 25

Deposit Required
4 months 20
5 months 15
6 months 10
7 months 5
Yes 0
No 35

Negotiation Exercise (Office Lease) Payout Schedule - Summary
Item Leasing Officer Prospective Tenant
US$40 0 60
US$43 20 40
US$47 35 30
US$50 50 0
2% 5 20
3% 10 15
4% 15 10
5% 20 5
Move-in Date
August 1 15 5
August 15 10 20
September 1 5 30
Lease Terms
3 Years 0 15
4 Years 10 10
5 Years 20 5
3 offices 15 5
4 offices 5 10
5 offices 0 15
$3 millions 0 25
$4 millions 10 10
$5 millions 15 0
2 months 40 5
3 months 20 15
4 months 0 25

Deposit Required
4 months 10 20
5 months 20 15
6 months 30 10
7 months 40 5
Yes 50 0
No 0 35
Total – Range 20 - 265 30 - 245

11.3 Business Partnership
You are about to expand your own language training business ABC English from the US into
Italy. An Italian businessman Giovanni from Milan contacted you proactively and wants to start
a business of his own while leveraging on your name brand and published course books and
video recordings.
There will be too much of risk for you to start your own office in Italy since you have limited
local knowledge and no business contacts. You also don’t have the substantial financial
resources required for such an endeavor. Hence you would like to establish a mutually beneficial
partnership with Giovanni.
Task Summary
Negotiation Category:Integrative (for the purpose of this exercise)
Negotiation Subject: Terms of Business Partnership
Role-play: Yes (ABC English vs. Giovanni)
Information-Exchanging:
1) Share information strategically to find common ground, build trust and
facilitate a win-win situation
2) Do not share any specific payout points with each other
2) Score higher on a combined basis based on payout schedule for each
party
3) Be creative and explore all other unlisted possible ways to maximize
combined profits

Negotiation Mix (for illustrative purposes)
- Initial Investments Allocation
o 0-50% for ABC English; 100%-50% for Giovanni
- Profit Allocation
o 20%-50% for ABC English; 80%-50% for Giovanni
- Business Entity
o Joint Branding
o Independent Branding
- Teachers (agreement can include one or more choices - results can be cumulative)
o Recruitment
o Training
o Certification
- Course Book File Release
o Yes or No
- Course Book Printing
o Local Printing in Italy or not
- Marketing
o Joint
o Independent
- Admin Support
o Headquarters vs. Local
- Shared Website and Email
- Future Expansion to Other Cities in Italy
- Exclusivity Terms
o Yes or No

Negotiation Exercise (Business Partnership) Payout Schedule – ABC English
Item ABC English
Initial Investments Allocation
0% from ABC English 60
Profit Allocation
20% for ABC English 10
Business Entity
Joint Branding 20
Independent Branding 15
Teachers
Recruitment 0
Training 10
Certification 5
Subtotal – Maximum (Cumulative) 15
Course Book File Release
ABC Releases Files 5
ABC Does not Release Files 15
Course Book Printing
Local Printing in Italy 25
No Local Printing 0
Marketing
Joint 5
Independent 20
Admin Support
U.S. 5

Local - Italy 15
Shared Website and Email
Yes 15
No 0
Future Expansion to Other Cities
in Italy
Yes 20
No 5
Exclusivity Terms
Yes 40
No 0
Total - Range 280

Negotiation Exercise (Business Partnership) Payout Schedule – Giovanni
Item Giovanni
Profit Allocation
Business Entity
Joint Branding 20
Independent Branding 5
Teachers
Recruitment 30
Training 15
Certification 15
Subtotal – Maximum (Cumulative) 60
ABC Releases Files 25
ABC Does not Release Files 0
Local Printing in Italy 20
No Local Printing 5
Marketing
Joint 25
Independent 5
Admin Support
U.S. 10

Local - Italy 20
Yes 15
No 5
in Italy
Yes 5
No 10
Exclusivity Terms
Yes 15
No 20
Total - Range 310

Negotiation Exercise (Business Partnership) Payout Schedule – Summary
Item ABC English Giovanni Combined
0% from ABC English 60 30 90
Subtotal – Maximum 60 45 90
Profit Allocation
20% for ABC English 10 50 60
Business Entity
Joint Branding 20 20 40
Independent Branding 15 5 20
Teachers
Recruitment 0 30 30
Training 10 15 25
Certification 5 15 20
Subtotal – Maximum (Cumulative) 15 60 75
ABC Releases Files 5 25 30
ABC Does not Release Files 15 0 15
Local Printing in Italy 25 20 45
No Local Printing 0 5 5
Marketing
Joint 5 25 30
Independent 20 5 25
Admin Support
U.S. 5 10 15

Local - Italy 15 20 35
Yes 15 15 30
No 0 5 5
in Italy
Yes 20 5 25
No 5 10 15
Exclusivity Terms
Yes 40 15 55
No 0 20 20
Total - Range 280 310 255 - 520

11.4 Business Combination
Your financial advisory business New Horizons is growing fast but the competition is fierce.
You believe that in order to firmly secure your market share and continue the growth, you need
to combine your business with a similar sized or bigger company in the same sector but with
minimal overlapping customers or business lines. One of the potential merger candidates is BH
Advisory. They focus on west coast customers while you focus on east coast. They focus on
selling stocks while you focus on fixed income securities. They are more profitable and have
acquired some small businesses in the past.
Task Summary
Negotiation Category:Hybrid (for the purpose of this exercise)
Negotiation Subject: Terms of Business Combination
Role-play: Yes (New Horizons vs. BH Advisory)
Information-Exchanging:
1) Share information strategically to find common ground, build trust and
facilitate a win-win situation while maximizing your own points
2) Do not share any specific payout points with each other
2) Score higher on a combined basis based on payout schedule for each
party while striving for a high score for yourself
3) Be creative and explore all other unlisted possible ways to maximize
joint benefits as one combined entity going forward

Negotiation Mix (for illustrative purposes)
- Maximize Deal Synergies - Projected Technological Investments
o New Horizons Solely: $1-3 Millions
- Maximize Deal Synergies - Conflicting Clientele Focus
o Institutional Clients
o Retail Clients
- Maximize Deal Synergies - Conflicting Geographical Markets Focus
o East Coast
o West Coast
- Maximize Deal Synergies – Non-Conflicting Geographical Markets Focus
o Expansion into Japan
o Expansion into Mexico
- Economics - Currency
o Cash
o Stock
o a Combination of Cash and Stock
- Economics - Total Transaction Value
o $10-$15 Millions
- Payment Timing
o All Upfront vs. Milestone Payments over Three Years
- Key Employee Retention Plans
o Number of Key Employees to be Retained
o Incentive Packages (Options & Bonuses)
- Exclusivity During Due Diligence Period
o Yes vs. No
- No-Solicitation of New Offers Between Transaction Announcement Date and Closing Date
o Yes vs. No
- Break-up Fee
o Mutual vs. Unilateral

Negotiation Exercise (Business Combination) Payout Schedule - Summary
Item New Horizons BH Advisory Combined
Maximize Deal Synergies -
Projected Technological
Investments
$1 MM from New Horizons 60
$2 MM from New Horizons
$3 MM from New Horizons

Manhattan Elite Prep Notice Negotiation Decision Chapter 9 11 end

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