"Peru's Bicentennial Year: 200 years of Independence".

BUSINESS SCHOOL
INTERNATIONAL BUSINESS AND
ADMINISTRATION

THEME: "Case analysis: The Warehouse"

Course:
Negotiation and Conflict Resolution

Teacher:
Valdivia López, Lizardo

Members:
Alvarado Cabello, Katherine - N00189753
Evangelista Magariño, Yulma Naymi - N00201862
Márquez Salas, Vivian Lizeth - N00105623
Ramos Chipana, Gabriel - N00208954

Lima - Peru 2021

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ATION

THE STORE

Juan and Pedro are two coworkers who have maintained a cordial relationship in their work activities. Both are
employees of the warehouse department, which, in turn, is part of the logistics management of a manufacturing company
under the direction of Engineer Roberto Fuentes. Logistics management is divided into three departments: procurement,
warehousing and distribution. The warehouse department is in charge of Engineer Marco Ruíz, who has to maintain the
environment and inventory in optimal conditions. Juan is in charge of the primary warehouse and has the task of
receiving raw materials purchased by the procurement department for proper storage. Pedro, on the other hand, works in
the finished goods warehouse and his role is to store production and deliver it to the distribution department for shipment
to customers.

Each department works under objectives and receives commissions that are distributed by order of Engineer Roberto
Fuentes in case they reach the objectives, reduce losses and optimize time under the Just In Time philosophy. For this
month, the objective was to save $5,000 in shrinkage throughout the warehouse, in addition to the objectives set for the
previous month. It is known that the shrinkage of each raw material generates a $200 loss for the company and the
shrinkage of each finished product generates a $600 loss.

Logistics management determined that Juan's team has a goal of keeping a maximum of 15 raw materials in shrinkage per
month (a number within expectations) and for every shrinkage saved, below that margin, his team will split an additional
$50. For Pedro's team, a maximum of 10 finished products in shrinkage per month (a number within the expected range)
was set and for each shrinkage saved, below that margin, his team will receive an additional $150 to share. At the end of
the month, if the department exceeds the overall savings goal (regardless of individual team results), everyone will share
an additional $500 success bonus.

Both are constantly working on the organization of their warehouses and to meet their objectives they must optimize the
space allocated and the time their products spend in the warehouse. It is not in anyone's best interest to lose space and
keep products longer than they should because the shrinkage statistic increases as a function of space and time. Marco
also has his objectives as a manager and these consist of keeping shrinkage below the maximum allowable limit by
earning an additional 20% of each team's commissions for exceeding the month's objectives as usual.

Both warehouses are located in the same space separated only by a yellow line. The sales situation has been difficult this
month and, due to a lack of communication between sales and logistics, more raw materials have been purchased than the
projected sales for this month. To complicate the situation, production had not slowed down and many finished products
had not been ordered for shipment to customers. In this situation, Pedro's warehouse has a lot of products to store and he
requested Marco's permission to temporarily use Juan's space on the grounds that "Juan's warehouse does not have as
much inventory as his" and he has estimated that he needs half of his colleague's space if he wants to achieve his goal.
Marco, faced with the urgency of keeping the finished products in good condition, agrees to Pedro's request and, before
he can inform Juan of the decision, Pedro has already used more than 50% of his partner's space. When Juan observes
this, he complains to Pedro about his actions, who replies that he had Marco's authorization for the use of his warehouse.
Juan tells him that it is not possible to use the space because the last purchase orders that were placed before production
slowed down due to the lack of sales have yet to arrive and that the reduction of his warehouse increases the risk of
increasing shrinkage or not reaching his targets for the month, thus hurting his team's commission.

When Juan communicates with Marco, he tells him of his discomfort, however, he receives a formal document in which
he is required to cede the space to Pedro because it is urgent, since the finished product has a higher value than the raw
material.

Juan warns about the possible consequences to the detriment of his team and leaves uncomfortably, thinking that it was
an unfair decision because "the commissions on finished products are higher and that suits the boss". With the perception
of injustice, he requests a meeting with the logistics management in charge of Engineer Roberto Fuentes, his boss
Engineer Marco Ruiz and his colleague Pedro.
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Case analysis: The Warehouse

1. Integrative negotiation proposal for the parties.

It is important to identify that in any negotiation process there are different scenarios, such as "win-win" in all the parties
involved in this negotiation, where this includes knowing the interests of both parties, which allows the information of
value of each party involved to be shared with the other party, as this is the only way to know more deeply the real
interests of the other individuals (Ceupe, S.).This is the only way to know in greater depth the real interests of the other
individuals (Ceupe, S.F.). This is a negotiation strategy that allows boosting the profits as well as the interests of the
parties involved in order to achieve a balanced and equitable negotiation for all (López J., 2019).

In the present case, the warehouse manager, who is Ing. Marco Ruiz, should have applied the Diplomatic style, since it
refers to finding the break-even point based on neutrality, both for the primary warehouse and the finished goods
warehouse. This corresponds to the fact that the diplomatic style is oriented to find mutual purposes by finding equity and
equality in the parties, in order to find the interests of each one (Rojas B., 2020). However, in the present case, Marco
applied the imposing style, since by making decisions that favored Pedro, they negatively impacted the other party
involved, which is Juan. Given that the imposing style is characterized by being firm and seeks to win over the other
party since it is sure of the superiority it believes it has (Rojas B., 2020).

Building on these concepts, the most important steps and main integrative negotiation strategies are fourfold: 1) identify
and define the problem, 2) understand the problem and bring interests and needs to the table, 3) generate
alternative solutions to the problem, and 4) evaluate those options and select among them (Lewicki R.; Saunders D.;
Barry B., 2012).

1) Identify and define the problem

This step is one of the most cumbersome in the process of negotiation strategies, since in many cases the parties involved
do not agree, each focusing on their positions, but not on their interests, which complicates the problem itself, since there
is no neutrality and starts a conflict. That is why it is of utmost importance to identify the problem at the beginning, so
that it does not transcend and have consequences in the future, because what must be taken into account is that all parties
involved stop defending their positions and prioritize their interests by exposing it before all parties, reaching a common
agreement (Lewicki R.; Saunders D.; Barry B., 2012).

In the case of "The Warehouse" it can be seen that Eng. Marco, being in charge of the storage department, did not know
how to identify the problems that arose in the raw material and finished product warehouse, possibly due to poor
communication with his staff or his lack of leadership.This was possibly due to poor communication with his personnel
or his lack of leadership, since one of the parties involved, in this case Juan, did not inform him that these areas were
already reserved for the raw material that was going to arrive, giving priority to the finished products from Pedro's
warehouse to occupy the space that corresponds to Juan. Therefore, it would be important that Marco, as Juan and Pedro's
direct boss, can hold more frequent meetings where both Pedro, Juan and Marco as boss, can have a more assertive
communication where there can be a synchronization between both warehouses, since one operates in parallel to the
other.

2) Understand the problem and bring interests and needs to the table.

This step explicitly requires a lot of capacity in understanding what is outside of personal interests having the wisdom in
understanding the other parties in a negotiation process, as this turns out to be fundamental key to achieve agreement
between all parties involved (Lewicki R.; Saunders D.; Barry B., 2012).
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The communication between the commercial area and the logistic area was bad, since this has generated a higher
purchase of raw material than what was even projected to be sold, and it is at this point where the problem begins in both
warehouses, since if the raw material had been bought in excess, this would be reflected in the amount of shrinkage in
that warehouse, the starting point of the problem that transcends to Pedro's warehouse.This is where the problem begins
in both warehouses, since if the raw material had been bought in excess, this would be reflected in the amount of
shrinkage in the warehouse, which is the starting point of the problem that transcends to Pedro's warehouse, since the
latter is not able to produce the amount of finished products in parallel to the raw material that enters the warehouse.
Marco did not know how to identify the problem, and this generated a conflict that is unnecessary. The solution could
have been to temporarily invest some empty space in the premises or reduce some office space that could be used as a
temporary warehouse, hire more labor or, if there is no space, negotiate with both warehouses so that neither is harmed by
the actions of the other, reaching an agreement and working as a team. In a future case, the inputs to produce the finished
products definitely have to be synchronized with the sales projection, which has not been the case this time. It is
important to identify the type of interest in the case of both, based on this work to achieve those interests in an integrative
way, since it is said that there are types of interests and in the case of both, the interest can be "Substantive interests"
since there is an importance of achieving goals as an objective, and this generates economic achievements for both stores;
and the other type would be "Interests of a process", since in both cases there is on the one hand a distributive competition
which generates a win-lose negotiation, applied by Pedro and Pedro.The other type would be "Process interests", since in
both cases there is on the one hand a distributive competition which generates a win-lose negotiation, applied by Peter
and Marcus, and on the other hand John, who tries to make his voice heard and negotiate his interests, although the latter
was unsuccessful (Lewicki R.; Saunders D.; Barry B., B.; Lewicki R.; Saunders D.; Barry B., B.; Lewicki R.; Lewicki R.;
Saunders D.; Barry B.).Saunders D.; Barry B., 2012).

3) Generate alternative solutions to the problem

This stage is the one that requires the most creativity to be able to put on the table the explanation of the problem and the
interests of each one, list them, evaluate them and select one of the alternatives. At this stage there are two methods,
where in one you can "Create options. Generate alternate solutions by redefining the problem or set of problems" by
revisiting the list of interests again until balanced alternatives are obtained for both cases; and the other method is to "take
the problem as is and generate an extensive list of options" that they are presented with and can choose from; however, it
is also possible for both methods to be used (Lewicki R.; Saunders D.; Barry B., 2012).

In the case of "The Warehouse", Marco could have applied the first method by applying the dimension " Achieving
underlying interests vs. replace underlying interests", since this dimension achieves to satisfy the interests of both parties
finding balance and equity; in addition to saving costs, since they will save shrinkage in both warehouses and can obtain
the extra bonuses for the achievement of their objectives (Lewicki R.; Saunders D.; Barry B., 2012).

4) Evaluate these options and select among them

This stage is to thoroughly analyze all those options that were put on the table and choose the best ones, and it is
important to comply with the step by step: "definitions and standards, options, evaluation and selection" so that the best
alternative can then be chosen by reaching a consensus, thus complying with some guidelines. For this case, it is proposed
to use the guideline "Evaluate solutions based on quality, standards and acceptability", since it indicates that choices
should be made based on criteria, grounded and achievable proposals; also, seek background information and any other
information that may be useful to decide what the solutions would be for all parties involved in an equitable manner
(Lewicki R.; Saunders D.; Barry B., 2012).

2. Analysis of communication styles and the degree of power of the parties.

o Communication style:

Assertive - Juan
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The assertive communication style is the most appropriate in the workplace, the person with assertive communication
usually communicates in an honest and transparent manner, solves problems as soon as possible before they become
bigger, they are willing to ask for help when necessary and know how to listen to others(Rigby A, 2020).

Indeed, in the case of "The Warehouse" we can see that Juan had an assertive communication with both Pedro and
Marcos, because he exposed to Pedro at the time the disagreement he was in for having used the space that corresponds to
his work area, without even having mentioned it to him beforehand. On the other hand, Juan also communicates with
Eng. Marco, who is his direct boss, pointing out his discomfort; however, Marco is in Pedro's favor. Not finding a
solution to this conflict, Juan requests a meeting with the logistics management in charge of Engineer Roberto, Marco and
Pedro. In this case, it is specified that Juan tries to solve the problem as soon as possible, trying to dialogue with all the
corresponding people.

Aggressive - Pedro and Marco

Aggressive communicators find it difficult to respect limits, take things by force, and encourage positive behaviors. So in
order to achieve proper communication with such people managers must state the rules about what is right and what is
wrong(Rigby A., 2020).

In general, when people feel pressured, they tend to act hastily without considering the consequences that this action may
generate in the future. This is what happened with Pedro and Marco when they were under pressure to save on finished
product shrinkage, which would be a loss for the company. Marco makes the decision to accept Pedro to occupy Juan's
warehouse space, without considering that it would negatively impact Juan and his team in his area.

o Type of power in the negotiation:

The power of negotiation is to give in on some points, allowing better benefits and thus to make the operation, so that
both parties are satisfied. In the case of the warehouse, several types of bargaining power can be observed, analyzing each
point and obtaining a synthesis; thus managing a negotiation in the future.

Peter - Coercive Power

He used coercive power with Juan and Marco; to Marco he indicated that they would not reach the goals and Juan left
him aside acting in a bad way without consulting the needs of his area and going over his head. He also acted in a brusque
manner by giving Marco's order to use Juan's area instead of being more empathetic.
The ability to be persistent about something is much more emotional than logical. We all know that persistence is key to
achieving success in whatever area we choose (Covette, 2011).

Marco - The Power of Position

I execute the power of the position; because based on his authority over the storage area he made a decision without
consulting a manager of lower hierarchy; generating a conflict between the parties involved.
Position power is the result of a manager's position within the organization (Covette, 2011).

John - The Power of Persistence

He obtained the power of persistence, because his ideas were clear at the moment of expressing them, remaining firm
until the end. He spoke with Marco, believing he was asserting his right because it was the area he was in charge of and
he also needed that space; therefore, since he did not obtain a solution, he opted to wait and go to a higher authority than
Marco to solve his problem.
Not giving up in the face of failure and trying again and again is the key to success (Covette, 2011).
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3. Negotiation tactics

Tactics at the beginning Tactics in intensification Closing tactics

John Start with the big and small issues. Association Small requests.

Pedro Start with the big and small issues. Closing concessions.
Association

Marco Tentative resolution. Extrapolation Pressure in time.

The negotiation tactics are discussed below after analyzing the "EL ALMACEN " case.

Juan: Undoubtedly, Juan was the most harmed according to the case. However, Juan should have started with the initial
negotiation tactic "Start with the big and small issues", since the finished products were already in his field, what was left
was to comment to Pedro that the space he had just occupied was already destined for the entry of more raw material and
from there, start negotiating little by little. Likewise, Juan should have used the intensification tactic "Association", since
this consists of associating a point related to the conflict, in this case each one needed space for the storage of the
products and with a good communication there would be greater possibilities of a solution.

Finally, Juan should have used the closing tactic "Small Requests", this is when it comes to acquiring some request,
where Juan could have perhaps negotiated some economic or in-kind benefit, in his favor, and thus, Pedro would not have
problems with the finished products and possibly would have given in with the request.If Juan asks for too many requests,
the deal could be broken.

Pedro: According to the case, it can be said that Pedro started the negotiation using unfair tactics, he should have used as
an initial tactic the "Start with the big and small issues" by commenting on the problem he had, in this case, the lack of
space for the storage of finished products and its consequences. Likewise, Peter should have used the intensification tactic
"Association", since both he and John have a common point related to the conflict, and this would surely have generated
greater possibilities for a solution.

Finally, Peter had to make use of the closing tactic "Closing concessions" where in order to accelerate the negotiation he
had to give up some economic or in-kind benefit, in order to achieve a higher value interest for John.

Marco: After the case, it should be noted that Marco was the most benefited, with an authoritarian leader's behavior,
where he did not give importance to the feeling and emotion of the moment that Juan felt. Marco should have used
"Tentative Resolution" as an initial tactic, since it conveys the intention of reaching an agreement, allowing the parties to
find a win-win solution and not give rise to dishonest win-lose tactics that only generate a toxic work environment and a
lot of discomfort among employees.
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As an escalation tactic, he should have used "extrapolation", as this consists of having solid information and arguments
for the parties to draw their own conclusions and arrive at the desired results. Marco should have had the information
from both Juan and Pedro and from there generate the negotiation.
To conclude, Marco should have used the closing tactic " Pressure on time", as this is defined when it is identified that
there is a rush to finish the negotiation. In this case, Marco should prioritize the welfare of the raw material and finished
products, as he now has the information from both parties and it will be the best decision for everyone and the company.

All negotiation tactics should be applied considering the style and character of each person, taking into account their
interests, through solid support with a rational and emotional support where win-win negotiation should prevail (Budjac,
2011).
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References

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Ceupe (S.F.). Retrieved July 08, 2021, from: https://www.ceupe.com/blog/negociacion-distributiva-e-integrativa.html

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Lopez J. (2019). Retrieved July 08, 2021, from: https://ojs.ehu.eus/index.php/CG/article/view/21332

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