Business Negotiation

Full Answer Section

     

2. Background of the Starbucks and Kraft Dispute

In 1998, Starbucks and Kraft entered into a licensing agreement. Kraft would manufacture and distribute packaged Starbucks coffees in grocery stores, leveraging Starbucks' brand recognition and Kraft's extensive distribution network. This partnership proved fruitful for both companies, with Starbucks benefiting from increased brand awareness and market penetration, while Kraft saw a surge in sales within the premium coffee segment. However, by 2 010, the landscape had shifted. Starbucks, emboldened by its growing success and desire for greater control over its brand, saw the packaged coffee business as an integral part of its overall strategy. Kraft, on the other hand, viewed the partnership as less strategically important as it focused on its core grocery business. These divergent goals sowed the seeds of discontent.

3. Literature Review on Failed Negotiations

Understanding the factors that contribute to failed negotiations is crucial to analyzing the Starbucks-Kraft case. Lewicki et al. (2015) identify several key elements that can lead to negotiation breakdowns. These include:

• Lack of trust and open communication: When parties harbor suspicion or withhold information, it hinders collaboration and makes reaching a mutually beneficial agreement difficult.
• Focus on positional bargaining: When parties take a rigid stance on their initial demands and prioritize winning over finding common ground, it can lead to an impasse.
• Unequal power dynamics: If one party has significantly more leverage than the other, the weaker party may feel pressured to accept unfavorable terms.
• Unrealistic expectations: Parties with overly optimistic goals or a poor understanding of the other side's needs are more likely to be disappointed and walk away from the negotiation.

These factors, when combined, can create an environment where compromise becomes difficult and ultimately lead to a failed negotiation.

4. Analysis of the Failed Negotiation

Origins and Nature of the Conflict The origins of the conflict stemmed from the evolving strategic priorities of both companies. Starbucks, with its increasing focus on the premium coffee experience, viewed packaged coffee as an extension of its brand and a way to reach new customers. Kraft, however, saw the packaged coffee business as a more commoditized product within its broader portfolio. This misalignment of goals created friction. Negotiation Strategies Employed When negotiations commenced, Starbucks reportedly offered to buy out Kraft's stake in the joint venture for $750 million. This offer, likely reflecting Starbucks' desire for greater control, was deemed insufficient by Kraft, who potentially valued the business higher. Kraft then started expressing dissatisfaction with Starbucks' stewardship of the brand, potentially a tactic to strengthen their bargaining position or justify termination of the agreement. Points of Contention Several key points of contention emerged during the negotiation. These included:

• Valuation of the packaged coffee business: Starbucks and Kraft had vastly different estimations of the business's worth, hindering a mutually agreeable buyout price.
• Control over brand management: Starbucks desired greater control over brand image and marketing, which conflicted with Kraft's established approach for its products.
• Termination clause: The specific terms of the termination clause within the original agreement became a point of legal dispute.

5. Consequences of the Failed Negotiation

The failed negotiation resulted in a costly legal battle that dragged on for several years. Impact on Starbucks

• Loss of control: Starbucks lost control over the packaged coffee business during the legal proceedings, hindering its ability to leverage it as part of its overall strategy.
• Financial costs: The legal battle incurred significant legal fees for Starbucks.
• Brand image tarnish: The public dispute potentially tarnished Starbucks' brand image by portraying them as a litigious company.

Impact on Kraft

• Uncertainty and disruption: The legal battle created uncertainty about the future of the packaged coffee business, impacting Kraft's ability to plan effectively.
• Financial costs: Similar to Starbucks, Kraft also incurred significant legal fees.
• Potential reputational damage: Being involved in a protracted legal battle with a popular brand like Starbucks could have negatively impacted Kraft's public image.

 

Sample Answer

   

A Brewing Dispute: Analyzing the Failed Negotiation Between Starbucks and Kraft

1. Introduction

The coffee giant Starbucks and food manufacturing giant Kraft were once locked in a successful partnership, bringing Starbucks-branded coffee to grocery stores across the nation. However, this seemingly harmonious collaboration crumbled in 2010, escalating into a multi-year legal battle. This paper delves into the failed negotiation between Starbucks and Kraft, analyzing the origins of the conflict, the negotiation strategies employed by both parties, and the points of contention that ultimately led to arbitration. We will explore the consequences of this failed negotiation on each company and propose alternative strategies that could have yielded a more positive outcome. Finally, the paper will define the characteristics of a successful negotiation