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Fiji Versus FIJI Negotiating Over Water Case Solution
When FIJI Water began its operations in 1995, the government gave a 13-year tax holiday to the company thus helping it to expand its operations swiftly. In 2006, two years were left in the tax holiday of the company but in 2008, the government, without informing the corporation imposed a tax of $.20F per liter of water. In reaction, the company threatened to shut down its operations, alarming the government into withdrawing the tax.
Following questions are answered in this case study solution
In the negotiations between FIJI Water and the Fiji government over the proposed tax increase on water extraction, which party is in a stronger position? Why?
In what ways can each party leverage power to force a deal on favorable terms? Provide examples of power-based moves that each party could employ.
FIJI Water relies on the Fijian government to access Fijian Water. How can the company build a trusting relationship with a government that has been unstable and is likely to continue being unstable?
Suppose that just after the tax increase on water extraction was announced, you were hired to provide professional negotiation advice. What advice would you give to FIJI water? What advice would you give to Fijian government?
Case Analysis for Fiji Versus FIJI Negotiating Over Water
FIJI Water’s shams were verified unsuccessful, nevertheless, when the company ineffectively claimed to shut down another time in 2010, the tax was cut down to $.15F per liter tax. This time the regime did not back down thus in the negotiation process, the Fiji government came out with a stronger force. The FIJI Waters shut down its operations by removing 400 employees from their jobs and discarding various other humanitarian projects. This act made government’s position even more strong. However, FIJI waters became prominent during the negotiation phase when it reopened its operations only after one day of shutting down. The government had endangered to take back FIJI Water's rights to extract water from wells, and then the company was offered international competitors in the water market.
FIJI Water’s robust arms reaction did nothing to control the rising pressure. Threatening to shut down the plant every time the government does something, FIJI Waters does not like it as an imprudent and harmful tactic. In reaction to the standoff, the company’s position became weaker and weaker with the passage of time and the government’s position became strong because the state knew that if it places too much pressure on the company, it will eventually shut down all of its operations permanently. Thus, with the increase of tax, government’s position became stronger which could be controlled only if FIJI Waters took some feasible steps well before time.
2. In what ways can each party leverage power to force a deal on favorable terms? Provide examples of power-based moves that each party could employ.
To reach a settlement on favorable terms, both the parties must clearly define their walk away point and the target price. This process is known as bidding, and if not managed effectively, the whole negotiation process might become a flaw. Following are the power moves that can allow both the parties to reach some useful settlement that would be in the best interest of the government as well as the company.
First of all, both the parties must share useful information with each other. It will help them to build trust and understand the situation from each other’s point of view. However, all the confidential information must not be shared. Only the data that would aid the negotiation process must be shared to make sure the process takes place smoothly.
FIJI Waters, as well as the government, must rank their priorities and then make decisions accordingly. For instance: water extraction, bottling, shutting down and getting the tax waiver are all different options available to the company. On the other hand, alternate sources, revenue generation and tax imposition are the priorities of government. The costs and benefits of each position must be weighed so that right decisions can be taken.
Both the parties must also define their BATNA carefully so that the negotiation process goes in their favor.
FIJI Waters as well the government must make sure that they have enough power to mobilize resources that can then be used in the negotiation process. To actualize this power, strategy development must be done from a wider perspective.
3. FIJI Water relies on the Fijian government to access Fijian Water. How can the company build a trusting relationship with a government that has been unstable and is likely to continue being unstable?
The first step that FIJI Water Company can take to establish a healthy relationship with the government is through creating a community action group. This group will consist of key participants from the community users that will meet at regular intervals and would take the responsibility of reaching the government. The purpose of this group will be to present demands of the community to the government and to reach a feasible solution. The secondary aim will be to endorse schemes to the FIJI Water Foundation for the improvement of FIJI. Achievements involving the latter will make the primary goals much more likely.
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