GSBS6009 Cross Cultural Management Final Negotiation Schedule

Time 16:00 16:45 17:00 17:45 18:00 18:45 19:00 19:45 20:00 20:45 Groups Group 8 will negotiate Group 10 Group 4 will negotiate Group 6 Group 3 will negotiate Group 5 Group 2 will negotiate Group 7 Group 1 will negotiate Group 9

Your Topic and Instructions: oint !enture in China

Common "no#ledge The year is 2012. Chinas continued industrialisation has led to an insatiable demand for coal for electricity production. Coal prices have been soaring and have kept a large amount of small unsafe coal mines in operation. 80% of the 000 fatalities recorded last year occurred in these small mines. The Chinese !ederal "overnment #ants to close the small mines do#n$ ho#ever local communities and regional governments have protected the mines as they offer valuable employment and income to the local economy. %n 200& 'ustralia and China signed a bilateral trade agreement that has opened the #ay for increased collaboration in the mining sector. The bilateral agreement has also emphasised the development of safer mining technology and practice. . (ne of the #orlds biggest coal mining companies$ Fernet Brio has$ over the last 1) years developed a long term relationship #ith $i%an Mining$ one of the largest mining groups in China. They have been collaborating on trade of minerals$ and lately in *oint investments in 'ustralia. 's part of !ernet +rios ,esearch and -evelopment$ it has funded development of a safer coal mining technology at the .niversity of /e#castle. 0i*an 1ining is keen to apply this technology in its mines in China. !ernet +rio and 0i*an 1ining are developing a *oint venture 2345 proposal #hereby they #ill establish large6scale surface coal mines in an e7isting coal field. 0i*an 1ining has en*oyed a close relationship #ith the 8rovincial "overnment #hich has contributed to the 0i*an 1inings success in the region. Currently 90 small underground mines operate in the area$ employing around 9000 #orkers. 8roduction from the region is e7pected to increase from 0.) to 10 million tonnes:year$ but this #ill re;uire ma*or investments in the mines and in the rail#ay system. Current coal prices are very good and are forecast to remain high. 8rofits are e7pected to be in the order of )0million '.-:yr once the mines are fully operational. The intention is that

profits be shared )0<)0$ ho#ever the final split #ill be dependant on the financing arrangements and the risk e7posures. The 8rovincial "overnment is e7pecting from its side that there #ill be minimal *ob losses and that the mining companies in addition to establishing a dedicated track for coal transport$ contribute to the upgrade of the e7isting rail#ay track. These pressures have created tension bet#een the 34 partners. The meeting today is the last chance for 0i*an 1ining and !ernet +rio to agree on ho# to proceed. The meeting agenda lists the follo#ing points for discussion and agreement. =trategy for the closure of small mines Commitment to scholarships for training in mining safety ,ail#ay track upgrade -ivision of profit

For $i%an Minings Management e&es onl&

The 0i*an 1ining company has a stronghold in the province. The company needs to accommodate the 8rovincial "overnments re;uests in order to maintain important "uan7i and also be seen as a company that #ill benefit the region. The biggest problem #ill be the loss of *obs in the small mines. 'lthough these mines are very unsafe$ they offer the only employment in the region. %f 0i*an 1ining and !ernet +rio dont succeed in finding a solution to the loss of *obs the 3oint 4enture #ill be met #ith resistance by the administration and the local population. !urther$ 0i*an 1ining are keen to capture the safer mining technology that !ernet +rio has developed. 0i*an #ould like to have the ma7imum amount of engineers and educated in this technology in order to replicate this in other mining regions of China and abroad. 0i*an 1ining has during previous 3oint 4entures #ith !ernet +rio al#ays had a )06)0 split of the profits based on e;ual investment capital and risk6sharing. %n the current 3oint 4enture$ both companies #ill invest the same amount and thus have an e;ual financial risk$ ho#ever$ 0i*an 1ining have over the years developed "uan7i and close #orking relationships #ith the 8rovincial "overnment. This #ill be at stake if the pro*ect both leads to substantial *ob losses and they obtain less profits to reinvest in industrial pro*ects in the region. (btaining less than )0% of the profits #ill also feel like losing face and becoming a less valued partner in the 3oint 4enture. >ast the financing of the upgrading of the e7isting rail track is something that #ould benefit the region. This #ould create good#ill #ith the 8rovincial "overnment$ increase trade opportunities and lead to economic development in the region and over time create ne# *obs.

Con'idential success ta(le 'or $i%an Mining Closing o' mines and reduced %o(s 20 mines closed ? )00 *obs reduced 6 2) mines closed ? 1000 *obs reduced 6 @0 mines closed ? 2000 *obs reduced 6 90 mines closed 6 @000 *obs reduced 6 Training o' Chinese engineers 1)0 Angineers trained in =afe 1ining Technology 6 20 points 100 Angineers trained in =afe 1ining Technology 6 10 points ) Angineers trained in =afe 1ining Technology 6 ) points 20 Angineers trained in =afe 1ining Technology 6 0 points @0 points 20 points 10 points 0 points

Financing o' upgrade o' the e)isting rail#a& 1) million '.- 6 10 million '.- 6 ) million '.- 6 0 million '.- 6 20 points 10 points ) points 0 points

Splitting o' pro'it !ernet +rio )0% 6 0i*an 1ining )0% 6 )0 points !ernet +rio ))% 6 0i*an 1ining 9)% 6 @0 points !ernet +rio B0% 6 0i*an 1ining 90% 6 10 points !ernet +rio B)% 6 0i*an 1ining @)% 6 0 points ,emove 10 points for every 10% 0i*an 1ining gets less than @)% of profit.