Learning Objectives

• 1. To understand the interconnectedness between psychology and entrepreneurship

• 2. To introduce different cognitive biases confronted by an entrepreneur

• 3. To learn about different types of personalities and attitudes of entrepreneurs

• 4. To familiarize with different sets of emotions of an entrepreneur

• 5. To recognize the role of an entrepreneurial mind-set, and how it becomes a differentiating factor for an entrepreneur

Opening Scenario: Apple and US Book Publishers

The US Department of Justice (DOJ) sued Apple and five major US publishers for colluding to raise the prices of ebooks. Three of the publishers settled the suit; two others and Apple were unwilling to settle.

The publishers had negotiated a new business model for ebook pricing with Apple as it prepared to launch the iPad: in exchange for a 30 percent sales commission, Apple would let the publishers set their own prices for ebooks. For the publishers, this pricing model appeared to be a vast improvement on their wholesaling arrangement with Amazon. After at least one of the publishers threatened to delay the release of its digital editions, Amazon reluctantly replaced its flat $9.99 price for ebooks with Apple’s model, and prices rose industry-wide to about $14.99 on average.

The DOJ’s lawsuit suggests that the negotiators and attorneys involved may have neglected to thoroughly analyze whether their agreement would truly create value for consumers and thus whether it fell within the parameters of US antitrust law. In the flush of hammering out a deal that appears to create synergy for everyone involved, negotiators sometimes neglect to consider how their agreement could affect outsiders, an oversight with ethical and legal implications.

Understanding Interconnections between Psychology and Entrepreneurship

Entrepreneurship has a multidisciplinary perspective. Disciplines such as psychology, economics, sociology and anthropology contributed to the development of the field of entrepreneurship during the last years. Psychology is one discipline that has had a strong influence on entrepreneurship. Essentially, psychological characteristics as demonstrated by the entrepreneur play an important role in entrepreneurship. Major scholars, such as Schumpeter (1934) and later McClelland (1967), have contributed to the psychological perspective particularly in terms of individuals and their behavior also; economic and strategic theories have been used to understand entrepreneurship (Kirchhoff, 1991).

Learning Objectives

• 1. Understand the importance of negotiation for startup ventures

• 2. Familiarize with historical developments of negotiation

• 3. Understand factors that impact the effectiveness of negotiation at individual and group levels

• 4. Understand the difference between integrative and distributive negotiation

• 5. Familiarize with outcomes of poor negotiation

Opening Scenario: Disney’s Purchase of Lucasfilm

Walt Disney Company made a surprise announcement that it was acquiring Lucasfilm. Lucasfilm was founded by George Lucas who owned the famous Stars Wars brand. Walt Disney agreed to pay US$ 4.05 billion split evenly between stock and cash for the deal. Lucas was the sole shareholder of Lucasfilm.

The acquisition bolstered Disney’s status as a leader in animation and superhero films. It was a beneficial deal for Disney as the company had rights to Star Wars and afforded them the opportunity to reap benefits from related merchandizing and media business. Disney promised to begin producing new Star Wars films every two to three years. The acquisition included a great deal of negotiation and even included a detailed script for three upcoming Stars Wars films.

The 68-year-old Lucas founded Stars Wars, and he had extensive negotiations with Disney before he settled for terms of purchase. After the purchase, it was agreed that Lucas will serve as a consultant for the acquired Star Wars brand. Lucas had been planning to retire for years. In a past interview with the Times, Lucas revealed that he was tired of the pressure of living up to the expectation of Star Wars fans.

According to Walt Disney Chairman Robert Iger, a famous negotiator in Hollywood, he and Lucas conducted the negotiations personally. Speaking of Lucas’ decision to hand over his creative legacy to Disney, Igor told, “There was a lot of trust there.” The acquisition of Star Wars by Disney illustrates the importance of building trust through successful negotiations when dealing with a powerful counterpart.

Startup Ventures and Negotiation

Startups are business ventures in their nascent stage and do not have a fully developed business models or other related strategic frameworks. Such ventures often lack funding and tend to rely on external funding to take their specialized products or services to market.

Learning Objectives

• 1. To become familiarized with the barriers to entrepreneurship

• 2. To highlight the major challenges and issues related to conflict

• 3. To understand the nature and sources of conflict in an entrepreneurial venture

• 4. To identify the types of conflicts observed in an entrepreneurial venture

• 5. To highlight approaches to conflict management

• 6. To learn the ways to manage conflicts in an entrepreneurial venture

Learning Objectives

• • Learn the importance of alternatives in negotiation

• • Understand the importance of listening

• • Explore techniques for effective listening

• • Learn about the importance of power and how to enhance it

• • Understand how to say “No” in a productive way

Opening Profile: Walmart Vendors

Walmart vendors are trained to treat their vendors in a variety of ways, depending on where you fit in their plan. This case shares the story of a vendor called Sarah who negotiated a win-win outcome with Walmart. Walmart, the world’s largest retailer, sold $514.4 billion worth of goods in 2019. A partnership with Walmart is either the Holy Grail or the kiss of death, given the organization’s single-minded focus on EDLP (everyday low pricing) and its ability to make or break suppliers. However, one’s perspective may make a difference.

Sarah Talley (owner of Frey Farms) acquired a deep understanding of the Walmart culture while finding “new money” in the supply chain through innovative tactics.

For example, Frey Farms used school buses ($1,500 each) instead of tractors ($12,000 each) as a cheaper and faster way to transport melons to the warehouse.

Talley also was skillful at negotiating a coveted co-management supplier agreement with Walmart, showing how Frey Farms could share the responsibility of managing inventory levels and sales and ultimately save customers’ money while improving their own margins.

Sarah Talley’s key negotiation principles:

When you have a problem, when there’s something you engage in with Walmart that requires agreement so that it becomes a negotiation, the first advice is to think in partnership terms and really focus on a common goal, for example, getting costs out and asking questions. Don’t make demands or statements. Rather ask if you can do this better. If the relationship with Walmart is truly a partnership, negotiation to resolve differences should focus on long-term mutual partnership gains.

Don’t spend time griping. Be problem solvers instead. Approach Walmart by saying, “Let’s work together and drive costs down and product it so much cheaper you don’t have to replace me because if you work with me I could do it better.”

Learning Objectives

• • To understand what is culture and how does it impact negotiations

• • Evaluate the differential impact of cross-cultural negotiations on outcomes

• • Understand the role of communication in negotiations

• • Get familiar with self-serving biases in cross-cultural negotiations

• • Evaluate how emotions shape outcomes of negotiations

Opening Profile: The Free Trade Agreement between Canada and United States

On October 3, 1987, the Free Trade Agreement (FTA) was signed by representatives of Canada and the United States after two strenuous years of intense negotiations. Canada could be described as a medium-sized economy. Its population is one-tenth the size of the United States, which is considered an economic superpower in comparison. More than 75 percent of its exports go to the United States making the United States Canada’s prime trading partner. By contrast, the United States was exporting less than 20 percent of its products to Canada.

A Royal Commission concluded that Canada’s only means to achieve this stability was to engage in an open free trade partnership with the United States.

The problem was that the United States wasn’t especially interested in such a free trade partnership agreement.

The first step that Canada took was in the form of preparation by developing a succinct plan. A chief negotiator, Simon Reisman, was appointed by the Canadian prime minister himself. He established an ad-hoc organization called the trade negotiations office which reported directly to the Canadian Government Cabinet and had access to the highest levels of bureaucracy. It established in no uncertain terms their negotiation goals and objectives which included a strong dispute resolution mechanism that the Canadians felt was vitally important to their success.

In contrast, the United States did not consider the FTA to be especially important and let Canada do all the initial work. The only reason why the US Congress even considered the FTA proposal was that they liked the idea of a bilateral approach to trade and were tired of the previous mechanism that failed to settle a host of trade dispute irritants between the two countries known as GATT.

Strong differences in interests and approaches dogged the negotiations.

Learning Objectives

• 1. To understand the concept of entrepreneurship

• 2. To highlight the factors responsible for the wider acceptance of entrepreneurship in the twenty-first century

• 3. To appreciate some prominent entrepreneurs and their entrepreneurial contributions

• 4. Learn about entrepreneurial intention and the resulting entrepreneurial ventures

• 5. To introduce sustainability entrepreneurship that solves societal issues

Learning Objectives

• 1. To understand the importance of distinction between a meeting and a negotiation meeting

• 2. What are disastrous outcomes and how to manage them

• 3. To understand the art of probing in negotiation

• 4. Evaluate the importance of timing in making offers

• 5. Overview concepts of empathy, trust and irrationality. Study their importance in the context of negotiation

Opening Profile: Starbucks and Kraft Foods

Back in 2013, a three-year negotiation and dispute between Starbucks and Kraft Foods over the distribution of Starbucks packaged coffee in grocery stores was finally resolved. On November 12, 2013, an arbitrator determined that Starbucks had breached its agreement with Kraft and ordered the coffeemaker to pay the food giant $ 2.75 billion.

After negotiating an agreement in 1998, Kraft began selling Starbucks packaged coffee through grocery stores. In 2010, with sales of its packaged coffee reaching about $ 500 million annually, Starbucks offered to buy Kraft out of the contract for $ 750 million. Starbucks wanted greater flexibility to sell the single-serve coffee pods that were hot at the time. The company’s agreement with Kraft limited Starbucks to selling pods that worked only in Kraft’s Tassimo machines.

Kraft objected to the deal termination, but Starbucks broke off the business relationship, nonetheless. Since then, Starbucks’ share of single-serve pod market and grocery-store products has grown significantly. The parties’ dispute over Starbucks’ termination of their partnership moved to arbitration when the two sides were unable to settle it on their own.

The business dispute illustrates how the fluid nature of marketplace trends can cause negotiated business agreements to become undesirable over time. In their original agreement, Kraft and Starbucks would have been wise to agree upon set times for renegotiation, during which they would have had leeway to revisit existing deal terms in the face of changed economic and industry conditions. They could also have negotiated conditions for ending the agreement early, such as cancellation penalties and other forms of compensation.

Sometimes you and your counterpart can draft the agreement on your own. Larger agreements and dispute settlements, on the other hand, typically have legal provisions drafted by a lawyer or a third party.

It gives me great pleasure to write the foreword to this excellent book by Dr Vimal Babu and Dr Robert Hisrich. I have known both authors and particularly Dr Babu through their extensive academic and research endeavors, as well as their international consulting work.

When I look back on my career, I realize that a person’s potential to solve problems and overcome obstacles is not in itself enough to make a contribution. Rather, to leave a mark, this potential must be harnessed and given expression through effective human behavior. After more than two decades of professional experience, I am convinced that good negotiation is a particularly important aspect of human behavior that can favorably influence the outcomes attained by an individual.

Moreover, it doesn’t matter whether you’re negotiating with a person from a different field or industry, what matters is how you structure your negotiation to meet your needs. This is particularly true for entrepreneurs. Entrepreneurs have to deal with a variety of different stakeholders in the context of their work. As a result, they have to be adept at negotiating when they collaborate with others and need to accomplish their goals through the involvement, commitment and engagement of others. Entrepreneurs are savvy negotiators when they can persuade, influence and convince people with enhanced trustworthiness, transparency and authenticity in their actions and responses.

There is a lot in this book to recommend to readers. There are chapters on the basics of entrepreneurship, conflict management and communication, as well as the psychological and behavioral dimensions of being an entrepreneur. There are also chapters on negotiation and entrepreneurial ventures that cover topics such as the process of negotiation, considerations for entrepreneurs who are women and how cultural diversity affects how entrepreneurs negotiate. In general, the authors have done well in selecting the most essential aspects of negotiation in the context of entrepreneurship with a focus on evidence-based discussions, real-life examples, case scenarios and thought-provoking questions as well as a rich reference list of readings to follow up with.

It’s clear that both authors have a wealth of knowledge that they can draw up.