Negotiating G-50 Compressor Rights

This assignment delves into a negotiation scenario within Rig Gear, Inc., where Compressex (the author's division) seeks to manufacture the G-50 compressor from Waterflow. The analysis examines potential conflicts stemming from competition between divisions and the desire for monopoly power over the G-50 compressor. It proposes a strategy involving limited sales restrictions to competitors, allowing Waterflow to maximize profits initially while maintaining competitive advantage in the long run.

Negotiation and Conflict Resolution in Rig Gear Inc.
Business is created with the sole aim of making more profits which will enable them to
have perpetual existence in the market. The success of firms is decided by the strategies they
adopt to help them produce products that meet the customers' needs and ability to reach as many
customers' as possible for high sales. Business competition is high both from the internal and
external environment. The firm must have a competitive edge to enable it to succeed in the
market. Management must lead the business to success by ensuring they reduce competition and
attract a large number of customers. In this paper, I as the manager of Compressex I will try to
identify the strategy to convince my counterpart Michael Harding to give me rights to
manufacture the G-50 compressor and avoid any disputes arising.
Rig Gear, Inc. has problems which are as a result of competition among the different
divisions. All the divisions are independent with managers who can make their decisions. They
are also allowed to sell their products and purchase components they need in their activities from
other divisions. All the departments focus on making profits than the other departments and these
bring troubles in the company. Departments or divisions in the firm are supposed to collaborate
and ensure attainment of the overall goal and objective of the firm. The different departments in
the company are focusing on attaining their goal instead of aligning them to the organization
goal. Therefore, the firm experiences conflicts of interests among the departments as each strives
to get the highest profits.
The G-50 compressor is the issue that is bringing disputes between my division Compressex
and Waterflow as each we want to manufacture it to get more profits. Michael Harding
department uses compressors in the production of products used in water injection and drilling
operation, and this was the reason for investing US$1.5 million in the development of the

compressor. Simon Vickers department initially did not want to carry out the development of the
G-50 compressor as they thought it wouldn't be commercially viable. The provided chart shows
that Waterflow won't make any net profit in 2-year lifecycle if it produces the compressor and
sells it internally to the divisions of Rig Gear. However, the reason for Michael is reluctant to let
the manufacture of the compressor to be in the hands of Compressex is to avoid it getting into the
hands of its competitors.
The fear of waterflow is valid as competitors' access to the G-50 compressor may use it to
produce more competitive products. Therefore, competitors must be stopped from accessing the
compressor to reduce competition and give waterflow monopoly power. However, competition
in most times is unavoidable for firms. These are because technological changes are rapid
globally resulting to inventions of other ways of execution of businesses. Despite Michaels' fear
of stiff competition from competitors when they get access to the compressor, they will find
another way to counter the competition. Therefore, the best strategy is to restrict competitors for
a reasonable period and after the division getting adequate profits. These will make competitors
buy the compressor increasing the profits of the firm. Michael this time would have a
competitive advantage in the market, and brand name would be established. Additionally, he
should be carrying out research to get a new compressor to use in manufacturing to remain
competitive in the market. Michael Harding should allow me to produce the G-50 compressor
and have a 12-month restriction on sales of G-50 to the competitors of Waterflow and 6-moth
restrictions to the competitors of Rig Gear. During this time the profits will be high $9, 500, 000
Minus Agreed Technology Transfer Value and the division will have adequate time to exploit the
compressor wholly in its production and be stable to have a competitive advantage over the
competitors. Despite the department being independent to some extent the competitors of the

Firm may be their competitors directly or indirectly hence need to restrict them and avoid high
competition.
Waterflow production of the compressor and sell internally does not result in profits, and it
should consider my division production and sale as there is lucrative profits estimation. The
gains would add to the profit margin of Waterflow division. My division is the only one allowed
to sell compressors outside of Rig Gear, and this is the only chance Waterflow can adapt to get
more profits from the sale of the compressor. Waterflow manufactures' specialized compressor,
and they cost the division fixed cost of 25% of its sales and variable costs of 65% of sales. These
shows that production of compressors by Waterflow is expensive and it should leave the work to
my department. My department will produce the compressors for the Waterflow and sell rest to
other firms hence making profits which will be shared with the division. This option for Michael
is economical and profitable. The company intends to make benefits form the departments. All
alternative checked I think this is the only best way that is beneficial to both of the parties and
also to the firm.