FIJI Water & Fijian Government Negotiation: A Detailed Case Study

This case study delves into the negotiation between FIJI Water and the Fijian government concerning a proposed tax increase on water extraction. It identifies the Fijian government as holding a stronger position due to its regulatory power and potential to seek alternative investors. Both parties can leverage their power; FIJI Water through its employment contributions and welfare programs, and the Fijian government through extraction taxes and the option to invite other investors. Building a trusting relationship is crucial for FIJI Water, which can be achieved through community engagement and addressing tax disputes cooperatively. Professional negotiation advice for FIJI Water includes leveraging its goodwill and addressing tax issues through cooperation, while the Fijian government should consider FIJI Water's social welfare contributions. The analysis emphasizes the importance of mutually beneficial outcomes through negotiation.

Fiji VS. FIJI - Negotiating over water
Case Questions
Individual work
Read and prepare the case, then answer the following questions in a 2 to 3 pages.
QUESTIONS
1. In the negotiation between FIJI Water and Fijian government over the
proposed tax increase on water extraction, which party is in a stronger position?
Why?
ANSWER
It is observed that, in the negotiation between Fijian government and FIJI
Water, the Fiji government is in a stronger position, for the proposed tax increase on
the extraction of water. The Fijian government is in a stronger position because of its
power, to allow the functioning of FIJI Water, with the allotted tax. On the other hand,
if FIJI Water refuses to pay the tax and close its company, then the Fijian government
will call for the international tenders from reputed organization, which could pay the
demanded extraction tax by the Fijian government.
By compromising and negotiating with the Fijian government, the FIJI Water
can continue its water extraction and company’s functioning. The employees of FIJI
Water will not have to lose their jobs. FIJI Water can use its built goodwill for
appealing to the Fijian government, for addressing the issue of increased tax for
negotiation. Thus, the statement that, Fijian Government is having stronger positing
denotes that, it is the government who has the power to decide.
The FIJI Water can approach only the government for their battle with the
increased tax, where earlier the tax was F$ 0.0033 and now it has increased to F$ 0.15
per liter of water. Thus, FIJI Water must cooperate and compromise with the Fijian
government (Gino, Toffel and Van Sice, 2014).
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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.
ANSWER
It is observed that each of the party (i.e., FIJI Water and Fijian government)
can leverage their power, for forcing an effective deal with the negotiable terms and
conditions. The below section describes the possible negotiable terms and conditions
(Gino, Toffel and Van Sice, 2014):
A. FIJI Water
i. Employment
In Fiji, the FIJI Water has effectively provided employment for
approximately four hundred employees. It has nearly 100 employees in
other plants of different countries. It helped the economy of Fiji, it gave
employment to many local Fijians, both directly and indirectly in the FIJI
Water's supply network. The workers believe that FIJI Water has helped
them to earn their livelihood and provide education for their children.
Moreover, in the Fiji its employees are successfully able to earn the
highest salary i.e., per hour the FIJI Water workers earned F$ 3.35c and
the other plant's workers earned ranging from F$ 2 to F$ 3, on hourly
basis. Therefore, due to any circumstances if the plant closes, then all these
employees will become unemployed.
ii. FIJI Water Contributed to Fijian Welfare
The FIJI has successfully contributed many things to the welfare of the
Fijians. FIJI Water aims to provide clean water to the consumers. It has
invested for the development of the Fijian community by contributing
millions dollars on a yearly basis, for clean water development. It is also
involved in a project which renovates the primary schools, then it had
taken initiative in supporting the low income families. Next it helps the
healthcare programs with funds and supports the education system of the
country.
Thus, the leveraging power for FIJI Water includes its built goodwill. If
FIJI Water closes its company then many employees will be unemployed
and many of its welfare programs will be affected.
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Power-based move
The alternate source for FIJI Water can be the second artisan aquifer water
source present in Canterbury, in New Zealand, which was purchased in 2008 by FIJI
Water. It can act as a potential backup source, which can be used when FIJI Water
deteriorates. This source can be utilized as a power-based move by FIJI Water.
B. Fijian Government
i. Extraction Tax
FIJI Water is held for exploiting the natural resources and is blamed to pay
less taxes. Based on the previous year’s export earnings, FIJI Water is
determined to have the capacity to pay extra tax, as it earned F$ 150
million, where just its marketing budget includes F$ 18 million.
ii. Transfer pricing
With a specific end goal to spare the taxes, the FIJI Water has used the
strategy of underpricing its water exports. For different nations, when
compared to the local competitors, the export charge resulted in selling
with a higher cost.
iii. Alternate Investors
In case where, FIJI Water denies to pay the additional taxes, which the
government has demanded then, the Fijian government could request FIJI
Water to stop their operations. Because, various foreign international
private players would be easily ready to invest for the economy.
Power-based move
Calling the international tenders for the trusted and reliable private sector
organization for extracting the natural resource will be the power based move by the
Fijian government.
3. FIJI Water relies on 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?
ANSWER
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The negotiation is taking place between FIJI Water and Fijian government,
due to the increased proposed tax on the extraction of water, which just applies for the
large extractors like FIJI Water and not for its competitors. The tensed relations of
FIJI water with Fijian government with respect to taxes is quite tough, especially
without the local Fijian’s help. Thus, this is the reason that has brought the parties
together.
They hope to accomplish good trustworthy relationship for appealing the
national government through the community action group. Then, to approach the
government for compromising with the tax disputes.
The tax related issues has stressed the relationship between the Fijian
government and FIJI Water. It is true in all sense that FIJI Water only relies on the
Fijian government for accessing the Fijian water. FIJI Water can build a trusting
relationship with the Fijian government that has been unstable and is likely to
continue being unstable by focusing on building a trusted relationship, then agreeing
on a common goal and next is formulating a plan which benefits all. All these steps
are involved by negotiation.
4. 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?
ANSWER
I would advice FIJI Water to use its built goodwill and trusted relationship
through which it built the community in the previous decade. The same goodwill can
be used for appealing the Fijian government. Then next, FIJI Water must address the
issues of tax with the negotiation approach, by using the cooperation and
compromising aspects.
I would advice the Fijian government to consider the contributed social
welfare projects of FIJI Water, to develop the country. Then, based on negotiation, the
acceptable tax can be fixed. There must be no harm to any one from the negotiation
deal, instead all the parties and the local Fijians must be benefited.
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ReferencesReferences
Gino, F., Toffel, M. and Van Sice, S. (2014). Fiji versus FIJI: Negotiating Over
Water. Harvard Business School.
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