This is the case that i make for Strategic Decision Making and Negotiation Class. The theme for this case is about Integrative Negotiation, followed by Distributive Negotiation. This case is a take home project for end-term exams at MBA-ITB Bandung.

1. .MM5010 - SDMN Class.
Integrative Negotiation Case:
THE MINORITY
GAME TENDER
MBA-ITB | EXECUTIVE 44
STEPHEN HENDRA GUNAWAN - 29110330

2. • CHAPTER 1 •
PREFACE
n and say...
One day, a Dad come to his so
l of my choice.
Dad: I want you to marry a gir
Son: No, i don’t want to.
hter.
Dad: The girl is Bill Gates’ daug
Son: Then OK.
Dad goes to Bill Gates...
marry my son.
Dad: I want your daughter to
nna do that?!
Bill Gates: No, why i would wa
World Bank.
Dad: My son is the CEO of the
Bill Gates: Then OK.
e World Bank...
Dad goes to the President of th
O of your Bank.
Dad: Appoint my son as the CE
President: No!!
ll Gates.
Dad: He is the son-in-law of Bi
President: Then OK!!
ION.
This is BUSINESS NEGOTIAT

3. Negotiation
Negotiation is a dialogue between two or more people or parties, experience two or three negotiation each day, from a simple issue
intended to reach an understanding, resolve point of difference, or to a big complex issue.
gain advantage in outcome of dialogue, to produce an agreement
upon courses of action, to bargain for individual or collective Sometimes, negotiation can be hot, stressful, and even put a
advantage, to craft outcomes to satisfy various interests of two relationship at a stake. But if we put a little more empathy, focus
people/parties involved in negotiation process. on each parties interest, and with a creative mind, a negotiation
can produce more satisfying results. The case below will illustrate
Negotiation took places in our everyday life, from business, social an example of a condition in which integrative negotiation can be
relationships, and even our private life. Anyone of us can applied. Enjoy!
2

4. • CHAPTER 2 •
THE MINORITY GAME TENDER

5. • Section 1 •
The Case Background
PT Garuda Genit (PT GG - the name is disguised) is one of the few The new investment will cost them $160 million, a pretty
companies who specialize their business in underwater significant part of their profit in this project.
construction in Indonesia. There are only a few players in this
industry, and most of their business comes from the governmental Another option is to cooperate with another companies in
contract or multinational infrastructure companies. PT GG direct underwater welding project. PT GG found that this option will not
competitors are PT Beruang Nuklir (PT BN), PT Gurita Sakti (PT violate the contract. After several consideration, PT GG tried to
GS), and PT Ayam Abadi (PT AA). explore this option and decide to put another tender for this
project. At the initial stage of the tender, PT GG found that they
Recently, after a fierce competition for the governmental project in can give up $100 million of their profit to solve this problem. This
Sumatra, PT GG emerged as the winner of underwater option is deemed as a better option because they can save $60
construction for gas lines, fiber optics, and electrical lines million with this scenario. PT GG decide to pursue this option.
connecting the Sumatra, Java, and Borneo. The project value is
more than $5 billion (the real number is disguised) that will The participants of the tender are:
generate profit of more than 10% for PT GG.
PT Beruang Nuklir (PT BN). Have most experiences and skills in
The construction works is divided into ten major sections. Each underwater welding. Their price is the highest among the other
section generate various profit level for the company. One part of participants.
the project is underwater welding. PT GG’s focus-group for
underwater welding is currently engaged at another project for PT Gurita Sakti (PT GS). Has a reputation and excellent track
another 6 months, and PT GG is forced to invest in new equipment record in underwater welding. The price is at the second highest.
if they want to honor the contract and to finish it on schedule. The
violation of the contract will result in penalty, the ruin of PT GG’s PT Ayam Abadi (PT AA). Is the new players from China. Have
reputation, and without fail put them out of the competition for the the expertise and cutting-edge technology. Willing to give the
next projects ahead. lowest price to gain a reputation.
4

6. PT XXX is indifferent as to which company will get the project, 3. Each player will choose one between these two card, and put
because each of them has their own advantages and disadvantages. their choice on the ballot box. The other card will have to be
They all proficient in technique and skill needed, reliable submitted latter to confirm that they only put one card on the
contractors, professionals, and the prices are not too far apart. PT ballot box. The violation of this rule will result in
GG still have to give up approximately $100 million to the project- disqualification.
winner, no matter who win the project. PT GG will only give this
project to one of the participants to simplify control. If the winner 4. The voting will only take place one time. The player who become
wants to collaborate with other participants, it is up to them. But the minority will win the project. The payment will take place 2
PT GG will only ask the project-winner for accountability. months after the welding done.
The problem is, if only one participant receive $100 million, PT GG Why the minority game? On the opposite side, the majority game
afraid that the money will only strengthen the project-winner and will obviously need the players to collaborate, thus will give up PT
be used against PT GG in the next governmental tender. PT GG’s GG’s true intention (to divide the winning prize) to be spotted by
CEO think it would be for the best that they devise a strategy to the participants. The minority game state only one participant will
divide this winning money to several participants. The objective is win, while to ensure the victory, participants should collaborate
to undetectably arrange the rules of the tender, so players are with each other. This way, PT GG’s image still uphold and their
willing to cooperate with each other and divide the winning prize objective will be accomplished.
(so they can pose less threats in the next governmental tender).
The tender schedule has been disseminate to the three participants.
Stephen, the senior consultant from “The MBAITBX44 Consultant Each participants has received their cards and game-rule. The
Firm“ (The MCF) - the company’s main business consultant - are voting will take place in three days. Now, PT GG is only have to
given the task to handle this tender. Stephen devised a game to wait to receive the result.
determine the winner of the tender. The game is called “The
Minority Game”. The rules of this game are:
1. Only one player will win.
2. Each player will be given two card, the Apple card and the
Orange card.
5

7. • Section 2 •
From The Players’ Point of View
PT Beruang Nuklir (PT BN) PT Gurita Sakti (PT GS).
Is one the senior player in the industry. Have most experiences and Has a reputation and excellent track record in underwater welding.
skills in underwater welding. Their price is the highest among the The price is at the second highest among other participants.
other participants.
More fortunate than PT BN, PT GS has successfully secure several
PT BN last semester financial report was somewhat disappointing. projects in the future. The only downside of abundant projects is
Even though the company condition is very safe with little the financing. PT GS has used all the bank facilities, but they still
liabilities and huge current assets (especially Cash), but the need an additional quick cash flow to financing their newest
company almost make no-profit at all last term. The condition was project that will generate $15 million profit. If PT GS can’t secure a
worsened by their defeat in Sumatra tender. Their stocks quick cash flow, they will need to issue a short-term bonds (at least
plummeted and stockholders are very upset with this performance. 1 year term). The bonds issuing fee and the interest expense for
The CEO starts to feel the pressure from the stockholders to give one year bonds will approximately set back PT GS for another $10
his resignation if he couldn’t fix company’s performance in the million.
next term.
According to the schedule, this new project will start one week
The end of current term is near and the condition is no different after the completion of PT GG’s project. This project and the
than last term. The CEO has prepare himself for the worst when he underwater-welding project from PT GG will be the last projects
learn about the underwater-welding project tender hosted by PT for PT GS this term. To satisfy its shareholders, PT GS requires at
GG. PT BN was surprised by this tender. The CEO sees this tender least an additional $45 million profit this term.
as his last chance to turn around their bad financial performance
before next shareholders meeting. To satisfy the target from
shareholders, PT BN need at least $60 million to generate in this
project.
6

8. PT Ayam Abadi (PT AA). The Questions:
PT AA is the new player from China. They have the expertise and 1. How much the best Total Value that can be emerged in this deal,
cutting-edge technology. Since PT AA is a new player in Indonesia, and what kind of collaboration will generate it?
they are willing to give the lowest price to gain a reputation and to
extend its network. 2. If each company aiming to maximize their own profit, which
companies that most likely will make collaboration?
Currently, PT AA is involved in a negotiation process for
underwater construction with one of the telecommunication
company. Knowing that PT AA is a new player seeking for
reputation, the telco company tried to pressing PT AA to reduce its
price by $15 million.
After several thought, for the sake to gain reputation, PT AA had no
other choice but to accept the telco company offer. The CEO is
about to make a deal when PT AA heard about PT GG welding
project. If PT AA could become the winner of this project, their
reputation will increase and they only have to reduce its price by $5
million.
PT AA financial condition is moderate with enough cash for
CAPEX, but can’t give any loan to other. PT AA shareholder
requires at least additional $20 million profit this term.
7

9. • Section 3 •
The Steps:
1. The first step to answer
the questions is to first
understand the
available strategies
that can be used to
ensure a winning in
the Minority Game.
2. The second step is to
identify each company
Reservation Point.
3. The third step is to
calculate the Total
Value for each of the
strategies and to
identify the best one.
4. The next step is to
identify the BATNA
and ZOPA (or money
The Answers
at stake) for each To ensure the winning at the minority game, the players need to collaborate with each other. If the
various collaboration. players not collaborate with each other, it means that they will be relying on pure luck - something that
big companies like these three will not ever do. There’s too much at stake here, and relying on pure
5. The final step is to
luck won’t be a good reason to be accountable in front of the shareholders.
identify which
companies that most
likely will form a The very first step to solve this case is to identify the strategies that can be used to ensure the winning
collaboration. in the Minority Game. The key is to collaborate. There are two kinds of collaboration that can be used:
8

10. Three Parties Collaboration: Two Parties Collaboration:
It’s the easiest collaboration to ensure the winning in the Minority The trick is to form a two-companies collaboration. One player will
Game. After negotiating the profit portion attributed for each choose Apple, and the other will choose Orange. One of them will
players, they only need to appoint the winner by letting the winner surely become a winner. Example:
to choose the different card. Example:
Collaboration between PT AA with PT GS:
PT Beruang Nuklir
PT Ayam Abadi
PT Ayam Abadi
PT Gurita Sakti
If PT BN choose Apple card, PT GS will be the winner. If PT BN
PT Gurita Sakti choose Orange card, PT AA will be the winner.
Having understand the strategies, the second step to solve the case
is to identify each company Reservation Point:
PT Ayam Abadi will be the winner.
9

11. PT Beruang Nuklir Reservation Point PT Ayam Abadi Reservation Point
The case stated that to satisfy the target from shareholders, PT BN The case stated that PT AA shareholder requires at least additional
need at least $60 million to generate in this project. So, PT BN $20 million profit this term. It’s also stated that if PT AA become a
Reservation Point is $60 million. winner of this tender, their reputation will arise and PT AA will
save another $10 million from telco project. So, the Reservation
PT Gurita Sakti Reservation Point Point for PT AA is:
The case stated that to satisfy its shareholders, PT GS requires at $20 million - $10 million = $10 million
least an additional $45 million profit this term. The case also stated
that PT GS need a quick cash flow to financing their newest project The next step after we know the reservation point is to focus to
that will generate $15 million profit. If PT GS can’t secure a quick each company’s interest that will be the base for the collaboration,
cash flow, they will need to issue a short-term bonds (at least 1 year and to calculate the Total Value generate from each scenario.
term). The bonds issuing fee and the interest expense for one year
bonds will approximately set back PT GS for another $10 million. Three Parties Collaboration
If PT GS were to collaborate with the cash-rich PT BN, PT GS can PT BN need “The MONEY” --> the Nominal.
ask the payment ahead of time from PT BN, so the additional $15
million could be captured completely. The Reservation Point for PT PT GS need “Fast Money” --> the Cash-Flow Timing.
GS if they form a collaboration with PT BN is:
PT AA need “Fame & Reputation”.
$45 million - $15 million = $30 million
After exploring each company’s interest and priorities, the
But if PT GS form a collaboration with PT AA, PT BN could only collaboration can be made. The result would be:
capture $5 million of additional profit. So the Reservation Point if
PT GS collaborating with PT AA is: PT AA could be the winner, while PT BN received the
biggest portion of profit, and PT GS could settle for less
$45 million - $5 million = $40 million money provided that the cash-rich PT BN give the
payment upfront.
10

12. According to each Reservation Point, the $100 million profit will be PT Beruang Nuklir + PT Ayam Abadi
distributed likewise:
PT BN need “The MONEY” --> the Nominal.
PT BN: $60 million.
PT AA need “Fame & Reputation”.
PT GS: $30 million + $10 million bonds interest savings.
For this collaboration to be formed, PT AA have to be a winner.
PT AA: $10 million + $10 million telco project savings. That way, PT AA will save $10 million from the discount for the
telco company project. The Total Value will be calculated as follow:
The Total Value: $100 million + $20 million = $120 million.
$100 million + $10 million additional value = $110 million
The Total Value for three parties collaboration is $120 million.
Next is the total value for two parties collaboration. PT Gurita Sakti + PT Ayam Abadi
Two Parties Collaboration PT GS need “Fast Money” --> the Cash-Flow Timing.
PT Beruang Nuklir + PT Gurita Sakti PT AA need “Fame & Reputation”.
PT BN need “The MONEY” --> the Nominal. The only thing that can be gained from this collaboration is when
PT AA become a tender-winner, so PT AA could save $10 million
PT GS need “Fast Money” --> the Cash-Flow Timing. from telco company project. And since PT AA don’t have enough
money to cover PT GS payment upfront, PT GS get no additional
The project winner could be PT BN or PT GS; the works could be value from this collaboration. The Total Value is:
divided proportionally; but for to form the collaboration between
PT BN & PT GS, the cash-rich PT BN have to give the payment $100 million + $10 million additional value = $110 million
upfront to PT GS. That way PT GS will save $10 million that were
supposedly paid to be bonds interest expense. Total Value:
The best Total Value is generated by three-parties-
collaboration with $120 million total value.
$100 million + $10 million additional value = $110 million
11

13. PT BN vs PT GS ZOPA
Total money prize
:
$100 million
Even if the three parties collaboration generate the PT BN Reservation Point
:
($60 million)
biggest total value ($120 million), but the important
PT GS Reservation Point
:
($30 million)
things for the companies is not the total value. The main
objective for each of the company is to maximize the The money at stake
:
$ 10 million
profit. To maximize the profit, it would be more feasible
to form a two parties collaboration. The results from The maximum profit possible in this collaboration are:
three parties collaboration will serve as BATNA (Best
Alternative To a Negotiated Agreement) for each PT BN: $60 million + $10 million = $70 million
company:
PT GS: $30 million + $10 million = $40 million
PT BN BATNA is $60 million. PT BN vs PT AA ZOPA
PT GS BATNA is $30 + $10 = $40 million.
PT AA BATNA is $10 + $10 = $20 million. Total money prize
:
$100 million
The results under this nominal will not be entertained PT BN Reservation Point
:
($60 million)
anymore, since three way parties collaboration has been
their BATNA. PT AA Reservation Point
:
($10 million)
The money at stake
:
$ 30 million
To know which company that most likely will form a
collaboration, the next step is to identify each
The maximum profit possible in this collaboration are:
companies combination’s ZOPA (Zone Of Possible
Agreement) or “The Money at Stake”. PT BN: $60 million + $30 million = $90 million
PT AA: $10 million + $30 million = $40 million
12

14. PT GS vs PT AA ZOPA
CONCLUSIONS:
Total money prize
:
$100 million
If each company intend to maximize their own profit,
PT GS Reservation Point
:
($40 million) they will choose two parties collaboration method. It is
because all the possible profit generated by two parties
PT AA Reservation Point
:
($10 million)
collaborations are well above the profit generated by
The money at stake
:
$ 50 million three parties collaboration.
The maximum profit possible in this collaboration are: Even if the real negotiation to form a two parties
collaboration among PT BN, PT GS, and PT AA is more
PT GS: $40 million + $50 million = $90 million complex and will depend on the offer from each
participant, but scientifically, the most likely two parties
PT AA: $10 million + $50 million = $60 million
collaboration will be reached between PT GS and PT AA.
It’s because, even if PT BN gives all the-money-at-stake to
SUMMARY: PT AA, the maximum nominal will only reached $40
million - the number that will easily beaten by PT GS
PT BN will incline to make a collaboration with PT AA. offers (PT GS still have a lot of room to beat PT BN offer).
PT GS will incline to make a collaboration with PT AA.
And, even if PT BN gives all the-money-at-stake to PT GS,
the maximum number will only reached $40 million - the
PT AA will incline to make a collaboration with PT GS.
number that will easily beaten by PT AA offers (PT AA
still have a lot of room to beat PT BN offer).
So, the most likely two-parties-collaboration that will be
formed is a collaboration between PT GS & PT AA.
13

15. MM5010 - Strategic Decision Making and Negotiation
End of Term Exams | MBA-ITB Executive 44
© Stephen Hendra Gunawan - X44 - 29110330
Made exclusively for Strategic Decision Making and Negotiation Class
MBA-ITB 2012
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