Midterm notes Flashcards
Bill Urry
Importance of having a third party - camel story
the balcony perspective - step back and look at a situation from afar – take emotions out of it
Forest and TREE perspective
ex. we are all students and fall in the student forest perspective
- -some attributes of students: party, poor, independent, single
- -at BYU we are sober and bc we don’t drink and are virgins we are very diff. than other colleges = we are TREES in a college FOREST
Tree = unique among a large forest
–so when going into negotiation, make sure you aren’t assuming they are just like the forest they are in (country, culture, age, etc.) - listen to them and try to figure out what kind of tree they are
two forms of negotiation
- distributive
- -fixed sum of value, win/lose - one time deal
- -do not disclose significant info.
- -first offer can provide strong psychological advantage (buying car from dealer)
- -info. on other side can benefit you
- -exploit what you learn about the other side in setting your first offer or demand - integrative (value-add, win/win)
- -MAJORITY OF NEGOTIATIONS IN BUSINESS SETTINGS ARE THIS TYPE - not one off deals - want to work together and develop a RELATIONSHIP
- -Provide info
- -explain WHY you want to make deal
- -talk about interests and constraints
- -reveal and explain in general terms your preferences
- -consider any additional resources that might help meet other sides needs
- -use what you learn to find creative options that benefit both sides
- -benefit both parties long term
RP
reservation price – the highest price you are willing to pay as a buyer and lowest price you are willing to sell as a seller
ZOPA
Zone of possible agreement - diff. btwn your reservation price and theirs
BATNA
Best alternative to a negotiated agreement = your backup (go to buy a car and already have your brother’s friend who can sell you a car for $3000 if you don’t like the dealers deal – not your first option but an acceptable backup)
• BATNA could be a bike you have – can bike instead of drive
• You have power if you go in to a negotiation with a good BATNA
Anchoring price
the first price —> price you start with
• Has a psychological impact — 70% of the time, the price agreed to in a negotiation will be within 30% of the anchor price)
• If the first offer was 20k and it is only worth 10k…the lowest price someone will pay is usually 14k (even though it is only worth 10…)
• Doesn’t matter what market value is — the anchoring price has a psychological and irrational impact
globalization
for business means an extension of the make or buy decision beyond national borders
Adam Smith taught about absolute advantage - if a foreign country can supply us with a commodity cheaper than we ourselves can make it…then buy it off them
–Adam Smith - Wealth of Nations
Milton Friedman on globalization
tech. revolution has made it possible for a comp. located anywhere to use resources located anywhere to produce products and sell them anywhere
- -makes global economy possible (which has enabled Asian countries to develop by supplying cheaper labor)
- -not possible until tech. revolution advanced comm. and transportation
–America should open boundaries and cut down on tariffs
Tom Woods show on globalization
some argue manufacturing jobs have declined in recent 10 years and free trade is to blame – actually ordinary living standards have improved…so declining manufacturing jobs are really not related
- –ppl are blaming free trade on stagnation in wage growth - argues if you are not considering the extreme growth in non wage pmts. (employee benefits) – also consider an hour of work today can buy a much larger basket of American goods than an hour of work used to be able to do
- -look at living standards of Americans - can see free trade is good
be careful when ppl cite periods of history for low unemployment bc of free trade - bc in case of 2001-2010 we saw high unemployment rates bc were in the middle of a recession
LOOK AT LIVING STANDARDS
- -Not about what type of jobs you have but about how you are living
- -decline in manufacturing jobs comes from AUTOMATION (or tech. improvements that take humans place) - not those workers can go to better jobs
service sector v. manufacturing sector - what jobs do you want your kids to be doing?
when people oppose free trade they are really opposing ECONOMIC CHANGE and COMPETITION
–today we have diff. kinds of jobs - more high skilled jobs and high paying - the low skilled workers have been replaced by automation
wage arguments do not consider that we have more ppl in the workforce now (women) which increases the denominator of calc. avg. wage of Americans
–also does not consider non-wage benefits offered to employees
Ted talks on free trade
looks at three countries
1. Vietnam - over past 15 years poverty has decreased dramatically as opened up free trade – especially in areas where products manufactured were in high demand in America
- India - poor ppl did not benefit from free trade, BUT poor here were not allowed access to labor mkts. so didn’t have opp. - had rigid labor mkt regulations
- Indonesia - reduced protection of own mkts. – tariff reductions affected regions diff. depending on products and demand
- -but international trade allowed for efficiency in mkts. - hire more workers, inc. wages, poverty levels fell
Ted talks against free trade
- -interconnectedness creates winners but also losers – don’t equally distribute the gains and benefits
- -impacted developed countries the most – might create a further gap btwn developed countries and emerging mkts
- -productivity growth has stagnated
- -globalization unleashed negative feelings of nationalism - they are promiting their own workers and looking out for themselves
comparative advantage
Milton Friedman pencil example – all parts of the pencil came from diff. parts of the world - collaboration
–ppl cooperated bc of the magic of the price system - free mkt. promotes efficiency and harmony in world
international supply chains make it possible to share resources globally
–VOLUME OF world today is 27x larger than it was in 1950
protectionism
Harley Davidson wanted to move production outside of US bc of tariffs here - 31% tariff added $2,200 per bike to export to Europe - would have to raise prices which harms sales — better and more cost efficient to pick up and move manufacturing to Europe
- -China put 40% import tax on cars made in US — BMW moving production from South Carolina plant to overseas
- –Tesla also plans to make plant in China - trying to avoid impact of tariffs on exports
comparative advantage definition
a country should specialize in producing and exporting only those goods and services which it can produce more efficiently (at lower opp. cost) than other goos/services (which it can import)
