Assignment: Foreign or Domestic?
Connie Hatley is a very successful businesswoman who has holdings in a wide variety of industries. Hatley recently was approached by one of the Big Three automakers and offered a multidealership arrangement. In return for investing $50 million in facilities, the auto manufacturer would be willing to give her five dealerships spread throughout the United States. These locations, for the most part, are in rural areas, but over the next decade, these locales likely will become much more populated. In addition, the company pointed out that a large percentage of new cars are purchased by individuals who prefer to buy in rural locations, because prices at these dealerships tend to be lower. Hatley has been seriously considering the offer, although she now has a competitive alternative. A South Korean auto manufacturer has approached Hatley and offered her the same basic deal.
Hatley indicated that she was wary of doing business with a foreign firm so far away, but the Korean manufacturer presented her with some interesting auto sales data: (1) Between 1981 and 2001, the South Korean share of the U.S. auto market went from 0 to over 3 percent. (2) South Korean automakers are capturing market share in the United States at a faster rate than any other competitor. (3) New technology is being incorporated into these Korean-built cars at an unprecedented rate, and the quality is among the highest in the industry. (4) Although the Big Three (GM, Ford, and DaimlerChrysler) hold a large share of the U.S. auto market, their market share among those 45 years of age or younger is declining and being captured by foreign competitors. (5) The South Korean firm intends to increase its share of the U.S. market by 20 percent annually. Hatley is very impressed with these data and forecasts. Recently, however, the Korean auto company's sales and market share have been declining, and she remains uneasy about having to deal with someone located halfway around the world. "If I don't receive scheduled deliveries, whom do I call?" she asked one of her vice presidents. "Also, we don't speak their language. If there is a major problem, how are we going to really communicate with each other? I like the proposal, and I'd take it if I were sure that we wouldn't have communication problems. However, $50 million is a lot of money to invest. If a mistake is made, I'm going to lose a fortune. They did experience some problems last year, and their sales were off that year. Of course, if the South Koreans are right in their long-range forecasts and I have no major problems dealing with them, my return on investment is going to be almost 50 percent higher than it will be with the U.S. manufacturer."
Questions
1. What specific types of communication problems might Hatley encounter in dealing with the South Koreans?
2. Can these communication problems be resolved, or are they insurmountable and will simply have to be tolerated?
3. Based on communication problems alone, should Hatley back away from the deal or proceed? Give your recommendation; then defend it.
4. What negotiation approaches might Hatley use if she wants to continue with the deal in order to increase her confidence that it will be successful?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.