Nov 20, 2020 in Case Studies

Factory Closure Negotiations
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Factory Closure Negotiations

 

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In 2004, the management team of Vensys Controls Europe, a division of the Vensys Controls Worldwide embarked on a process of closing down their factory in Cluse, France . This Company specialized in production of electronic controls for the white goods market. After some time, it faced a downwards price pressure, as a result of increasing component costs and competition in the market. Based on these facts, there was a foreseeable bankruptcy on the near horizon, and the company decided to transfer its operations to Slovakia . However, some issues arose during the strategy development process, which will be discussed in this paper, as well as the ways in which they were addressed.

1. What were the key negotiation points/ issues the CEO used to convince top management to allocate appropriate funds for restructuring?

The first key negotiation point the PDG used to convince the top management to consider allocating appropriate funds was that the factory in Cluse was operating on loss for three years, from 2001 until 2004. In other words, considering the interest of its shareholders, the factorys profitability is of grave concern. Secondly, the proposed plant in Slovakia has been running at its minimal capacity, since 2001. The unit cost for their products in Slovakia is 31% cheaper, with 74% savings on labor and 50% savings on variable factory costs . However, the main point of negation was the timeline created by the chief financial officer, highlighting the net benefits the company could achieve in the long run. Therefore, these facts presented to the top management convinced them that the factory was running at a loss, while the proposed factory in Slovakia was running at its minimal capacity which needs to be maximizes.

2. How did the CEO organize to communicate to the media the closing of the plant in France and its relocation to Slovakia from becoming a national/ international issue?

In order to prevent the closing of the plant in France and its relocation to Slovakia from becoming a national/ international issue, the company decided not to proactively include the media at the initial stage. The press release which was prepared in advance was only released in response to the Unions release of information. While gaining additional professional media training, which was focused on television questioning, the PDF acted as the only spokesperson in France . This resulted in a single communication channel that minimized the scope for contradiction of statements and scaremongering. Therefore, they prepared ahead of time when the media involvement would become unavoidable by presenting a unified front and reducing perceived uncertainties.

3. What were the negotiation strategies used to reach the agreement?

The company provided the assurance of an opened dialogue between them and the general public. This enabled them to achieve a creative and mutually beneficial result.1 This is the fundamental factor for creative problem solving by creating informal relationships early on in the process. Also, the company embarked on pre-negotiation planning, which stands out as one of the dimensions for the companys successful strategy . This was a planning concession, based on knowing what the company need and the requirements of the union, the employees, as well as the local officials . More so, the specific separation of the labor officials and the media also helped in achieving success.

 
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4. What were the pitfalls to be avoided when negotiating with the labor union representatives?

When negotiating with labor officials, the primary issue to be avoided is overemotional comment or other developments within the negotiation process that could serve as a threat to the cooperative environment. Some of these issues are anxiety, anger, sadness and frustration etc. Also, the manifestation of such weaknesses such as their ability to bring about social unrest should be taken note of. In this case, it was done by agreeing with the labor office to allow employees aged 55 years old and above to obtain early retirement .

5. What were the negotiation strategies and tactics you have learned form this case?

The negotiation strategies I learned from this case are building informal avenue through open dialogue, and the application of prenegotiation planning which help in cases of unrest or overemotional behavior . However, a collaborative environment should be maintained, in order to avoid heightened emotions that could cause the negotiation to result in arguments and unrest.

In conclusion, Vensys Controls is a Company that specializes in the production of electronic controls for the white goods market, embarked on a process of closing down their factory in Cluse, France. This is based on the fact that there was a foreseeable bankruptcy and the company decided to transfer its operations to Slovakia. However, the key negotiation point the PDG used to convince the top management to consider allocating appropriate funds were discussed in the paper. For a company to close down or transfer its operations to a different location, it needed to analyse the possible challenges it could face in achieving such a goal. It has to plan ahead against any unrest through negotiations. The company achieved this goal by creating an avenue for open dialogue, especially with employees and the labor union. The company also tried to keep the media at a distance and ensuring no premature leaks to the media. This is done in order to minimize the effect of any potential unrest or overemotional actions from other parties or from the general public.

Reference List

Cellich, Negotiations for Closing a Factory in France, Case analysis assignment guidelines.

Cellich, Negotiations for Closing a Factory in France, Case analysis assignment guidelines.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

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