The paper 'Negotiations for a Joint Venture - Virgin Airlines vs. Singapore Airlines" is a perfect example of business coursework. The aim of this report is to analyze a past unsuccessful joint venture negotiation between Virgin Airlines and Singapore Airlines. The top leadership of both airlines had met and decided to work on a joint venture in the provision of airline maintenance systems in the vibrant Chinese market. However, the negotiations failed to take off and were rendered ‘ grounded for good’ based on a number of issues that were not considered during initiation, planning and implementation of the negotiation process (Alvarez & Kennedy, 2015).
This report explores the scope of negotiations between the airlines and discusses the factors that needed to have been taken into considerations as well as the quality of alternatives and practical implications. It also discusses what should have been included in the negotiation script of the parties and other options available during negotiations. Lastly, it examines the lessons learned from this negotiation to build a good platform for future negotiations. 1.1 Joint venture negotiations: Virgin airlines vs. Singapore airlines 1.1.1 Scope of negotiations The proposed joint venture between Virgin airlines and Singapore airless involved making negotiations before reaching into an agreement.
The two firms made commitments to develop a proposed joint venture and set up project teams. The top leadership had earlier met and realized that they have a common interest in the Asian airline market particularly in the provision of maintenance facilities. The scope of negotiations involved mid-ranking executives from both parties held up in an informal or formal setting. The negotiators develop their platforms based on good working relationships, interpersonal trust and a clear joint understanding of the benefits and the nature of the joint venture proposed (Bamford & Ernst, 2014).
A memorandum of understanding was endorsed by the project team negotiators by signing the confidentiality agreement that allowed for the continuation of further negotiations. First, the MOU served as a cushion to the joint venture in the event of exchanging sensitive financial and technical information. Second, the agreement indicated the expression of mutual trust meaning that each party was convinced on the level of trustworthiness of the other party.
The negotiations were centered on scope-related synergies, pool capital, share risk, markets, and capabilities. Favorable outcomes were reported by the teams returning to their companies that the joint was going to be a success. The European team brought in competencies on systems while the Asian team made proposals connected to operating systems. The common platform was the safety standards of the aircraft. 1.1.2 Factors, alternatives and practical implications Joint ventures provide freedom among the players to structure and negotiate in creative ways. Yet, compared to licensing agreements and acquisitions, are more challenging to structure and negotiate.
In the case of Virgin and Singapore Airlines joint venture, a number of factors come into play. First, the role of teamwork in negotiations based on mutual trust is critical. The nature of work involved required expert knowledge in handling technical and computer systems relating to airline security (Bamford & Ernst, 2014). The two parties found that it was more complex and tedious working on their respective proposals which went into much detail to the detriment of the negotiations. Second, taking a compromise position is essential to the negotiating parties.
In the Virgin-Singapore airlines case, the parties to the negotiations took a tough stance and defended their proposals instead of seeking a compromised position to reach an agreement. The negotiations were headed for a breakdown because one party was not willing to cede ground and wanted to gain more at the expense of the other partner. According to Yan and Luo (2014), successful joint ventures require dealmakers with multiple dimensions and design choices. The Virgin-Singapore JV seemed more of a punitive agreement not based on mutual trust and cooperation.
While the difference was on the nature of airline maintenance systems to be adopted, the relationship was already compromised.
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