Dispute Resolution (Essay Sample)

Business Negotiations in the Global Context: A Case Study of Telsim of Turkey
Mohammed Alhajri
Potomac University
MGMT 424
 DATE \@ "MMMM d, yyyy" October 10, 2015
Instructor: James Booker
Negotiating Globally: Nokia and Motorola versus Telsim
The Fundamental and Strategic Mistakes Negotiation Mistakes that Motorola Committed
Fundamental Mistakes
The fundamental negotiation mistake that Motorola made is its failure to identify a reliable dispute resolution mechanism in the event Telsim defaulted on the loan payment. The choice of an arbitrator was desirable in as much as it helped to avoid bias in Turkish courts. This is especially so considering that the Uzan family, the owners of Telsim, had connections in high places and political influence. However, the choice of Switzerland as the country where arbitration would take was disadvantageous to Motorola because the decision of the arbiters would not carry as much authority as a legal process. In this case, Motorla made a fundamental mistake in failing to identify a third party with “the authority to impose a settlement on the disputants” (Brett, 2012, p. 122). In contrast, litigation could have been more effective because of the legal authority of courts to make binding judgments.
Another mistake that Motorola made was its failure to carry out a background check on Telsim’s previous deals. Such an investigation would have enabled Motorola to come to the negotiation table with useful information not only regarding the financial state of Telsim and its debt burden to other lenders, such as Nokia, but equally important, of Telsim’s integrity and commitment to fulfill its promises. Establishing the integrity of a potential business partner is important when arbitration is the intended mechanism for dispute resolution because when either party breaches a contract, “the rules of evidence are not strictly applied” (Brett, 2012, p. 125). Therefore, getting information about Telsim’s past deals would have helped Motorola determine whether Telsim was in a position to pay the loans, and whether it would put the money into the agreed projects considering that it (Telsim) and a similar arrangement with Nokia. Finally, Motorola failed to take into account the nature of business practices, such as the level of corruption, in Turkey. Being aware of the level of corruption could have enabled Motorola to put in place measure that could have guaranteed that its investment was safe. For instance, the company could have anticipated the possibility of Telsim illegally diluting Motorola’s shares to its advantage. The fact that Telsim was able to do so without Motorola’s knowledge or following the right procedures for issuance of shares suggests that it was possible to bribe some shareholders to pass questionable resolutions. Basically, therefore, Motorola failed to know the kind of client or business partner it was dealing with in terms of the business environment in which it (Telsim) operates, it financial status, as well as existing contracts similar to the one Motorola was bringing into the table.
Strategic Mistakes
With regards to strategic mistakes in the investment, Motorola failed to demand a role in the decision making process considering that its share holding of 66 percent made it the majority shareholder (Mikko & Rieger, 2005). Accordingly, Motorola should have demanded to have representation on the board of directors in proportion to its shares. Such a representation could have kept the company informed of any proceedings that could have affected its equity negatively. Still, even if Motorola got representation on the board of directors, it could have been more convenient for the company to have its people involved in Telsim’s day-to-day business activities to monitor any illegal or fraudulent financial dealings. This is reasonable considering that the Turkish government’s representative on Imar Bank, also owned by the Uzan family, was kept in the dark about the bank’s financial situation, and therefore failed to report about it to the relevant authorities.
Considering that Motorola’s partnership with Telsim was its first venture in the Turkish market, it could have been convenient and strategically sound for the company to have local representatives to manage its interests. Local representatives could have been desirable not only because of their knowledge of how business dealings are carried out in the Turkey, but most important, their knowledge of Telsim’s reputation, financial performance and ties with other businesses owned by the Uzan family. This arrangement could have helped Motorola to learn of any behind-the scenes moves by Telsim’s owners to issue shares illegally. For example, Motorola failed to know about the illegal issuance of shares because the announcement was made through a local media. A local representative could have possibly learned of it and alerted Motorola to block the process.
Finally, Motorola should have included a clause in the negotiation that prohibited any dealing on Telsim issues unless it is agreed and jointly announced by both parties. Negotiation strategies involve the strategic choices that negotiators include in a contract, as well as how “they act and react at the negotiation table (Brett, 2012). Motorola’s failure to include a clause that prohibited Telsim from manipulating the shares in any way without the consent of both parties was therefore a big strategic mistake. This arrangement could have made the Uzan family’s issuance of shares null, and therefore avoid the dilution of the share held by Motorola.
The Reasons Why the Turkish Government Shared the Funds Generated form Sale of Telsim’s Assets Even after Nokia and Motorola and Written off their Losses
The decision by the Turkish government to share the funds generated through the sale of Telsim’s assets with Nokia and Motorola despite the latter’s having written off their losses was a strategic move intended to boost Turkey’s international image as an investment destination as well as boost its chances of being accepted into the European Economic Commission (Mikko & Rieger, 2005). The Turkish government, with its weak and unstable economy, must have realized that foreign investment would play a big role in strengthening the local economy. Accordingly, it was necessary to send the right message to potential foreign investors regarding the safety of their investment. The decision to refund Nokia and Motorola signaled that the Turkish government was determined to protect the interests of foreign investors. Most often, investors are reluctant to invest in a country where corruption is high, and in situations where they risk losing their money. At the time, Turkey ranked poorly in the corruption index, and the government was keen to show the international business community that it was committed to providing a safe b...