Page 240 - DMGT519_Conflict Management and Negotiation Skills

Conflict Management and Negotiation Skills

Notes
which reported directly to the Canadian Government Cabinet and had access to highest
levels of bureaucracy. It established in no uncertain terms their negotiation goals and
objectives which included a strong dispute resolution mechanism that the Canadians felt
were vitally important to their success.
In contrast, the United States did not consider the FTA to be especially important and let
Canada do all the initial work. The only reason why the U.S. Congress even considered
the FTA proposal was that they liked the idea of a bilateral approach to trade and were
tired of the previous mechanism that failed to settle a host of trade dispute irritants
between the two countries known as GATT. It would also allow freer access to other
segments of the Canadian economy. President Ronald Reagan decided to fast track the
negotiations and appointed Peter Murphy to represent their interests. The U.S. was also
concerned about the growing hegemony of the European economy.

Strong differences in interests and approach dogged the negotiations. The Canadians used
every advantage available including the use of Summit meetings between the leaders of
both countries to emphasize their concerns at every opportunity. Yet, the political powers
in the U.S. dragged their feet to such an extent that the Canadian negotiators walked away
from the talks to express their displeasure. This put some heat on the U.S. administrators
to the extent that U.S. Treasury Secretary Baker took over the negotiations.
As a consequence, the talks between the two countries were successfully concluded. Several
concessions were made by both countries. The U.S. opened up a larger investment segment
in the Canadian economy and removed some of the more time consuming trade irritants.
The Canadians achieved their main goals of getting freer access to the U.S. economy,
while implementing a strong trade dispute resolution method.

The Free Trade Agreement between the two countries created the largest bilateral trade
relationship in the world. Canada achieved its objectives because of its detailed planning
and the intense focus of its negotiating team despite the asymmetry in power between the
two nations.
Question:

Analyse the case and discuss the case facts.

11.4 Sources of Power

Positional Power

Legitimate power (sometimes called authority or formal power) is that which is derived from
the person’s position in the organization. It exists because organizations find it advantageous to
assign certain powers to individuals so that they can do their jobs effectively. All managers have
some degree of legitimate power.
Reward power is based on the individual’s ability to reward desirable behavior. It stems partly
from legitimate power. Managers because of their positions have control over certain rewards,
such as pay increases, promotions, work schedules, status symbols and recognition awards,
which they can use to reward desirable behavior.
Coercive power is the opposite of reward power, and is based on the ability of the individual to
sanction (punish) or prevent someone from obtaining desirable rewards. Rewards and
punishment are powerful motivational tools, and leaders are generally better served by the
exercise of reward power than by the exercise of coercive power. But only if reward power is
used effectively. Look at these three types of power as POSITIONAL power and conferred on one

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