WMBA 6501 Week 5 Bargaining Power Analysis Example

Where Each Side's Bargaining Power Comes From in the Bolt Renewal: Dependence, Spare Capacity and a Real Alternative, the Tactic That Power Makes Available and Whether Using It Is Defensible

Student Name

Walden University

WMBA 6501: Conflict Management and Negotiation

Instructor Name

Month Day, Year

Where Each Side's Bargaining Power Comes From in the Bolt Renewal: Dependence, Spare Capacity and a Real Alternative, the Tactic That Power Makes Available and Whether Using It Is Defensible

Power as Dependence

Talk about who "has more power" in a negotiation usually substitutes impressions for analysis. Emerson (1962) offered a sharper definition: the power of one party over another equals the other's dependence on it, and dependence rises with how much the other values what the first party controls and falls with how many alternatives it has. This paper applies that definition to the renewal between Linden Fastener Supply, the composite distributor used in this course, and Calumet Bolt Works, its main domestic supplier of structural bolts. It traces each side's power to its sources, names the tactic that power makes available to Linden and judges whether using it is defensible.

Calumet's Sources of Power

Linden depends on Calumet in three ways. First, volume: Calumet supplies about a third of Linden's bolts, about 6,500 thousand-piece units a year, and no other domestic supplier could absorb that quantity quickly. Second, quality: Calumet's lots have passed Linden's incoming inspection for four years, while the Ohio importer, Linden's main alternative, had a thread gauge rejection on one of its two trial lots. Third, speed: Calumet ships in four weeks and can do better, while the importer needs six. Each of these increases Linden's dependence, and therefore Calumet's power.

French and Raven (1959) described several bases of social power, including reward, coercive, legitimate, expert and referent power. Calumet's position rests mainly on the reward side: it controls something Linden values, reliable domestic supply, and can withhold it. In a shortage, Calumet could also allocate scarce production to other customers, a coercive form of the same power.

Linden's Sources of Power

Calumet depends on Linden too. With roughly a fifth of its line time idle, Calumet relies on the 6,500 units Linden buys to keep those lines working. Losing that volume would raise Calumet's cost per unit across its whole output. Calumet's other outlets, other distributors paying about $425 per thousand, would take some of the volume, but at higher selling cost and probably not all of it in one year.

Linden also has a real alternative. The Ohio importer has quoted $428 per thousand delivered, and while its lead times are longer and its record is short, it is a working supplier with whom Linden has already placed two lots. An alternative that exists, rather than one invented for the negotiation, reduces Linden's dependence on Calumet.

The Balance

Table 1

Sources of Dependence on Each Side

Composite figures from the case.

The balance is closer than either side's opening suggests. Calumet's opening at 6 percent assumes Linden has nowhere else to go. Linden's position is that Calumet needs the volume more than its opening admits. Lewicki et al. (2020) treat power in negotiation as relational, something that exists between the parties rather than a possession of one, and the table shows why: each side's power is the other's dependence.

The Tactic Linden's Power Makes Available

Linden's power makes one tactic available: a credible offer to move part of its volume to the importer. Concretely, Linden could tell Calumet that, at a 6 percent increase, it would shift about 30 percent of its bolt volume, roughly 1,950 units, to the importer for the coming year, starting with the part numbers where the importer's quality is proven. At Calumet's 80 percent utilization, losing that much volume would cost it more in fixed-cost absorption than the price difference it is seeking on that volume.

Is It Defensible?

The tactic is defensible under three conditions, and indefensible without them.

First, the alternative must be real. Linden may describe the importer's quote and its willingness to use it only if it would in fact move volume at the stated price. A bluff about an alternative that does not exist, or a quote that was never received, would be deception, and it would damage the relationship badly if discovered.

Second, the threat must be proportionate. Moving 30 percent of volume is a measured response to a 6 percent increase. Threatening to move all of it, when Linden knows the importer cannot handle the full volume or meet its customers' lead times, would be a bluff in disguise.

Third, the tactic should be offered as information, not as an ultimatum. Telling Calumet what Linden will do at each price lets Calumet decide with full knowledge; delivering it as a final demand invites a contest of wills that could end the relationship.

Under those conditions, using the alternative is not only defensible but honest: it tells Calumet the true cost of its opening price. The tactic Linden should not use is the one Calumet's dependence on Linden would also allow: hinting that Linden might leave entirely. Linden does not intend to, and saying so would cross the line from bargaining into misrepresentation.

How the Balance Could Shift

The balance described here is a snapshot. If Calumet's plants fill toward full capacity next year, its dependence on Linden's volume falls, and the tactic loses force. If the importer's next lots pass inspection, Linden's dependence on Calumet falls further, and its position strengthens. Emerson (1962) also noted that parties can rebalance a relationship by developing new alternatives or by changing what they value, and both firms are likely to try. Linden should therefore treat this year's renewal as one round in a longer relationship and avoid tactics that would make Calumet invest in replacing it.

Calumet's Likely Counter

If Calumet doubts the importer's capacity, it may test the threat by holding firm. Linden should be prepared to place a real trial order with the importer, on two or three part numbers, so that the alternative is demonstrated rather than described.

References

Emerson, R. M. (1962). Power-dependence relations. American Sociological Review, 27(1), 31-41. https://doi.org/10.2307/2089716

French, J. R. P., & Raven, B. (1959). The bases of social power. In D. Cartwright (Ed.), Studies in social power (pp. 150-167). University of Michigan.

Lewicki, R. J., Barry, B., & Saunders, D. M. (2020). Negotiation (8th ed.). McGraw Hill.