Following a 1998 partnership, Kraft distributed Starbucks’s coffee (whole beans and ground coffee) to supermarkets and other retail stores across the country. During the formation of the agreement, Starbucks was making approximately $50 million in revenues a year and by 2010; the firm was recording about $500 million. At the time of the dispute, the company’s coffee was found in 40,000 stores countrywide from the previous 4,000, which indicated that Kraft had contributed significantly to Starbucks’s revenues and market share (Neuman, 2010). In the dispute, the coffee maker indicated that the distributor was less aggressive in marketing its products, so it was in danger of losing a significant market share to Green Mountain Coffee. Further, the single served coffee pods taking off in at the time, were limited to Kraft’s machines. Therefore, the agreement was the only impediment to attaining the flexibility required to market the products. Starbucks approach to the dispute was aggressive. Nonetheless, if the firm could have taken a less adversarial approach, maybe it could have paid less the $2.75 billion for the breach of contract (Shonk, 2017). In this study, the researcher will focus on developing the best alternative approach that could have resulted to a win-win situation (getting to yes and getting past no) for the two parties.
This section focuses on the overview of the agreement between the two food giants and the reasons it resulted to a dispute
1. Features of the negotiation
2. Overview of the agreement between the two companies
3. Analysis of the dispute
Both companies Interests
The essay will analyze the interests of each organization in this particular agreement
1. Starbucks’s interests: Higher market share and profitability
2. Kraft: profitability
3. Kraft wanted the contract of USD1.9billion; so continue executing the contract
4. Starbucks needed to counter competition against Green Mountain Coffee, which was growing rapidly
Options
This section analysis the options that each company had:
1. Starbucks wanted deal termination while Kraft objected
2. Starbucks offers Kraft $750 million to terminate the contract
3. A peaceful negotiation to end the contract without financial repercussions
Criteria
The two parties used arbitration
Best approach, no involvement of third parties. Flexibility on either sides
BATNA
The best alternative that would have benefited both companies
Starbucks expected Kraft to default on the negotiation agreement
Both companies had a negative bargaining position
Results
Ethical model: Starbucks breaks from the agreement and begins selling the K-cup packs
Starbucks ordered to pay Kraft a sum of $2.75 billion
References
Neuman, W. (2010). Starbucks and Fraft Escalate Battle Over Marketing Pact. The New York Times. Retrieved from http://www.nytimes.com/2010/12/07/business/07coffee.html
Shonk, K. (2017). Examples of Negotiation in Business: Starbucks and Kraft’s Conflict Management. Harvard Education. Retrieved from https://www.pon.harvard.edu/daily/business-negotiations/the-starbucks-kraft-dispute-in-business-negotiations-prepare-for-problems/
