Case Study

Dragons’ Den

Troy is the sole shareholder in his small design company. He recently applied for and was granted, a patent on his latest product – the Ski Bug – a revolutionary product designed for the multi-million-pound baby care industry. He has shown the Ski Bug to several parent groups and a large baby care retailer and has had very positive feedback. Troy’s only problem is capital.

To fund the production of the Ski Bug, with proper marketing to meet his customer demand projection, he would need some heavy investment.

Without investment, his product is worthless as he could never produce market and sell it in a sufficient quantity to get a return. Ideally, he needs a backer who can help the industry, someone with a background in turning ideas into retail success, like money, though important, is not the only thing Troy lacks.

To this end, Troy has arranged a meeting with two Investment Capitalists. He has met with both previously and completed his presentation. Essentially he is looking for £100 000 and is willing to offer up to a maximum of 35% equity in his company, though he has initially asked both investors for £120 000 based on 25% equity.

Troy has a touch choice ahead as both investors are keen on the project – do doubt seeing its future potential in sales. He has received two bids:

	Investor 1	Investor 2
Investment	£ 100 000	£ 120 000
Equity share	40 %	45 %

 

Experience	Marketing	Retail
Extras offered	Design & Marketing	Contacts into sector

 

Troy is cautious about the equity share issue, as both Investors want much more than he has been prepared to agree on. He certainly does not want to lose overall control of his company – but without investment, the value of his company is very little. Troy needs to decide at today’s meeting, as he needs to get the investment in place and move forward as soon as possible. There is room to negotiate with both investors, but not much, and Troy is aware that he does not want to lose their interest!

Questions

1. What are the interests of Troy going into this negotiation? (8 marks)
2. What are the interests of the investors in this negotiation with Troy? (8 marks)
3. What are the negotiable issues in the case and their related priorities for each party? (8 marks)
4. How might Troy set his entry and exit points in this negotiation? (8 marks)
5. What justification would you give for a proposal that Troy might offer to Investor1? (8 marks)

(Total 40 marks)

Essay Questions

Essay 1

‘I can’t believe they think we will just do what they want! I’m going in there and demanding compensation!’ shouted Greg after opening his email. Ellie was a little surprised to hear Greg so angry. He wasn’t normally like that; something must have been said to upset him so much. She tried to persuade him to calm down, but he was determined to go to the meeting to fight his corner.

Explain why destructive debate behaviors can lead to a deadlock in negotiations, and why constructive behaviors can help.

(20 marks)

Essay 2

Cialdini discusses the Milgram Study where the subject was instructed to teach word- pairs to a participant known as the learner. When the learner made a mistake, the subject was instructed to punish the learner by giving him a shock, each mistake leading to an increasingly strong electric charge. Milgram Study aimed at getting an answer to the following question: “For how long will someone continue to give shocks to another person if they are told to do so, even if they thought they could be seriously hurt?” The level of obedience in the Milgram study was a surprise to the researchers.

Required:

a) Describe four factors that were thought to contribute to this high level of obedience.

b) How can a person defend himself from what Cialdini calls the “detrimental effects of influence”?

(20 marks)

Essay 3

Hari was a soft Blue negotiator and always felt he was giving away too much in negotiations. His boss was particularly unhappy with his last deal, where Hari agreed to give free servicing for three years to a new client. Although not catastrophic, it could end up costing the company as much as £10 000. Hari’s excuse, that he wanted to get the new client signed up and that maybe the company could negotiate a better deal next time, hadn’t been received well. So Hari had decided to change his negotiation style for the next negotiation – he was going to play Red and get the best deal possible, and not worry about the relationship at all.

What is the best style to use during any negotiation and why?

(20 marks)