Bargaining Power

Reproducing a brief article from https://pestleanalysis.com/bargaining-power-in-business/

Negotiating the terms of any agreement, formal or not, is a complicated matter. Taking commerce as an example, buyers will always want to negotiate to the lowest prices possible, while sellers will always seek to sell at the highest prices possible. Bargaining power is one of many economic concepts introduced to facilitate the understanding of all of the different factors that can affect how deals are struck and how businesses perform.

What Is Bargaining Power?

Bargaining power is a measure of the capacity of one party to influence another. It is an important topic in negotiation because parties with higher bargaining power are able to leverage their circumstances to strike more desirable deals with others.

All of the parties in an agreement have their own bargaining power, however little or great.

What Determines Bargaining Power?

There are a number of different factors that determine or affect how much bargaining power a party has. In the following list, you can see some of these factors along with a short explanation of how they affect a party’s ability to bargain.

Factors that affect bargaining power:

Having alternatives — If a party does not need to be dealing with some other party, because they have alternatives, then they have more bargaining power. This is because they present a risk in being able to walk away from the deal without causing themselves too much trouble.

If a party does not have any alternatives, then they have little bargaining power as the other negotiators can threaten to walk away from the deal, leaving them in an unfavorable situation.

Little trouble in switching to an alternative — Similarly, a party has more bargaining power if there is little trouble in them switching to an alternative, and vice versa.

Lack of necessity/importance — If one of the parties in a negotiation can walk away from the deal without suffering any consequences, either due to a lack of necessity or importance to cut the deal, then they have more bargaining power. Once again, this is because it indirectly threatens the other party with them losing business, so they have to offer a better ‘bargain’.

Relevant knowledge — Being knowledgeable in relevant fields also provides parties with more bargaining power. This is because they are less susceptible to making unfavorable deals due to being uninformed or misinformed.

The trigger for this post is the twin bargaining situations we are facing at the moment. One is staff agitation. The other is students request to reduce fee components.

The bargaining situations often arise in many facets of our lives. Knowing the bargaining power we possess is crucial to successful negotiations. Assuming more power than we actually have can lead to self harm. On the other hand, having more power should not lead to exploitation. As long as both parties perceive what they have got, the negotiation is successful.

Assess your own bargaining power. Assess the bargaining power of the other party. Be reasonable. Keep the greater good in mind. Understand environmental limitations. Bargain for win-win. 

Unintended Consequences

I have heard stories of unintended consequences.

Here is the first one I heard from Madhu Sudan Padhi. During the time when British were ruling India, at one time, there was a problem of snakes in Delhi. They debated a for a solution. The solution they arrived at was crowd sourcing. Give incentive for catching a snake. Later they observed that too many snakes are caught. On investigation it was found that people are breeding snakes to claim incentive. The solution has the exact opposite effect of increasing the problem. It has a name now called the Cobra effect.

https://en.wikipedia.org/wiki/Cobra_effect

Here is one more. In the past, the banks will staple currency notes in bundles of 100. The problem was that the notes were damaged in the process. RBI came with a notification to stop this practice. Tata Steel found that they had a revenue loss of a few crores as the demand for staple pins dropped. RBI certainly did not intend to harm the steel industry through this notification.

Here is the last one. The Demonization in 2016 was meant to wipe out black money from the economy. But it ended up harming the real economy. Whether black money was eliminated remains debatable.

I was surprised to see a website on Unintended Consequences. http://ucstories.com/

Any action from me or us has consequences and sometime it is unintended. We often score a self-goal in the process. One needs to game our decisions to see its consequences on oneself and others,

Over confidence of a group

During this pandemic, I have been busy reading a few books. One of these books is Sapiens: A Brief History of Humankind by Yuval Noah Harari an Israli Professor. One of the messages from the book caught my attention.

The Homo Sapiens is a social animal. We live in groups. The groups have now gone beyond the geographical boundaries. Being social, we exchange information and knowledge.

I have not invented the air-conditioner. But, I use one for comfort. I assume it is safe because millions use it. I have not invented the mobile phone. But I use one for communication. I have not invented the bed and the mattress. But I use one for sleeping. I have not invented the pen or the paper. But I use them to write. I am not going to invent corona vaccine but I will use it when it is invented.

The question in my mind now is why did the inventor of air-conditioner, mobile phone, pen and paper allow me the use their inventions for my comfort and my work. If I were an animal, to use these gadgets, I would have to invent them myself. I will not share my tricks with any body. So, my fellow animal have to invent their stuff for their comfort. No so with Human Beings. We share every thing: some times free and some times for a price. The development of the human civilization is based on this principle. More so with academicians, who have to share their knowledge, old or new, with everyone in books and journals.

Socializing and groups breed confidence, some times over-confidence. When, we go to a strange place or a strange domain, we get more confidence when in a group and less so when we are alone. Refer to a previous blog by my colleague Sushant Mishra. Some of our students went to the beach in a group. When a few entered in to water, others who knew no swimming, also entered the water. They probably would not have entered the water individually. An incidence of over-confidence. One student died when the under currents pulled him into deep sea. The sea did not divide the tragedy among the group. There are many instances among the youth who do very risky stuff in a group without realizing the personal risks involved.

We do things in a group which we will perhaps not do as an individual. It has positive and negative connotations. We join a mob and resort to ugly behaviour because the mob gives us the confidence. However, when the police fire at a mob, they do not harm everyone but a few individuals. We join a cultural group and perform a play. The performance is appreciated and we all take credit. The performance goes bad and we all share the discredit.

It is easy to succumb to the over-confidence we derive from a group. But, we have to remember that when a bullet is fired at a group, it is not shared by the group and an individual takes it, . Some may survive the wound, others may succumb. If I do not want to take a bullet, I should not join a group where the bullets may be a possibility.

What the hell happened in 2007

I was watching this video https://www.youtube.com/watch?v=EUWCj-d2heM when I decided to write this blog.

Thomas Friedman is one of my favourite authors. He was interacting in a Intelligence Squared debate - again one of my favourite shows.

He was talking about his book Thank you for being late and specifically talking about a chapter which shares the title of this blog.

What happend in 2007? Most people remember the financial crisis in 2008. Here are some events which took place in 2007:

1. Steve Jobs introduced iPhone, the first smart phone in the world
2. Google bought Youtube
3. Google launched Android
4. AT&T introduced Software Defined Networks (SDN)
5. Amazon introduced Kindle
6. Air BNB was conceived in an apartment in San Franscico
7. IBM built its cognitive computerWatson
8. Intel introduced non-silicon material in chips
9. Facebook opened up to public a few months before 2007
10. Twitter started a few months before 2007

While the world went into a tailspin because of the financial crisis, the events of 2007 augured the beginning of the tech driven world.

Coincidentally, IIIT Bhubaneswar started around this time.

1. The foundation stone was laid in 2006
2. The Institute started functioning in 2007 and M.Tech. programme started in 2007.

It feels great to be in company of such tsunami like events and hopefully we created small waves in our own environment.

RIP message of a Student : A Strong Lesson for Others

Sushant Mishra

“Death” is the answer which nobody questions, and “life” is the question which nobody can answer. Death is inevitable, nobody can avoid it. But reasons could have been avoided.

The unnatural death of a 4th Year student, Himanshu Rathore at Paradeep  on 28th Feb 2018  due to drowning  came as a shocking news to the Institute.

Students prefer to ignore advice / warning of the Institute. They prefer to take certain adventurous actions, which may result in fatality. They do not visualize the consequence of error. For the daring actions, they may get temporary satisfaction; even this might have gotten them brownie points from friends. The temporary provocation or temptation sometimes results grievous consequences.  

Apart from venturing into sea for bathing, doing acrobats in bikes or high wall jumping or Spiderman stunt or taking Selfie pic in vulnerable positions are some bright examples. But fatal results will leave tears in the eyes of your family and well wishers.

Life is very precious and delicate. There is no re-take or un-do. You don't have exclusive right on your life. A major part of your life belongs to your parents, relatives, and friends. So one should not dare / take risk on his life, which you have no complete ownership. Parents have many expectations, wishes and dreams on you. Don't dishearten them. They get pleasure from your smile, so keep them smiling, not crying.

The Institute has witnessed half a dozen unnatural deaths in its brief period of existence. A few had miraculous escape from the jaws of death. They got new lease of lives. The stigma, traumatic feeling of the survivors will last for their life long. They ventured into the water despite warning from the Institute and from others.

Off late some mischievous students get sadistic pleasure by breaking fire extinguisher system.  Fire extinguishers which are meant for protecting them will be no use in case of  a fire.

Death due to drowning is one kind of willful death or shadow suicide. Any kind of daring instinct and challenge should be avoided which will cause sorrow to family. Being aspirant of a bright professional career, you should do certain action for which your family, friends, Institute, nation should proud of, not to feel sorry about.

The Institute expressed condolence to his bereaved family. We know the Institute will back to normal within a day or two. Friends will mourn for a week or so. But we understand the heartbreaking feeling of parents, whose tears will not dry.

May the soul of Himanshu Rathore rest in peace. And it will be great tribute to him, if all other students learn a strong lesson from this irreparable loss and they should vow not to venture into life-risk actions beyond protection limit.

The Yellow Line

I have seen a yellow line in the airports at the metal detector near the security check area. The queue starts from the metal detector and one must stand behind the yellow line.

I have often wondered what purpose the yellow line serves.

Recently, I visited USA on a vacation. I noticed yellow lines every where. Even in the coach we traveled, there was a yellow line in the aisle near the driver. The driver will not start if some one has crossed the yellow line.

Queues are a very important element of civilization. In operations research, queuing theory is a tool in optimization. In computer science, queues are a very important data structure. In nature, we find ants achieve seemingly impossible things by following a queue.

I have noticed the futility of jumping the queue in the airport. We need to stand several times in a queue: when getting into the airport, check in, security, boarding, getting in the bus which takes us to the plane, deplaning. No matter who is ahead of us, we all reach the destination at the same time. It seems like a small victory in being ahead in a queue but there are no benefits. Following the queue helps in completing the process faster.

I have also observed how people respect a queue in a temple. In Jagannath Temple in Puri, queues are rarely formed and the Darshan is a traumatic experience for many. In south India, the queues are more regularly followed in temples.

I have observed school children meticulously form and follow a queue in school or when they visit a zoo or a museum in a group. But, as adults we often are too impatient to follow a queue and end up being chaotic.

I do not know why we hate queues but some reasons may be a. feeling more important if you do not stand in a queue, b. a feeling that you will achieve or acquire some thing out of turn, c. the VIP culture.

I hope to see more queues and less chaos in the Institute.

Bad News First

Everybody loves a good news. Be it in exams or job or family, or health, we welcome the good news.

I was chatting with an IT executive and he told me that he wanted to hear about bad news first and good news later. The logic was simple: you can do something if you hear the bad news early. He narrated incidents when he broke the bad news to his clients early and was appreciated for that.

That discussion got me thinking. It is said that before the truth takes off, the lie travels around the world. It may also be true of bad news and good news. I have often shared the bad stories with students and parents first. A few of them have appreciated the idea.

In our culture, the bad news is often not shared but the good news is gloated upon. Personally, I think no news is good news and bad news is worse news. One has to keep both eye and ear open for the bad before it becomes a news item.

Here are some good news and bad news jokes.

A man receives a phone call from his doctor.The doctor says, “I have some good news and some bad news.”The man says, “OK, give me the good news first.” The doctor says, “The good news is, you have 24 hours to live.” The man replies, “Oh no! If that’s the good news, then what’s the bad news?”The doctor says, “The bad news is, I forgot to call you yesterday.”

Here are some quotes about good news and bad news.

“It is much, much worse to receive bad news through the written word than by somebody simply telling you, and I’m sure you understand why. When somebody simply tells you bad news, you hear it once, and that’s the end of it. But when bad news is written down, whether in a letter or a newspaper or on your arm in felt tip pen, each time you read it, you feel as if you are receiving the bad news again and again.”
― Lemony Snicket, Horseradish

“There's good news and slightly less good news.”
― Joanne Harris, The Gospel of Loki

“The bad news is nothing lasts forever,
The good news is nothing lasts forever.”
― J. Cole

“In my experience , big words ornament bad news.”
― Roshani Chokshi, The Star-Touched Queen

“Bad news has good legs.”
― Richard Llewellyn, How Green Was My Valley