Luna Case

Analysis

Liaku Xiong
Professor Durpi-Hali
Writing 118
4/12/2012
Luna Case Analysis
DGG’s BATNA and Interests

The Luna Pen Case was an interesting piece to read and discussed in class. After a week-long
analysis, both parties have different BATNAs and interests in play. DGG’s alternatives were to
“bring suit against Feng and Global Service to recover damages for past trademark violations,
negotiate settlement with Feng in respect to prior royalties and right to future use of the Luna
name, [and] find other enterprise that would be interested in buying Luna.” DGG’s BATNA in
this case, was to negotiate a settlement with Feng. DGG does not want to bring a suit against
Feng and Global Service because a law suit is expensive and time consuming. DGG’s legal
expert, Gunther Schmidt, advised Erika that it would not be as expensive to file trademark
infringement suit. However, the best DGG would get from this suit is a court order prohibiting
Global Service from using the Luna name in the future. Moreover, DGG does not want to find
another interested enterprise to buy the Luna name and manufacture it. DGG do not want to enter
the fountain pen market as DGG will not be able to market it and plus, they got out of that
market 6 years ago for a reason.

With the best strategy set, DGG’s interest is basically to get anything out of this windfall. By
negotiating for a settlement, DGG is not going to lose anything, but gain only (if Erika negotiates
correctly). On a more personal level, Erika’s interest in this process is to create a good
impression upon her boss, Wilhelm Mann. Also, this was her very own first project requested by
Mann. She could not let her new boss at her new job down.

Global Service’s BATNA and Interests

From the other perspective, Luna represents 25% of Global Service’s sales. Global Service is
successful mainly because of Luna and furthermore, plans to expand. Their primary response to
Erika is to offer a nominal fee for their use of the Luna name. However, DGG must release all
rights to Global Service. This is their best alternative in this negotiating process. Their later offer,
a 1% royalty fee for all future sales, will only allow them to take 24% of their Luna sales. Also,
they would not get all the rights to the Luna name as requested. Mr. Feng’s interest in this
process is to avoid a lawsuit as much as possible, even if he does not seem to be afraid. He does
not want to discontinue manufacturing and distributing this product because it’s ¼ of his
company’s sales. Moreover, if he has to make a deal with DGG, he is not going to do so without
a fight. He will negotiate the lowest deal he can get.

What do you Think?

In my opinion, I would have to agree with Mr. Feng. DGG had discontinued with Luna and
should not be asking for any royalty fee for future sales, as this was a generous offer. On the
other hand, I do believe that Erika got the best deal at the end. She was able to go to the balcony
and think things through before making any final decision. She got Global Service to compensate
for past trademark violations and another huge payment for the release of the Luna name to
Global Service. Given that DGG had lost hope in Luna, this is the best offer they could have got
from Feng and Global Service.
Negotiating Style

After analyzing the Luna case, we were able to discover our own negotiating style. On the
matrix, I lean towards “Concern for other party’s interest.” I believe this has some truth in it. I
like to make decisions that are the best for both parties. I do not want the other to be left in the
dust given that I will be the winner. There has to be some give and take on both sides. If I was to
play Erika’s roll, I would have used a different method to contact Mr. Feng (i.e. phone call).
Additionally, I would have been the first one to offer a proposal than let Mr. Feng. It would have
just made the communication process more efficient and quicker, since as Mann had said earlier
“We have much bigger things on our agenda.”

Culture

As we can see, culture definitely took a toll on this negotiation. Erika was German and Feng was
Chinese. There was a huge gap in the culture differences between the two parties to begin with.
Erika had to understand that perhaps her gender as a woman was not seen as high authority to
Feng. The communication style could be different in that Feng will only negotiate with the
execute of the company, not an employee. Also, consider the fact that Feng may really be out of
the country for several weeks during Erika’s trip to Taipei. Thus, having his secretary (a woman)
contact Erika notifying her (who is also a woman). On the bright side, Erika was able to
understand the clash of the two cultures with her background knowledge, experience, and books.
She negotiated with Feng at the end and earned DGG something from this windfall. It was better
to receive something than nothing at all for DGG.