Introduction
The case study looks at the challenges and issues faced by the managerial leadership at BRL Hardy. It provides certain meaningful insights and information to the reader in order to help them to understand the magnitude of the dilemmas faced by the senior managers of the company as they attempt to analyze the various risks and rewards associated with taking up one potential business project or the other. The case study enables the reader to think and analyze the problem from the perspective of the acting manager and gives them an inside look into the procedures and processes of the corporate business world.
BRL Hardy is of the leading wine companies operating primarily in the Australian wine market. The case study introduces the reader to Christopher Carson, the managing director of the organization’s Europe and UK division. It focuses on the conflict that arises between BRL Hardy’s headquarters team in Australia and the company’s UK team under the leadership of Carson on the determination of potential business ventures and projects that are best suited for the future of the organization. The report attempts to examine and analyze the conflict between the two managerial camps from the perspective of international business negotiations and tries to determine the best course of action that should be followed by the management in order to resolve the issues at hand.
Company Background
BRL Hardy came into existence in June 1992 as a result of the merger of two Australian wine companies, namely Thomas Hardy & Sons and Berri Renmano Limited (BRL). Thomas Hardy & Sons began operations as early as 1857 and exported hogsheads to England. By 1912, the company not only became the largest wine maker in Australia but also the most respected in the business through an excessive focus on the aspect of quality. BRL, on the other hand, was the country’s first cooperative winery and established business operations in as early as 1916. It focused on “fortified, bulk, and value vines” and became the largest grape crusher in the country by the 1990s.
While Thomas Hardy & Sons followed more “traditional and cultural” values and operational practices, BRL’s business operations were centered around a more “aggressive commercial” philosophy. At a time when Thomas Hardy & Sons encountered financial problems as a result of its three European acquisitions, BRL was also on the lookout for new avenues in order to expand and upgrade its business portfolio. The two companies decided to merge their operations in 1992under the name of BRL Hardy in a bid to capitalize on the combined resources and capabilities of both the organizations. The merger was played down by industry experts and analysts at the time and the new company did experience some difficulties during the first year of its operations. However, effective management and leadership from CEO Steve Millar soon established the operating procedures of the new company and guided the organization to sustainable business operations in the following years. (BRL Hardy: Globalizing an Australian Wine Company, 2003)
The Strategic Focus
Under the managerial leadership of Steve Millar, who was also the managing director of BRL before the merger with Thomas Hardy & Sons, the operational strategy was to focus on growth though the sale of branded bottled wine, while, at the same time, protect the company’s share of the bulk cask business portfolio. The merged company initially focused its operations and targeted its business activities on the domestic Australian market. It allowed the management to sort out the merger efficiencies from both the companies and capitalize on its combined resources before launching its export operations.
Another area of focus for Steve Millar was the organizational culture and management practices within the merged company. He realized that the senior managers of both the companies had different management styles. Millar wanted to incorporate a more independent and decentralized management structure into the company which gave the senior management enough freedom and decision making capacity to identify, analyze, pursue, and own their individual business projects. Such an approach was particularly difficult for the managers that came from the Hardy’s side of the business as they had worked under a more centralized operational structure.
The decentralized focus incorporated by Millar later led to negotiating problems and difficulties between the Carson, the UK office lead, and the managerial leadership at the Australian head office. Carson, acting on the delegation principles and values that Millar had pushed, identified and pursued his own business ventures that he thought could bring sustained profitability and operational advantage to the company. Millar and his team, on the other hand, wanted to control certain essential aspects of the final product in a bid to keep the products brand centric and in line with the organizational vision and values. (BRL Hardy: Globalizing an Australian Wine Company, 2003)
The Challenge
There were two major problems and challenges in regard to business negotiations that can be pointed out from the analysis of the case study. At the outset, Carson wanted to execute his plans for the new line of wines under the brand name of D’istinto developed and worked over extensively by his team for months. He had taken his plans for the new brand to the Australian team in order to launch in the UK market but had run into problems regarding their approval. The Australian management under Millar had raised serious questions regarding the joint venture with Italian farmers as a similar project previously initiated by Carson had not fared well in the market. Millar had also raised questions over Carson’s commitment and dedication to the company’s established products and wine ranges as he feared that excessive focus on new product lines might be detrimental to the performance of the existing products.
The second challenge faced by Carson was a head to head battle between two proposed brands for the United Kingdom market, namely Kelly’s Revenge and the Banrock Station. Kelly’s Revenge was the pet project of Carson’s team developed specifically for the UK market, with a target focus on younger consumers. Carson, acting on the principles of delegation pushed by Millar, had given the creative freedom to his team in order to develop a new entry level product range for the local market and Kelly’s Revenge was their answer. On the other hand, Banrock Station, was a new entry level wine line introduced by Millar’s team in the local Australian market. The sales had exceeded expectations and Millar was convinced of the global brand potential of the product. Hence, the Australian team pushed Carson to launch Banrock Station in the UK and European markets as a new entry level product. Carson, on the other hand, felt that Banrock Station was not ideally suited for the UK and European market and aired his reservations regarding the new range of wines.
The dilemma faced by Carson was of epic proportions; on the one hand, he had a product range specifically developed by own team for the local market, on the other, he had a domestically successful product range from the Australian headquarters for the UK market that he felt was inappropriate for the local European market. Similarly, Millar, the managing director of the company, had his own set of challenges and dilemmas. While he wanted the managers to express freedom and practice decentralized business procedures, he also wanted to keep the new product ranges aligned with the company’s global branding vision. Millar also pondered over his response and the manner in which to negotiate with Carson in the event that Carson decided to push Kelly’s Revenge instead of the product Millar wanted to launch in the UK market, the Banrock Station.
Roots of the Conflict
A number of reasons can be identified from the examination of the case study that led to the clash between the Australian team working under the leadership of Millar and the UK team working under the leadership of Carson. Firstly, the merger between the two companies with contrasting management styles and philosophies led to cultural conflicts and autonomy problems. Most of the senior managerial roles were given to former BRL managers which was taken negatively by the former Hardy managers and employees. They felt like outsiders in the merged company and had to prove their worth in order to attain the creative freedom that Millar and his team promoted. Furthermore, the decentralization structures and practices incorporated by Millar created tension between the Australian and the UK offices.
As a result of unclear and imprecise negotiations and discussions, a rift was created between the two teams as Carson believed that he had control over product branding, labeling, pricing, and other essential aspects for the UK and the European market. In contrast, Millar assumed that the Australian team controlled the essential aspects of branding, labeling, and pricing while the distribution, promotion, and sales strategy was decentralized to the UK team working under Carson. Millar was of the opinion that the branding and labeling practices of the product ranges should be controlled by the headquarters as they attempted to keep the new products in line with the global branding effort of the company. Carson, on the contrary, believed that his team should determine the labeling, pricing, and branding aspects of the products in the UK market as they were more equipped with the dynamics and underlying forces of the European wine market.
Secondly, in an attempt to embrace the concept that the BRL Hardy wine ranges had to be global brands, Carson successfully negotiated a business contract with Italian grape farmers in the Sicilian region and partnered up with them in order to develop a new wine range under the brand name of D’istinto. The new product range was targeted at the average wine consumer in the UK market who necessarily did not have the knowledge or the expertise in regard to wine tasting and purchasing. Through the development and pursuit of D’istinto, Carson also acted in accordance with the expectations of delegation and decentralization put forward by Millar. However, when Carson presented the idea of the new product to the Australian team, Millar, along with others, was standoffish and unreceptive about it. This issue highlights yet another aspect of faulty communication and imprecise negotiation between the two parties.
Lastly, another decision that became a source of discord between the UK team and the Australian team was the hiring of Paul Browne. Carson, upon Millar’s suggestion that he needed to reconnect more effectively with the Australian team and delegate responsibility to subordinate managers, appointed Browne from the headquarters to the post of marketing manager in his team. Browne was given the responsibility to identify and develop new product ranges by Carson in order to fill up the gaps created by moving “Stamps” and “Nottage Hill” to a higher price range.Browne and his team came up with Kelly’s Revenge after months of work and finalized the product for launch in the UK market. But the project created tension between the two teams as Millar argued that it did not represent the organization’s collective branding message. Evidently, the lack of clear business negotiation between the two teams had created another problem for both sets of managers. (BRL Hardy: Globalizing an Australian Wine Company, 2003)
Business Negotiation Frameworks
Much research has been carried out over the years that attempts to indicate the best and most effective practices and strategies when it comes to the negotiation regarding crucial projects and business ventures either between different teams within the organization or between the company and its suppliers, distributors or other important actors.
Competitive vs Cooperative
Aslani et al. (2016), in their work, highlight the influence that cultural differences can have on business negotiations and conflict resolution attempts between an organizational team and a subsidiary team. They argue that information sharing, insights and a cooperative mindset when negotiating for joint goals and objectives occupy substantial importance in order to resolve the conflict in an effective and efficient manner. The study also suggest that business negotiation processes characterized by influence and competitive aspirations are more likely to result in further disputes between the teams.
Applying the work of Aslani et al. (2016) to the case of Carson and Millar, it can be argued that the most effective and efficient avenue in order to arrive at an acceptable resolution for both parties is to engage in business negotiations in a cooperative manner. Information sharing, openness, trust, and meaningful insights regarding priorities can result in an adequate and appropriate solution of the problem for both Carson’s and Millar’s teams. It will not only help them in resolving the conflict effectively, but also result in higher joint gains for the company in the long run. (Aslani et al., 2013)
Business Negotiation Model
One of the fundamental models for international business negotiations was presented by Ghauri (2003). The model for business negotiations can be used in order to simplify the process of negotiation and conflict resolution between companies and its subsidiaries.
Ghauri (2003) argues that the business negotiation process is influenced by a number of factors that can primarily be categorized into strategic factors, cultural dynamics, and background factors. The strategic factors comprise of the presentation of arguments and information in an effective manner, the strategy devised by the negotiators in order to attain their desired results, and the circumstances that play a crucial role in the decision making process of the negotiating parties. (Schoop et al., 2010)
Similarly, the cultural factors can be divided into time restraints, individual and collective goals of the negotiator and his team respectively, the presence and usage of emotions and feelings during the process of negotiation, and the relationship between the actors. The background factors can be defined as the objectives that a negotiator has before the process begins, the environment of the process, and expectations that negotiators have from the procedure. All these factors can be applied to the case of Millar and Carson in order to gain a better understanding of the negotiation processes between the two parties.(Fjellstrom, 2005)
Although Millar wanted to demonstrate his principles of delegation within the organization, his team still argued for controlling the essential aspects of the product ranges. This shows that Millar wanted to keep the power dynamic for the Australian team as his team felt that too much decentralization can have detrimental affects for the health of the organization and its global brands in the long run. Carson, alternatively, had many attachments that were bound to influence his decision making during the negotiation process. He had worked extensively on the D’istinto project and felt that it was unfair of Millar to slow down its approval on the basis of the previous Chilean joint venture. Similarly, Browne had emotional attachments to his project as well – Kelly’s Revenge. He even tried to block the launch of Banrock Station in the UK by playing politics. This shows that both the parties clearly wanted to hang on to their objectives and made up for a difficult negotiating journey.
The Negotiation Atmosphere
The atmosphere that existed for negotiation between Miller and Carson was a tense one. Both the parties had clashed over previous issues and problems. Carson, being a former Thomas Hardy employee, already felt like an outsider due to the merger. Although he had performed well and had “earned his stripes,” he still felt that crucial aspects such as labeling, branding, and pricing of the product should be the domain of the local team, not the corporate headquarter situated miles away. He had also gone through a difficult negotiation process with Millar and his team before when he wanted to move the Stamps and Nottage Hill to a higher price range. Hence, the feeling of unresolved tension and uneasiness governed the current atmosphere for negotiations.
References
Aslani, S., Ramirez-Marin, J., Brett, J., Yao, J., Semnani-Azad, Z., Zhang, Z.-X., Tinsley, C., Weingart, L., & Adair, W. (2016). Dignity, face, and honor cultures: A study of negotiation strategy and outcomes in three cultures: Dignity, Face, and Honor in Negotiation. Journal of Organizational Behavior, 37(8), 1178–1201. https://doi.org/10.1002/job.2095
Aslani, S., Ramirez-Marin, J., Semnani-Azad, Z., Brett, J. M., & Tinsley, C. (2013). Dignity, face, and honor cultures: Implications for negotiation and conflict management. In Handbook of research on negotiation. Edward Elgar Publishing.
BRL Hardy: Globalizing an Australian Wine Company, (2003).
Fjellstrom, D. (2005). International Business Negotiations. Sodertorn University.
Ghauri, P. N. (2003). A framework for international business negotiations. International Business Negotiations, 2, 3–22.
Schoop, M., Köhne, F., &Ostertag, K. (2010). Communication quality in business negotiations. Group Decision and Negotiation, 19(2), 193–209.
