Iberia Builds a Better Alternative to the North American Trade Agreement

The Iberia case presents details on the competition between two renowned aerospace corporations that have developed their brands worldwide. Airbus, a European corporation and Boeing, the American multinational, both looked to close a deal with Iberia, the flag air carrier airline in Spain. Iberia needed to add to its aircrafts in a purchase that was targeted at improving its business and service provision for the next ten years. Iberia had its target costs and the amount they were willing to spend for the aircrafts. Even with the numbers at hand, they needed to purchase quality aircraft that would be somewhat easy to maintain and hold its resale value even after the ten years had lapsed. It is why the company looked to get their purchase from significant brands such as Airbus and Boeing. The company presented to the multinationals the amount of money it was willing to spend on the aircraft and the deadline for when the deal was to be made. In a series of numerous months, both Airbus and Boeing presented their prices and additional advantages to why Iberia needed to purchase from them. Both prices were higher than what Iberia was looking to pay. Each aerospace multinational would adjust its proposition to Iberia of the period they were engaged in the negotiations. Iberia’s management was soundly grounded in their projected costs and would eventually ensure that the two companies yielded to their desire while including other attractive aspects in the deals they were offering. On the day the deal was to be made, both Boeing and Airbus had adjusted their deals to Iberia’s desired costs with other deal sweeteners such as resale value, employee training and engine maintenance. Nonetheless, Airbus had made its perfect offer before Boeing and this made the multinational Iberia’s best choice. A deal was therefore struck between Airbus and Iberia. 

Statement of the Problem 

One may not view any aspect of Iberia’s case as a problem per se but a negotiation process that saw one organization win the deal. Iberia, Airbus and Boeing engaged in long negotiations over many months with each manufacturer looking to get the deal. They ensure to adjust their packages as was necessary to ensure that they became more attractive to Iberia. Primarily, all three parties engaged in cross cultural negotiations that saw the right manufacturer for Iberia get the deal. Globalization has made it necessary for any organization looking to gain global headway to engage with other companies beyond its borders. This means that cross-cultural negotiations are a necessary occurrence for any company looking to advance its brand and make huge profits. Iberia identified suitable manufacturers of its planes in Airbus, which is a European multinational and Boeing which is an American aerospace giant. Lee, Adair and Seo (2013) identifies cross cultural negotiations as the dialogue and discussion of the issue at hand among parties who hold divergent cultural underpinnings. These engagements are often argued around the parties’ cultural rules and principles. In such negotiations, it is important for all involved parties to be well informed on the new processes they are likely to encounter in the other culture. They would then engage in negotiation of important issues separately, have and listen to interpreters and ensure to engage in social activities such as eating together even during negotiations. All parties should be ready for a no. In the case of Iberia, all negotiations were held separately with both Airbus and Boeing presenting their cultural uniqueness, be it their organization’s culture or their community’s culture to Iberia. Their organizational cultures meant that the business they presented to Iberia would be conducted in a manner that is unique to their organization. Nonetheless, Iberia needed to be well-informed on the cultural inclinations of both organizations to ensure that they were well-armed with information that would help them get the best deal out of the negotiations. 

Causes of the problem 

Cross cultural negotiations mean that the organization needs to have in place a marketing strategy that would fit best with the company they agree to work with in the end. In many instances, such negotiations would require the presence of an international marketing strategy to ensure that even when a deal is reached, the targeted market can be reached well and maximized efficiently ( Gelfand & Brett, 2004) . Cultural differences would mean that the products and services that may change hands among all involved parties need to be sensitive to the other culture. In instances where these products and services are not tailored to the other culture, there is a high likelihood that they may not be readily accepted ( Okoro, 2012) . Also, when presenting their packages during cross-cultural negotiations, all parties need to adopt marketing strategies that will be attractive to those they are selling to or buying from to ensure that a common ground is reached without raising any conflict that may result from cultural insensitivity. In Iberia’s case, the involved organizations were from three distinctly different cultures, one being European, another American and the last Spanish. It was necessary that the package presented by Airbus and Boeing were culturally sensitive to Iberia’s Spanish culture. Their businesses needed to ensure that even when they were presented from and American and European perspective, they integrated the Spanish and Iberian culture into their marketing strategy to make sure that the purchaser, Iberia, connected well with what they were selling. It further needed to ensure that even when the products were purchased, they would fit well into Iberia’s marketing strategy and their customers in general. 

Possible Solutions 

Pricing strategies and tactics are central issues in an organization’s marketing strategy and mix. When developing the marketing mix and overall strategy, pricing strategies will be a significant determining factor in whether the product or service will easily sell in the new market or not. As one of the crucial aspects of the marketing mix, the price needs to match the target market ( Volkema & Fleury, 2002) . This can only be achieved through research on pricing in the new market and information on how similar products are priced. Sufficient research in the pricing area would ensure that even as the organization develops its marketing strategy, it has a price in place that will be readily accepted by the buyer. For Airbus and Boeing, the companies needed to include a price in their marketing strategy that would offset negotiations with Iberia. An extremely high price would mean that Iberia may have opted for other options that presented better prices. An extremely lower price would mean that the two companies may not have maximized on their profits in case the business went through. It was therefore important to identify a price that would keep the buyer on the table even if it meant negotiating. In this case, it looks like Boeing’s and Airbus’ prices were reasonable which is why Iberia was willing to negotiate. Pricing was also a necessary aspect for Iberia since it would determine the success of their purchase in the long haul. The price Iberia attached to the purchase it was going to make with either Airbus or Boeing needed to factor in prospective profits, maintenance costs and resale value. It is why Iberia identified a cost it was willing to spend on the purchase and stuck with it. 

Solution and its implementation 

Pricing strategies and tactics determine whether a buyer would be willing to engage in business or not. Therefore, when getting into cross-cultural negotiation, pricing strategies will determine whether the buyer will take the package presented to them as determined by the prices presented ( Volkema & Fleury, 2002) . For instance, when Airbus, Boeing and Iberia where engaging in negotiations, pricing was one of the first aspects that Iberia considered. When the prices seemed reasonable and negotiable for the company, it was easy for the process to go on as it did. The pricing set by the two companies was highly dependent on the pricing strategies and tactics adopted by both selling organizations. It means that these strategies had to be right to ensure that the right prices were set for the negotiation process. To a great extent, the cross-cultural negotiation process was only possible because the pricing strategies and tactics adopted by Airbus and Boeing worked well it pulling Iberia to engage. Even when Airbus won the bid, the victory can be credited to their pricing strategies and tactics. The company reviewed their price to a level that was agreeable with the cost Iberia was willing to part with. Airbus managed to adjust its pricing strategies and tactics severally to ensure that the end result won them the deal. 

Justification 

Iberia engage in the negotiations to identify the deal that merged well with its cost and would be easy to maintain in the long run. The company opted for Airbus and Boeing because it was aware that they are the best in the market. Nonetheless, the prices presented by the two sellers would in the end determine how the negotiations went. The initial prices for both organizations seemed reasonable and this enabled the negotiation process. In the end, the strategy and tactics adopted by Airbus worked in the company’s favor. It managed to get the deal and would eventually reap the profits. Iberia made the choice by considering its initial costs, the resale value of the aircraft that would be purchase and the maintenance cost. All these were fulfilled in the deal presented by Airbus. 

References 

Gelfand, M. J., & Brett, J. M. (2004).  The handbook of negotiation and culture . Stanford University Press. 

Lee, S., Adair, W. L., & Seo, S. J. (2013). Cultural perspective taking in cross-cultural negotiation.  Group Decision and Negotiation ,  22 (3), 389-405. 

Okoro, E. (2012). Cross-cultural etiquette and communication in global business: Toward a strategic framework for managing corporate expansion.  International journal of business and management ,  7 (16), 130. 

Volkema, R. J., & Fleury, M. T. L. (2002). Alternative negotiating conditions and the choice of negotiation tactics: A cross-cultural comparison.  Journal of Business Ethics ,  36 (4), 381-398.