Negotiations Final Paper

2036 Words5 Pages

The business relationship between Starbucks and Kraft Foods was formed in 1998 when the companies struck a contract deeming Kraft the exclusive provider of Starbucks’ packaged coffee and thus limiting Starbucks’ selling flexibility. The partnership was strong and profitable for twelve years, which resulted in a sales increase from $50 million to $500 million in 2010. Consequently, because of this growth and the popularity spike in coffee pods, Starbucks wanted additional selling flexibility. As a result, in August of 2010, Starbucks offered to buy Kraft out for $750 million, however Kraft refused declaring that the offer was well below fair market value. Despite the refusal, Starbucks dissolved the relationship and the companies engaged in a feuded negotiation they could not settle on their own. Thus in 2013, an arbitrator determined that Starbucks breached its contract and therefore had to pay Kraft $2.75 billion. In the following sections, we further explore the negotiation between Starbucks and Kraft Foods, and make comprehensive recommendations as to how both parties could have performed more satisfactorily (nytimes.com).
In this case, there were numerous issues “on the table” that the companies needed to address. For example, the principal issue was to determine which company was responsible for the contract breach; Starbucks claimed that Kraft failed to successfully promote the brands in grocery stores whereas Kraft argued that Starbucks deliberately and improperly terminated the agreement. Additionally, Kraft accused Starbucks of undermining the sales of Kraft Tassimo machines prior to the vital holiday season. Once responsibility was attributed, the next issue that needed to be considered was whether or not to enforce a pe...

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...if it had done so in this case (Reily).” Due to the difficult nature of a partnership, it is essential that business partners engage in interest-based decision making, which may lead to more beneficial results. Too often parties execute rights or power-based techniques, only creates conflict for both sides. Also, how one party treats the other dictates the success of a business partnership, "Licensing – especially at the scale of the Kraft-Starbucks deal – is really about partnership, and the more time you spend studying your agreement and looking for loopholes in its language, the farther you may be getting from what made it (or could make it) a success (Reily).” Although Kraft could be classified as the winner of this negotiation, more value could have been created or "won" for both parties rather than Starbucks owing Kraft and a forever dissolved partnership.

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