Conflict at New Horizons

New Horizons Corporation, a drug manufacturing company,manufacturing Lixon, a drug to prevent heart attacks which is the best selling product inmarket. According to the facts and figures company is unable to earn profits as it is at breakevenpoint. The CEO of the company thinks that it is because of the high salaries of theemployees. He says that major part of the earnings of the company is used in the salaries.Two years earlier, Mr. Usman the CEO of that company decided to decrease the averagesalary from 3 million per year to 2.2 million per year which is almost 28 percentdecrease. This decision resulted in great conflict between the employee union and themanagement of the company.

After facing the great resistance, the management decided topresent the offer to the union to accept the salary of 50 percent of the revenues of thecompany but it will link the employees to the revenues which could swing up or down. But theboth ideas were rejected by the union and neither party agreed on the amount. TheCEO gave them the final offer to lessen the decrease from 28 percent to 26 percent,to take it or leave it. But the union wanted this decrease up to 20 percent. As a result theevents grounded to a halt.

Which affected the operations of the company and as a resultproduction was stopped. After bearing huge losses Mr. Usman offered 27 percent decrease insalaries of employees. Union was really unhappy with this decision but theyfelt that fighting on this issue will result in nothing but the wastage of time as the CEO hasbrought them at the position of no win situation. The lack of an agreement at newHorizons was a loss to everyone, employees, company, CEO and of course to the endconsumer.

Questions:

1. In the above scenario which negotiation perspective has beenused (distributive/ integrative)? Give logical reasons to support your answer.

2. What factors do you believe lead to the lack of settlement inthe negotiation of New Horizons?