Apple-Samsung Negotiations: Theories and Conflict Resolution

Negotiation between Apple and Samsung
Case Summary
Conflict resolution is common among business organizations due to the inevitable situation of conflicting interests that often arise from their daily business operations. All companies must deal with several forms of disputes, including breaches of contract, labor law, or intellectual property. In this case, the negotiation between Apple Inc. and Samsung Inc. represents one of those situations where businesses must find a solution to a dispute that could be detrimental to the relationship between them. Apple is a multinational technology company known for its wide range of consumer electronics, software, and online services. It was founded by Steve Jobs in 1979 and headquartered in the United States. Samsung is also a multinational technology company founded by Lee Byung-chul in 1938 and specializes in consumer electronics, electronic components, flash memory, semiconductors, and telecommunication equipment. It is one of Apple’s biggest component suppliers with Seoul, South Korea as its headquarters. The corporate dispute and the prolonged negotiation between the two companies started on August 4, 2010 with Apple’s claim of patent infringement evidenced by Samsung’s Galaxy phone CITATION Eic14 \l 1033 (Eichenwald). According to Apple, Samsung’s Galaxy S smartphone copied iPhone features and thus warranting the former’s claims of infringement on its patent rights CITATION Eic14 \l 1033 (Eichenwald). The ensuing negotiations towards reaching an amicable solution to the corporate dispute were led by representatives from both companies. Apple’s team was led by its associate general counsel for intellectual property, Chip Lutton, against Samsung’s Vice President Seungho Ahn CITATION Eic14 \l 1033 (Eichenwald). The business organizations did not come to an agreement during the first attempt at negotiation in Seoul. It ended in an impasse with both companies positioning themselves to pursue their interests through lawsuits stretching through years of corporate war between the two CITATION Eic14 \l 1033 (Eichenwald). Since the first lawsuit, more than fifty other lawsuits have been followed by both parties in major global markets, including China, the U.S., European countries, and Japan. By the end of the five months, it was estimated that the total value of the lawsuits was over $1 trillion (Chen, Liu, and Yang 141). A California jury ruled that Samsung had to pay $1 billion in damages, eventually reduced to $300 million by the judge. Another jury ruled in 2013 that Samsung should pay $290 million of the amount overruled by the judge in the 2012 case (PON). The breaking news also negatively impacted both companies’ image and reputation. The court settlement resulted from the parties’ failure to make concessions on their positions in their early attempts to negotiate an out-of-court settlement for the identified conflict of interests between the two companies.
Applicable Class Theories
The Apple-Samsung negotiations make for an excellent platform for evaluating negotiation principles in conflict resolution. A detailed evaluation of the negotiations reveals each party’s careful analysis of the ensuing conflict of interest towards developing the most appropriate bargaining strategy for achieving their desired outcomes. Steve Jobs, Apple’s mercurial chief executive’s fury over alleged Samsung’s infringement of his company’s patent rights trickled down to the negotiation’s table. Samsung’s Vice President Seungho Ahn expresses his anger over Apple’s patent infringement claims and thus escalating the dispute. Ahn directed a negative emotion of anger to Apple’s representatives at the bargaining table, limiting the chances of using the long-term relationship between the two parties in finding an amicable solution to the conflict CITATION Bro192 \l 1033 (Brooks). It is for this reason that the meeting ended in an impasse with each party poised for a lengthy battle of lawsuits in courts around the globe. Apple acknowledges the significance of maintaining a good relationship with Samsung, one of its key components suppliers for Apple’s manufacturing endeavors CITATION Eic14 \l 1033 (Eichenwald). Samsung also appears to have analyzed the situation and recognized its value to Apple’s production, which it prepares to use in bargaining a favorable outcome for its sustainable growth and development. The overall outcome of the companies’ analysis of the ensuing dispute elicited a situation of balanced concerns. Apple weighed its concern for future relationships with Samsung, its key component supplier, against the high stakes of protecting against infringement of its patent rights. On the other hand, Samsung embraced a competitive transaction approach to the negotiations by holding on to a position that would guarantee it high stakes of payment for royalties accrued at the expense of its existing relationship with Apple. However, the companies ended up embracing a competitive bargaining style as they both held high expectations of winning big from the court proceedings. The stakes of winning the lawsuits were higher for both parties mattered more than upholding their corporate relationship. Both parties then use the gathered information in planning how to approach or engage the other party in the negotiations. However, their plans do not execute or fail to apply the four elements of principle negotiation. Apple’s preference for an out-of-court settlement of the dispute meant Samsung’s payment of its claims to royalties over patent infringement. It would have resulted in a win-lose outcome in favor of Apple. On the other hand, Samsung sought compensation for Apple’s use of its wireless transmission technology. Both parties stood to win if the lawsuits were determined in their favor and thus prompting them to hold on to their positions during the initial discussions held between the companies’ C.E.Os.
It suffices, therefore, that both parties embraced the positional bargaining approach in their attempts to solve the dispute, as highlighted by their resolve to seek the arbitration of the courts. An out-of-court settlement for both parties would have saved them money in financing the lawsuits. Both companies were willing to find an amicable agreement out of court at some point in the discussions. Such an outcome would have been Apple’s best alternative to a negotiated agreement (BATNA) by ensuring that it maintains a good relationship with one of its key suppliers for its products’ components CITATION Ury07 \l 1033 (Ury). Avoiding lawsuit and reaching an out-of-court licensing deal with Samsung also makes for Apple’s best alternative to a negotiated agreement. Samsung’s BATNA, upon the breakdown of the mediated talks between companies’ CEOs, would have been to pay for the patent rights in return for receiving compensation from Apple for using its wireless transmission technology. It would have ended up paying less than the total amount it paid through the court. Both par...