Japanese and US Rice Negotations, business and finance homework help

INSTRUCTIONS:  This information below is the opposing TEAMS (United States) negotiation offer. Please play the role of Kazuhito, Yamashita Senior Fellow, The Tokyo Foundation and Research Institute of Economy, Trade, and Industry (REITI).  

PLEASE RESPOND and explain why there are benefits on US proposed agreement. Also please provide a Statement regarding policy changes & satisfaction over direction of the US agreement. (pasted below). PLEASE PROVIDE A ONE-PAGE response. 

THIS IS A LINK TO OUR JAPANESE POSITION:  https://docs.google.com/document/d/1IY1giBnDOsBl17hCRPnNBLt417CVoQjlRpZYcWNtCcY/edit?usp=sharing

PLEASE USE THIS BELOW TO ANSWER THE QUESTIONS ABOVE. 

Japanese – United States Rice Negotiation

Objective: By negotiation terms as to how much imported rice (%) should enter the Japanese market to the end consumer. Settle on a % per year over the next 5 years. The intent is 10% over 5 years; it is currently at 1%.

Percentage Structure

• 20% over 10 years

• 10% over 5 years (bottom line)

• 11% over 5 years

• 15% over 10 years

• 15% over 5 years (1st offer – best offer?)

• 9% over 5 years

• 5% over 5 years

Must Haves

1. Team B1, Inc.’s Preferred Transportation Methods

• Safety Control

• Using our preferred vendor(s) for transportation based on environmental and seasonal climate(s) changes (not independent 3rd party)

• Air Transportation

• Sea Transportation

• Our preferred vendor(s) are subsidiaries of our corporation making our transactions and product deliveries guaranteed (In the event of inclimate weather conditions that do not deem on-time delivery, it will be settled on a case-by-case scenario and also grant discount based on lateness of the delivery and circumstances)

• Our preferred vendor(s) have been acquired as an asset to our corporation’s quality

• Preferred vendor(s) include and are not limited to;

• Farmers

• Manufacturers

• Distributors

• Transporters

• Other (Packaging companies)

• Our preferred vendor(s) provide the depth and breadth of  corporate integrity whether business is being conducted domestically or internationally

• California Rice Cooperative utilizes vertical integration that consists of planting, growing, harvesting, drying/storage, trucking, quality control, milling, and packaging the rice

Specifications of which type of rice and how much will be purchased for importation

• Rice Types (I don’t think specifying this is necessary – as on the CA Rice Cooperative website, it specifies only the California rice, Calrose, with 3 varieties. If so, most of the rice imported should consist of the short-grain rice.)

• Jasmine

• Long-Grain

• Brown

• White

• Risotto

• Black

• Other (not specified)

• Current supply and demand of a particular rice

• California rice (known as Calrose) is the rice we are exporting to Japan

• 3 Varieties of California Rice (Calrose)

• Short-grain – well regarded cultivar in Japan, stick, Japonica style

• Medium-grain – most popular

• Sweet Rice – Japonica style, mainly used in desserts

• Typically, California grows the medium and short-grain rice, which the Japanese prefer over the long-grain rice

• “Stickiness” of the white rice is a factor; Japanese may feel that the stickiness of U.S. rice doesn’t stand up to Japanese rice

Quality Control

• Corporate monitoring

• Preferred vendor(s)

• Buyer?

• FRC has an aggressive capital investment program. From the use of robotics that consistently handle finished goods, to infrared color sorters which inspect every grain of rice. FRC is committed to making the necessary investments to continually improve the quality, marketability, and competitiveness of its products.

Contract Terms and Conditions

• Japanese assume contracts can be renegotiated (this can be a concession, option to renegotiate in 5 years, but do not offer it to them upfront)

• Payment terms – recommend net 30 and offer discount (2% for net 15)

Concessions

• Less emphasis on 5 years – stretch it out longer (less pressure on deadlines)

• Allow taxes on quota higher than 800,000 tons (this is not beneficial for us, but this will help in the long-run to maintain relationship and presence)

• Increase quota to XXXX amount (currently at 682,000 tons)

• Open the door and tell the Japanese that this can be renegotiated in 5 years

• Payment terms (allow installments; allow milestone payments; depends on how often they want to import/payments)

Initial and Counter-Offer

• Option #1 – 15% over 5 years, our vendors,

• Option #2 – 14% over 5 years

• Option #3 – 12% over 5 years

• Bottom line – 10% over 5 years

Negotiation Tactics and Approach

• Develop relationship with Japanese – open up with asking them questions not related to the negotiations

• Aim for long-term business relationship with Japan

• Emphasize groups and organizational harmony and success

• Treat the negotiations very formal

• Avoid conflict; do not be aggressive; never lose temper or raise voice

• Phrase questions so they can answer Yes (example “Do you disagree with this?”)

• Come with our best offer

Additional Notes

• Trade Organizations – Chamber of commerce, NGOs

• Trade Deficit – Increase in trade deficit due to imposed tariffs which reduce imports but at the same time, it can affect exports of Japan. Until later 1960s,the expansion of exports was accompanied by the expansion of imports in Japan. As Japanese manufacturing sector grew, the amount of imports of energy and raw materials increased, too.  Also, as the Japanese workers became richer, the import of foreign consumption goods increased.

• Efficiency of production – Unlike the large agribusinesses in the United States, where the average rice farm is nearly 400 acres, 77 percent of rice farms in Japan are family-owned two acre plots. Most of the farming sector in Japan is elderly rice farmers cultivating extremely inefficient, small-scale plots

• Rice is sacred in Japan and by saying this is a good financial business deal for Japan may offend them. We need to respect their culture and view towards rice

• Production cost – Not modernized equipment can increase production cost

• Be prepared to answer question related to drought in california or Japanese yen plunged compared to US$ – Other team may ask even if quota is increased, how rice can be grown since there is drought in CA or how it will benefit to Japan since yen is less than US$. Our response should be that exports to Japan and South Korea have remained intact. Due to lower growing cost, we can sell rice one third less than others in the US.