Negotiation: Hong Kong Government and Walt Disney

On Oct 31, 1999, agreement between Hong Kong Government (HKG) and Walt Disney Company (WD) for the development at Penny’s Bay on Lantau Island of Hong Kong Disneyland (HKD), was reached. To maintain a long term relation for further cooperation likes construction of Phase II project and upon CEPA concord, these two parties have adopted Integrative Negotiation to achieve a mutually satisfactory plan. To analyze this situation with negotiation knowledge, we can go through three important aspects: (I) Characteristics (II) Signs of Win-Win Potential (III) Strategies being used.
(I) To begin with, there was a conflict of interest between HKG and WD. The dominant argument here was the investment and shareholdings. Then, both parties also wanted to gain from the settlement. While WD’s concern was chiefly the prospective profitability because HKD would be the gateway to China market, HKG’s desire was based on the social benefits, which would derive from tangible factors including additional spending by tourists and local residents, rising employment, supplementary employee training, as well as intangible factors covering international images and enriched quality of life. Next, the parties preferred to search for agreement. During repetitive negotiation at early stage in 1999, HKG and WD had come up with numerous consensus including site, financing, staffing, timing, future expansion and license. These tasks required two parties to offer and take concessions so as to achieve better deal in exploratory stage. Finally, these parties have modified their positions and each will move toward each other. As a matter of fact, the latest adjustment in Sep 30, 2008, WD helped HKG to pay the 33 billion debt and offered privileged loan interest at 2%.
(II) To commence with, the negotiation between HKG and WD involved different issues, ranging from economical to environmental. Variation of preferences, beliefs and capacities could therefore be profitably traded off to create joint gain. Also, seeing the unsatisfactory number of visitors, they negotiated options to resolve problems: (1) offer annual pass (2) strengthen festive promotion (3) arrange packaged tour for mainland tourists. Furthermore, they have different preferences across negotiation issues. (Please refer to Figure 1 and illustration in appendix)
(III) First, negotiations among HKG and WD had built trust and shared information. They kept the ongoing discussion with Executive Council, Legislative Council, WD Board and Tourism Commission etc and both had revealed their preferences and priorities. This facilitated the Win-Win outcome to be reached. Second, they focused on interests, not positions. (Please refer to Figure 2 and illustration in appendix) Third, parties had reconciled needs. For infrastructural construction, parties had splinted the scope into reclamation, road works, railway transport, sewage network, multi-purpose lake etc. The multi-issue negotiations enhanced the different priority setting and further trade-offs.
In conclusion, the negotiation of Disney’s establishment was basically successful. Nevertheless, by the time of 2010, WD will has announced detailed planning of Disney Theme park in Shanghai, where would be a great BATNA (Best Alternative to a Negotiated Agreement), for being the most essential source of bargaining power. HKG may be deprived of more advantage due to WD’s strong position. As WD with the more power may have little incentive to give up its advantage, the unequal bargaining power may eventually lead negotiation (e.g. Phase II construction) between two parties from Win-Win to Win-Lose.