Question

The Australian – Japanese Sugar Negotiations

In the late 70s a famous misunderstanding between Australian sugar cane growers and Japanese sugar refiners occurred. It rumbled on for years. Both parties were indignant and perplexed at the other’s “bad behavior”, as they saw it.

The Japanese refiners had signed a ten-year, long-term contract to buy Australian sugar at the then market price, less $5 a ton. The Australians would get the security of a ten-year sales agreement. The Japanese would get guaranteed supplies at a competitive price vis-à-vis other refiners. Everyone seemed happy and the deal was signed.

Hardly was the ink dry on the paper than the price of sugar on world markets crashed by $10 a ton. The Japanese refiners faced the prospect of paying more for their raw sugar than anyone else, a cost that would fatally impact on the price of refined sugar and everything made from it.

Up to this point, both cultures probably saw eye to eye. It had been a good deal but now circumstances had changed and the Japanese refines faced genuine difficulties. The cultural split occurred over what to do about this. The Japanese suggested to the Australians that the contract be renegotiated. After all the Australians could not possibly wish their partners to lost money; mutual satisfaction and lasting relationships were surely the ideal.

The Australians pointed out that a contract was a contract. The Japanese had given their work. Fluctuations in the world price of sugar were not unusual. All business involved risks. Had the price risen, not fallen, the Australian growers would have been the losers. You cannot go crying to your partner every time the markets shift.

1. What cultural factors have played a role in the negotiation process?
2. Why does each party believe the other is in the wrong?
3. What actions could be proposed for the conflict to be reconciled?

Answer 1

Answer 1) Cultural issue that comes here is Japan is a country which is famous for manufacturing products and selling them to whole world with best quality in it and on the other hand Australians has never been known as a country which is famous for manufacturing, you will hardly find a product manufactured in Australia so Australians is famous for their hard working skills and Japan is famous for manufacturing. So Australia are high on their ethics and want fair money for their effort whereas Japan is thinking from a cost of product view because they need to supply that to whole world and price cannot be high.

Answer 2) Japan thinks they are right because they want to produce the product at lesser price as they want to supply it to all stakeholders and if the price of raw material will be high then Japan refinery company will not be able to do so, so in this case Japan is thinking they are right and on the other hand Australian citizens are high on ethics and have hard working skills so from their prospective it is fair enough that contract is a contract cannot be broken due to price rise and fall.

Answer 3) Well the price at which the deal was done before the price decreased of sugar should is now not the same but the ration of difference between price of Australian sugar farmers and other farmers would be known in other word before price increase if the price of Australian sugar was 5 and other farmers was 10 then the difference could have been 50% so what can be done is the whatever the price is there in the market 50% less price could be traded as a deal between Japan Refine company and Australian farmers