REGARDING WATER QUALITY PROBLEM...131.1 Phase 1: Twin Lakes interest City Council in a joint venture to build a filtration plant...131.2 Phase 2: Twin Lakes Company disapproved of the ch
FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS DEPARTMENT ********** CASE STUDY REPORT TWIN LAKES MINING COMPANY Subject: Code: KDOE302 Class: KDOE302 (HK1-2324)1.1 Group number: 02 No Full name Student ID Lê Thị Phương Thảo 2112150161 Vũ Thu Hiền 21113150029 Trần Thế Phong 2212150138 Lê Phương Linh 2112150090 Trần Hồng Anh 2012150012 Ngơ Trần Phương Thảo 2214150631 Nguyễn Khánh Vi 2212150555 Trần Anh Thư 2212150066 Lecturer: Hà Nội – 09/2023 TABLE OF CONTENTS I BACKGROUND 1 INTRODUCTION .1 1.1 Report overview 1.2 Background information of Tamarack 1.3 Background information of Twin Lakes mining company 2 CITY COUNCIL PERSPECTIVES & EXPECTED OUTCOME 2.1 City Council perspectives 2.2 Government expected outcome .3 COMPANY PERSPECTIVES & EXPECTED OUTCOME 3.1 Company perspectives .4 3.2 Company expected outcomes II NEGOTIATION STRATEGY ROLES OF THE TWO PARTIES IN THE NEGOTIATION 1.1 Interests of the two parties: .7 1.2 Power of each party FACTORS AFFECTING THE NEGOTIATION OUTCOME 10 2.1 Citizen responses 10 2.2 Environmental Protection Agency 10 STRATEGY IMPLEMENTATION 11 3.1 Theoretical framework 11 3.2 The City Council’s and the Twin Lakes Company’s Strategy .11 III NEGOTIATION PROCESS AND OUTCOME 13 REGARDING WATER QUALITY PROBLEM .13 1.1 Phase 1: Twin Lakes interest City Council in a joint venture to build a filtration plant 13 1.2 Phase 2: Twin Lakes Company disapproved of the change in capital share and made arguments .15 1.3 Phase 3: Twin Lakes company offers a balanced share and after negotiating City Council accepts it 16 REGARDING AIR QUALITY PROBLEM 17 i 2.1 Phase 1: The Twin Lakes Company’s suggestions on problem resolution .18 2.2 Phase 2: A dispute over the construction of dirty roads 18 REGARDING TAXATION PROBLEM 19 3.1 Phase 1: Discussion about taxation for the use of city land 19 3.2 Phase 2: Discussion about the selling price of city land .21 NEGOTIATION OUTCOME 22 IV STRATEGY EVALUATION & LESSONS LEARNED .23 STRATEGY EVALUATION 23 1.1 Benefits: 24 1.2 Drawbacks: .24 1.3 Opportunities: 25 1.4 Challenges: 25 LESSON LEARNED 25 2.1 How to manage negotiation Tensions 25 2.2 How to implement collaborative strategy successfully 26 2.3 How to adapt Tactics in real negotiations .27 ii I BACKGROUND INTRODUCTION 1.1 Report overview Environmental sustainability represents a business challenge, which has been considered one of the main pillars in business ethics Additionally, environmental governance is an important component of the national, as well as city governance system Authority supervision has been proved to have a positive effect on environmental governance and can urge enterprises to actively perform pollution control In the report, the authors present an outlook of the negotiation between the City Council of Tamarack and the Twin Lakes Mining Company to resolve the pressure from urgent environmental issues including water contamination, air pollution and taxation The report analyzes each party's perspective on the issue with consideration about their interests, powers in each stage of the negotiation The report aims to suggest implementable strategy and techniques from both parties with a detailed negotiation process between the City Council of Tamarack and the Twin Lakes Mining Company and its possible outcomes Finally, based on the negotiation process, the authors evaluate the efficiency of the strategy before drawing the lessons learned for other identical cases 1.2 Background information of Tamarack The city of Tamarack is located in Aitkin County, Minnesota, United States The city of Tamarack has a year-round population of approximately 18,000 Although there is a growing revenue that accrues to the city as a result of heavy summer tourism (summer homes, fishing, etc.), Tamarack is basically a one-industry city Twenty-five hundred people, 60% of whom live within the city limits, work for the Twin Lakes mining; 33% of the city real estate tax base of about $5 millions consists of Twin Lakes Mining Company property and operations Both in terms of direct tax revenue and indirect contribution to the economic stability of the local population, Tamarack is strongly dependent on the continued success of the Twin Lakes Mining Company Twin Lakes has a huge influence on the city of Tamarack If Twin Lakes stops operating, the majority of people in the city will fall into unemployment, and the state budget will lose a large amount of tax money because it cannot collect real estate tax from the property and operations of Twin Lakes Mining Company 1.3 Background information of Twin Lakes mining company The Twin Lakes mining company is an open-pit, iron ore mine Openpit mining consists of stripping the topsoil from the ore deposit with the use of power shovels Train rails are then laid, and most of the ore is loaded into railroad cars for transportation to a central collecting point for rail or water shipment The mining operation progress goes as follows: First, the topsoil are stripped from the ore deposits with the use of power shovels.Then the ore is transported to a beneficiation plant on the outskirts of the city Beneficiation of ore involved crushing, washing, concentrating, blending and agglomerating Finally, the ore is then shipped by railroad car to steel mills throughout the Midwest and rejected materials are returned to “consumed” parts of the mine, and the land is restored In the early days of production, such treatment was unnecessary; however, beneficiation is necessary today due to several reasons: First, transportation cost of rejected materials is minimized Secondly, ores of various physical and chemical properties can be purified and blended during this process Finally, fine ore materials can now be briquetted and pelletized to increase their value Originally, The Twin Lake beneficiation plant is located approximately five miles outside of Tamarack so it doesn't affect the life of the people at Tamarack However, due to the expansion of the residential areas of the city, summer home development, and various Twin Lakes operations, the plant has become a major problem for local citizens For years, The Tamarack City Councils has been pressing the company to clean up the most problematic operations CITY COUNCIL PERSPECTIVES & EXPECTED OUTCOME 2.1 City Council perspectives • Environmental issues caused by Twin Lakes Mining Company One of the main environmental issues is water pollution caused by the mining activities of Twin Lakes Specifically, granules of iron ore and other impurities consistently wash downstream from the plant This severely affects Tamarack’s water quality Air pollution is another concerning issue for the Council A significant amount of dust is produced during the whole mining, transportation, and crushing of ore As a consequence, the amount of airborne particles has dramatically increased Furthermore, the situation is further exacerbated by the use of several heavy vehicles on dirt roads during the dry summer months While environmental problems have had a negative impact on the Tamarack community's general living circumstances, Twin Lakes has done very little, if anything, to address the main issues Therefore, the city Council with both the state of Minnesota and the federal government are putting significant pressure on Twin Lakes for urgent environmental cleanup measures • Impacts of environmental issues caused by Twin Lakes on local citizens Regarding water quality, the contamination of water bodies can have severe consequences for the residents The pollution of water sources can affect the quality of drinking water, making it unsafe for consumption This directly impacts the health and well-being of the local citizens who rely on these water sources Regarding air pollution, local citizens may experience respiratory problems, irritation, and other health issues as a result of prolonged exposure to polluted air This can particularly impact those living and working in close proximity to the mine and beneficiation plant 2.2 Government expected outcome The Tamarack City Council will take the concerns of the local citizens and the United Mineworkers Union seriously The pressure from the community, coupled with the violations of water and air pollution quality standards, will likely push the City Council to address the issues with Twin Lakes Mining Company's operations Given the more stringent environmental laws and regulations, it is likely that the City Council will enforce the cleanup requirements imposed by the state of Minnesota and the federal government The Council may work with Twin Lakes to develop a feasible plan for environmental remediation, ensuring that the company takes immediate action to mitigate its violations and bring its operations into compliance The City Council aimed to make the company comply with environmental regulations and ease pressures from local citizens as well as Document continues below Discover more from: Principle of Marketing MKTE301 Trường Đại học… 4 documents Go to course Chapter - Teach Albert Park Principle of Marketing None Target Audiences of LIT Education Principle of Marketing None Group TH true yogurt - - Homework… Principle of Marketing None Ahead with CPE SB - 192 18 -quan hệ kinh tế quốc tế 100% (1) [ Group 4] Analysis on China's Belt and Roa… quan hệ kinh tế quốc tế 100% (1) Correctional Mineworkers Union Therefore, they would consider supporting Twin Lakes' Administration on the environmental cleanup They might consider employing various strategies to assist the company in meeting the cleanup regulations, including 96% (113) Criminology providing resources, guidance, or even potentially exploring partnerships with other organizations involved in environmental restoration Ultimately, the City Council's goal will be to find a balance between protecting the environment and addressing the concerns of the local citizens, while also considering the economic implications for Twin Lakes They will strive to ensure that the cleanup operations are carried out effectively and efficiently, with an aim to restore and maintain environmental quality in the area surrounding the mine COMPANY PERSPECTIVES & EXPECTED OUTCOME 3.1 Company perspectives • Financial Hardship and Constraints Twin Lakes Company currently confronts a complex financial landscape characterized by substantial challenges that constrain its ability to proactively address the pressing environmental cleanup project Central to these constraints is the nature of Twin Lakes' core operations, which predominantly involve the mining of ore with a relatively low-grade composition This inherently low ore quality drives up production costs significantly The elevated expenses incurred encompass various facets of the mining process, ranging from the labor-intensive cleaning and agglomerating procedures to the substantial costs associated with the transportation of the mined ore to our beneficiation plant Moreover, the company grapples with an external challenge stemming from the competitive dynamics within the steel market Intense foreign competition has gradually eroded the demand for Twin Lakes' ore, culminating in a pronounced demand deficiency This deficiency poses a dual threat to the company's financial well-being, impacting both short-term revenue and longterm profitability prospects Hence, despite Twin Lakes' existing financial constraints arising from operational expenditures, there is a compelling need to allocate resources for strategic planning aimed at mitigating the consequences of the ongoing demand deficiency This allocation of resources has been instrumental in shaping the company's decision-making processes, including its response to environmental concerns and regulatory requirements It is, therefore, the multifaceted nature of these financial challenges that has led to the company's delay in formulating specific responses to environmental concerns and additional regulatory obligations • Impact on Company Profitability The estimated total cost of $36 million required for compliance with stringent environmental cleanup regulations cannot be underestimated This substantial financial allocation is expected to exert considerable pressure on Twin Lakes' financial stability and profitability, particularly in the context of the company's existing financial performance As the company navigates the challenges posed by the ongoing demand deficiency and heightened foreign competition in the industry, it becomes increasingly imperative to strike a delicate balance between complying with regulatory obligations and safeguarding its financial sustainability Apart from the environmental cleanup, the company considers the current tax rate of $800,000 for the use of city land for the beneficiation plant and $400,000 for right-of-way taxation are excessive amounts, which occupy a substantial budget The cost analysis of the cleanup operation and yearly taxation is as illustrated in the table below: Table 1: Company’s cost summary of environmental cleanup project and yearly taxation Cost Summary of environmental cleanup project and yearly taxation (Company) Section Cost Filtration plant $20 million Sub-total Water Problem $20 million Plant Improvements $8 million Paving Roads Yearly maintenance $4.8 million $0.6 million/ year Periodic oil spraying $0.8 million/ year Sub-total Air Problem $14.2 million Situation 1: No purchase of land Tax on use of city land for plant Right-of-way flat rate $0.8 million/ year $0.4 million/ year Sub-total Taxation Problem $1.2 million/ year Situation 2: Purchase of land Tax on use of city land for plant $0.8 million/ year Purchase of land $2.2 - 2,4 million Sub-total Taxation Problem TOTAL $3 - 3.2 million $35.4 - 37.4 million 3.2 Company expected outcomes Given the intricate financial landscape and substantial budget allocation necessitated by environmental compliance, Twin Lakes acknowledges the necessity of soliciting support from governmental entities, with a particular focus on active engagement with the City Council Furthermore, the company recognizes the importance of cultivating a collaborative relationship with the local community By fostering stakeholder involvement and embracing a shared sense of responsibility, Twin Lakes aims to surmount the financial challenges imposed by environmental regulations, ultimately ensuring its long-term viability and the ecological well-being of the region In light of the pressing environmental concerns encompassing air quality, water quality, and taxation, Twin Lakes has articulated a proactive stance, delineating specific actions and strategies expected to address these complex issues Regarding water quality, Twin Lakes recognizes the imperative need to collaborate with the City Council in a joint venture for the construction of a state-of-the-art $20 million filtration plant This ambitious project aims to rectify water quality issues comprehensively, safeguarding the local ecosystem and ensuring compliance with environmental standards To address air quality concerns, Twin Lakes has devised a comprehensive plan that encompasses multiple dimensions This multifaceted approach involves the enhancement and modernization of existing plant facilities, thus minimizing emissions and optimizing air quality Furthermore, the company intends to invest in infrastructure by paving roads situated on the city outskirts while ensuring their annual maintenance Simultaneously, Twin Lakes intend to implement periodic oil spraying of these roads to curtail dust emissions The estimated cost for implementing these measures totals approximately $14.2 million Regarding taxation, the company expects a tax cut for the use of city land from the initial excessive tax rate along with a lower price for the sale of land where the railroad spurs cross by 1.2 Phase 2: Twin Lakes Company disapproved of the change in capital share and made arguments • Negotiation development: In response to the 70%-30% capital share requested by the City Council, Twin Lakes showed their disagreement and made some arguments The company gave two reasons for its disapproval: The shortage of budget that Twin Lakes was facing, and the enormous advantages City Council would gain from the filtration plant that was worth at least 50% of capital requirement Firstly, the company revealed its current financial difficulties This is because Twin Lakes was mining relatively low-grade ore, and foreign competition in the steel market had significantly eroded the demand for ore More importantly, the company emphasized substantial benefits that the City Council would gain from the filtration plant According to them, the plant would address not only the current problem of water contamination, but also the future concern of water insufficiency Since the City Council would receive such huge advantages, Twin Lakes firmly believed that they should be responsible for at least half of the construction cost Because of those two above reasons, Twin Lakes Company insisted on the initial 50-50 share The company asked the City Council for empathy and reconsideration of the benefits they would receive • Analysis of negotiating techniques used: Surprise: In phase 1, to persuade the City Council to agree on the joint venture, Twin Lakes company used a firm and confident voice tone to deliver their ideas and reasons However, as the proposed capital share proportion was refused, Twin Lakes then had to switch to a deeper voice tone and spoke more slowly, with greater word emphasis This sudden shift had two advantages Firstly, it helped minimize the conflict on capital share between two parties Secondly, the City Council could better listen to and consider the arguments made by Twin Lakes Company Ask for empathy: Twin Lakes Company honestly revealed its current financial situation that made it impossible to afford 70% of the construction cost, thoroughly explained the reasons behind and asked for empathy from the City Council Seeking empathy was beneficial in this situation When the City Council could 15 completely understand the budget constraint of the company, they were more likely to accept the equal cost share Bring up future needs: In persuading the City Council, besides mentioning the immediate needs of solving the water contamination problem, Twin Lakes Company also emphasized the future concern on water shortage problem In the next two to three years, water insufficiency would be a pressing issue Therefore, bringing up the future need for a new water source helped the company increase the success rate of the joint venture 1.3 Phase 3: Twin Lakes company offers a balanced share and after negotiating City Council accepts it • Negotiation development: Due to those arguments made in phase and 2, Twin Lakes insisted on the initial 50-50 share and believed that this was a fair deal for both sides Due to limited resources of the city, the City Council was cognizant of the urgency of this environmental issue and this problem needs to be handled as soon as possible in order to improve the overall living conditions of Tamarack Therefore, this issue could be considered a priority Moreover, the City Council had been pressed to help Twin Lakes company in its environmental cleanup operations by local citizens The City Council approved to offer 50% of the filtration cost with a condition of the guarantee for the long-term performance and sustainability of the plant As received the desired offer, Twin Lakes confirmed to fully commit to the project The deal was signed and the two parties hope for a successful outcome together • Analysis of negotiating techniques used: Offer Sympathy: The City Council empathized with Twin Lakes’ financial struggle and approved the deal of providing 50% of the filtration cost Setting Limits: Although having approved of the deal, the City Council setted limits for Twin Lakes company that they have to guarantee for the long-term performance and sustainability of the plant Decide what will be lost: 16