Teaching Notes Essay

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Texoil

Teaching Notes
By Stephen B. Goldberg

Texoil is a two-party, quantified transactional negotiation with integrative potential. The owners of a service station would like to sell their station, and a large oil and gas company would like to buy it. The stations owners are tired of the responsibilities of ownership and want to take a two year sailing trip around the world, while they are still young enough to enjoy such a trip. The oil and gas company is in the midst of a strategic expansion, buying independent service stations, and turning them into mini service marts.

are not written up in their role materials; however, they should use the information they have creatively.

The most striking learning point of the exercise is the fact there is no overlapping bargaining range unless the two parties use their information creatively and literally create one. Thus, this is an excellent exercise to demonstrate to the doubters why they should be concerned about integrating or creating value. Unless they do, there is no deal. Other nice characteristics of this exercise are that it is totally interest driven on the part of the station owners. They have set a price based on their assessment of their needs. Students who stick close to the numbers sometimes have a very hard time accepting such analysis as a valid basis for setting a price. The point is that it is the other side’s perceptions of their interests that are relevant, not your interpretation of them.

a. Put the opening offers on a bargaining zone chart. Logistics
There is a half page of general information and then a page of confidential information for each role. This exercise can be prepared for very quickly, and we normally limit the negotiations to an hour, telling students if they do not have a deal within an hour, they should stop.
Students should be told that they should not make up facts that are not in their confidential role instructions, for example, other buyers or sellers that

Debrief
1. There are likely to be some impasses. Ask what happened, how did the group start, where did negotiations break down and why. Use this discussion to introduce the concept of bargaining zone, bottom line or reservation price, and BATNA.

b. Put the points where the parties that impassed walked away on the chart.
Buyer

$500

$580

Seller

c. Ask the class what a BATNA is and ask those who impasse what they are going to do.
This generates some discussion, because some owners will sell to BP and others will hold the station for the next offer. Which is the BATNA and why? The point being that BATNA is subjective. d. Ask the class what the difference is between
BATNA and bottom line. Some will have difficulties with the fact that Texoil’s BATNA is
$675,000 to build a new station, but its bottom line is $500,000 to buy. Students have trouble seeing why the difference, especially because a new station does not come with a clientele.
However, to upgrade the old station with new tanks and a mini-mart will cost Texoil money, hence the difference in BATNA and bottom line.
2. Ask the groups that got deals how they went about it. To get a deal at a minimum, Texoil has to

© 1996-2006 Dispute Resolution Research Center, Northwestern University. All rights reserved. Revised 1998.
The Dispute Resolution Research Center (DRRC) requires a $3.50 per person usage fee for each of its exercises, including this exercise. Payment should be made to the DRRC in U.S. dollars. Any use of this exercise without this required payment is unauthorized and in violation of copyright law, which imposes statutory and other damages on infringers.
DRRC, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, Illinois 60208-2001
Tel: 847-491-8068, Fax: 847-467-5700, drrc@kellogg.northwestern.edu, www.kellogg.northwestern.edu/drrc

promise the station owners a job worth $75,000 to them. This is a reasonable thing to do as the Texoil representative is the director of operations, and
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