Week 11 Flashcards
WHAT IS A NEGOTIATION?
- A negotiation is the interaction of two or more independent parties, each party wants to realise its own goals in the best possible way.
- Neither of the two parties is able to reach its goal alone, because the goals areto some extent controlled by the other side.
- This means that both parties need to cooperate (or to fight-out of our scope).Each party will put some resources in order to realize its goal.
- During the negotiation, each party modifies its own goals and coordinates themwith the modified goals of the other party. A negotiation is a strategic interaction, it is a process.
- In this sense, negotiations are exchange of relations and information.
The negotiation triangle
During the complete negotiation cycle, negotiator should keep the elements of this figure in his/her mind as the big picture, especially the following points:
Context:
* Substantive: (and Issues)
* Relational
* Procedural
* Process
Types of Negotiations
-> Create value
Integrative:
Parties cooperate to achieve maximum benefits by integrating their interests into an agreement while competing to devide the value.
Principled:
(negotiation on the merits) which,
a) separate people from problem,
b) focus on interest rather than positions,
c) generate alternatives based on b,
d) objective standards
Types of Negotiations
Claims value
Positional:
(Bargaining negotiation) taking successively and then giving up a sequenceof positions which serves some useful purposes in a negotiation. It is the most used style. (logic of consequentialism).
Distributive
(zero-sum) each side‘s goal is to get as much of the transaction as possible. For seller –buyer relationship: seller looks for highest price, buyer for lowest one.
Internal and External Negotiation
INTERNAL Characteristics
* within the same organization or company.
* used for e.g.: project management, firm’s strategy, handling of clients and suppliers, preparation for negotiations
* important in preparation phase of an external negotiation
* direct correlation between success in internal negotiations and one’s ability to succeed in external negotiations
* often the same amount or access to same information/ information sources
* main specific influencing factors: available resources, overall strategies, structure and hierarchy, job-related issues, relation to
* stakeholders
EXTERNAL Characteristics
* between two or more individuals from different companies or between two companies or organizations
* used for all types of topics and issues
* more challenging in the implementation phase
* slower negotiation in core negotiation phase (due to formality)
* larger influence and role of BATNA
* different stand related to information (quantity, quality, sources, handling)
* main specific influencing factors: previous experiences, socio-political factors, economic environment, technology, power and alliances
What are the criteria for a good negotiation?
If there is an agreement, the agreement should be a wise agreement, i.e.:
* Meets the legitimate interests of each side
* Resolves conflicting interessts fairly
* Is durable and Future-oriented
* Takes stakeholders’ interests in account
It should be efficient
It should improve or at least not damage the relationship between parties.
Negotiation’s phases (generic)
Several models of negotiation, generally all models share more or less the same phases:
* Preparation (internal and in form of pre-negotiation)
* Core negotiation (with possible additional steps)
* Closing the negotiation (including agreement)
* Implementation (some don’t consider it as part of the negotiation)
PROFIT DISTRIBUTION
ZOPA & Concessions
Concessions
-> definition
Concessions (even no-concession) are full with indicators and messages
An opening offer is usually met by a counteroffer, and these two offers define the initial bargaining range (ZOPA)
Concessions
-> rules for concessions
Rules for concessions:
* Plan your concessions
* Make a chart of what issues or terms you will give up, what you must keep, what you want to get, and what could be a surprise.
* Create a chart of information that you will disclose to the other party, keep from the other party, want to get from the other party, and what would surprise you if they gave it to you.
* Remember, information is power in a negotiation
* Do not set your initial demand near your final objective
* Do not ever underestimate your power = knowledge + bargaining skill + resources (don’t make concession to hide a weakness)
* Do not reveal your power too early
* Never accept the first offer
* Initial demand is too high? Ask to be lowered before you make a counteroffer.
* Try not to make the first concession on important issues.
* Never give a concession without getting one in return
* Never lose track of how many concessions you have made
* List every issue in the negotiation with an aspiration level, a minimum, and an initial asking price for each issue.
* People who give a little at a time do better
* Never make concessions in a predictable pattern (change)
* Different concession rates send different messages (concessions are getting smaller, the opponent’s resistance point may be near).
* Let your concessions be known and recognized (what you have given up- or what you have stopped demanding).
* Emphasize the benefits to the other side, this allows you to ask for reciprocity. You define the reciprocity you expect for your concession
BATNA
BATNA: “Best Alternative To a Negotiated Agreement”
* Alternatives are the walk-away possibilities that each party has if an agreement is not reached.
* In general, neither party should agree to something that is worse that its BATNA.
* Effective negotiators determine their BATNAs before talks begin.
* An awareness of the BATNA gives the negotiator the confidence needed to walk away from a subpar agreement. Bargainers should invest resources in strengthening their existing BATNA looking at outside alternatives -> enhance power.
* In most business negotiations, negotiator faces two counterparts: the individual across the table and the organization he represents. This means facing two BATNAs as well. Sophisticated deal makers think through both BATNAs—the organization’s and the individual’s.
* “Outside” the negotiation
* Fall back position if negotiation fails
* Can be implemented unilaterally (einseitig)
OPTIONS
“Inside” the negotiation
* Created with counterpart
* Brainstorming session
* Potential solution(s)
* BOTH you and counterpart receive benefit
Power in Negotiations
Definitions & Categorization
Power is defined as : Ability or official capacity to exercise control; authority
Power can be divided in three major categories from the point of view of its consequences:
* destructive power,
* productive power
* integrative power
Usage of Power
-> Rules
- Understand the source of power and the conditions for their mobilization, select the most appropriate one(s).
- Determine the costs and benefits of using a certain power
- Establish credibility (incl. the will to use power)
- Do your research and gather information
- Do not have all the answers from the outset
- Do not push too hard for minor gains (cost/benefits), threat is last resort
- Create dependence
- Use time strategically
- Carefully understand and select the contextual conditions as much as possible
- Cultivate the will to use power
- Do not play the same hand twice (use your repertoire)
- Remain flexible (re-evaluate)
- Create supports, friends, coalitions and alliances)
- Find the soft spot (encourage other to open up, identify motivations)
- Pay attention to the phenomenon of power decay (end of power) including the fall of protection barriers with the time and the changing conditions
Strategic Approaches
What are the possible strategic alternatives ?
Two major factors are to be considered: The substance of the negotiation and the relation between the partners
Preparation
-> Context
Context
* data on market conditions, future trends
* Mapping the parties
* creation a coalition
* which parties has to be excluded/ included
* History of relationship with the other party(
* Mapping the stakeholders
* Optional-Mapping the possible mediators, facilitators, conciliators
Preparation
-> Goals / Strategy
Goals / Strategy
* Define general goal
* negotiation objective
* Decide whether the relationship is an important issue in your outcome?
* framing of the problem
* possible agreement -> consequences
* team interests
* Formulation of a Negotiation Strategy (Aviod, collaborate, accomadation, competition)
Preparation
-> Issues, Options, BATNA
Issues, Options, BATNA
* List of issues
* List of non-negotiable issues
* common elements between the team and the other party
* options to propose
* Define the BATNA
* Define walk-out points
Preparation
-> Bargaining
Bargaining
* Define the bargaining mix
* bargaining approach
* Bargaining Verbal Tactics to be used (promises, normative appeals, threats, commitments, recommendations)
* Define the Opening position
* concession strategy
* List of possible arguments
* Prepare answers to anticipated/ expected questions
Preparation
-> Power
Power
* Define the sources
* List of external constraints
* any linkage with other negotiation
* external set of criteria and objective standards
* Evaluation of power balance and equivalence
* Which type of power
* need for pre-actions to change power status
Preparation
-> Agenda / Logistics
Agenda / Logistics
* Establish a draft agenda
* ist of issues and their priorities
* Consider a flexible agenda as option
* Define the Preferred time, place and the length of the negotiations
* Prepare logistical concerns
* Define list of proposed parties to involve
Preparation
-> Negotiation Team
Negotiation Team
* Define what are the existing/available resources
* Building the Team Members
* Distribution of roles among team members
* Evaluate the cultural distance with the other party
* Conduct Role plays
* Select Communication channels to be used and rules of communication
* Prepare visual and other aids
* Define the Preferred time, place and the length of the negotiations for the team
Preparation
-> Dynamic
- List of elements which may change during the negotiation
- Prepare scenarios for sequence moves with their outcomes/consequences
- Prepare what actions (or sequence of moves) can change the dynamic of the negotiation
- Prepare for how to control the flow and sources of information
Preparation -> Pre-negotiation
Why? -> three major obstacles to negotiations
* defining of the problem
* developing a commitment to negotiation
* arranging for negotiation
Start: when one party considers negotiation as a possible option and it communicates this intention to the other party. It ends when parties agree to formal negotiations.
It is an integrated process with mandated persons of parties involved prepare for negotiation by jointly: framing their issues, generating various options for **structuring substance, possible outcomes and process **of future negotiations.
