university of economics in bratislava, slovak republic

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

INTERNATIONAL NEGOTIATION –

UCL – JANUARY, 2014

lecturer Milan Oresky

INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014

5. Negotiation in Business


Preparation

Identify the main goal of negotiation: yours and opponents Make necessary economic and financial calculations Prepare technical and other documentation Design your negotiating team and get the mandate to negotiate Prepare your position and best alternative (BATNA) Set the agenda for negotiations Gather and analyze information about your opponents


Preparation: practical aspects Inform your team about your goals, strategy and agenda. Discuss their roles

in negotiation process Offer opponents to negotiate at your territory Propose to write down minutes of negotiations Be the first to send draft agenda Meet former employees, business partners or clients of your opponents Invite your opponents to meet informally: dinner or lunch, beer or coffee

prior to negotiations Be the first to send them drafts of documents: contract, technical

specification, samples etc. Offer your help to the other side: interpreter, driver, office, hotel reservation

etc. Take time to relax and be ready to make decisions


Ask yourself : are we ready?

Do we really have enough information

or

just see what we want to see and make wrong perceptions?


Exchange of information

Main rule: only the necessary minimum of valuable information to the other side

Possible exchange of preliminary positions Composition and authority of the teams Final agenda of negotiations Exchange of the draft documents Practical arrangements: meeting room, refreshments etc. Informal meeting with the opponents: dinner, lunch, coffee prior to

negotiations


Team formation (2)

Small and flexible Knowledgeable and well informed United: team spirit Resourceful and creative All necessary areas well represented Team members know their roles and functions


Main principles of integrative negotiation “Getting to YES”

Separate the people from the problem

Focus on interests, not positions

Invent options for mutual gain

Use objective criteria


1. Separate the people from the problemSeparating the people from the problem means separating relationship issues (or "people problems") from substantive issues, and dealing withthem independently. Face the problem, not the people.

1. Try to see the situation from your opponents perspective 2. Dont deduce your opponents intentions from your own fears3. Avoid blaming your opponent for the problem 4. Discuss each others perceptions 5. Seek opportunities to act inconsistently with your opponents misperceptions 6. Give your opponent a stake in the outcome by making sure they participate in the

negotiation process7. Make your proposals consistent with the principles and self-image of your opponent8. Recognize , understand and acknowledge emotions: theirs and yours 9. Don’t react to emotional outbursts and allow to let off steam 10. Listen actively and speak to be understood 11. Speak about yourself, not about them 12. Build a working relationship


2. Focus on interests, not positions Negotiating about interests means negotiating about things that people really want and need, not what they say that they want or need 1. Behind opposed positions lie shared and compatible interests, as well as conflicting

ones 2. Identify the interests: ask “Why?” and “Why not” 3. The most powerful interests are basic human needs: security, economic well-being, a

sense of belonging, recognition, control over one’s life 4. Give your interest and reasoning first and your conclusions or proposals later5. Look forward, not back. Instead of asking to justify what they did yesterday, ask who

should do what tomorrow? 6. Be concrete but flexible. Think about options that meet your interest, use “illustrative

specificity” 7. Be hard on the problems, soft on the people. Help the other side to solve their

problems


3. Invent options for mutual gain

This means negotiators should look for new solutions to the problem thatwill allow both sides to win, not just fight over the original positionswhich assume that for one side to win, the other side must lose.

1. Brainstorm: invent as many options as possible to reach an agreement 2. Broaden your options by the expertise and changed scope or focus of

possible agreement 3. Look for mutual gain indentifying shared interests and matching differing

interests 4. Make the opposite side decision easy. Look to agreement from your

counterpart perspective and involve him/her in designing the right solution. Invent first, decide later.


4. Use objective criteria Insist on objective criteria for decisions. While not always available, if some outside, objective criteria for fairness can be found, this can greatly simplify the negotiation process

1. Find fair standards: market value, precedent, scientific judgment, technical requirements etc.

2. Follow fair procedures: reciprocity, moral standards, reciprocity etc.3. Agree first on principles and be open to reason. Search for objective criteria

together 4. Never yield to pressure, only to principle


5 main conceptual instruments

BATNA – Best Alternative to Negotiated Agreement Reservation price: walk away price ZOPA – Zone of Possible Agreement Value creation through trade-offs Negotiating power


BATNA: Best Alternative to Negotiated Agreement

1. Invent a list of actions you might conceivably take if no agreement is reached

2. Improve some of the promising ideas and convert them into practical alternatives

3. Select one option that seems the best

Do not mix it with a Bottom Line: negotiators try to protect themselves by establishing in advance the worst acceptable outcome. The Bottom Line inhibits imagination and creativity


BATNA

The better your BATNA, the greater your power

It gives you additional confidence in negotiations and you can negotiate on the merits.

Identify and consider the other side’s BATNA

Knowing their alternatives, you can realistically estimate what you can expect from negotiations


Reservation Price

The reservation price is the least favorable point at which one will accept a negotiated agreement.

For a seller this means the least amount (minimum) or bottom line theywould be prepared to accept, while for a buyer it would mean the most(maximum) or bottom line that they would be prepared to pay. It is alsosometimes referred to as the “walk away” price


Negotiations: opening (1)

Create cooperative and constructive atmosphere:

1. Inquire about trip, hotel, flight etc.

2. Introduce your team

3. Announce time table: information about coffee breaks, lunch, production site visit etc.

4. Ask whether sent documents and information were well received, are sufficient and understood by the other side

5. Ask does the other side need some other help or assistance: separate room, copying or other office services


Negotiations: opening (2)

Take the initiative:

1. Propose and agree the goal of the meeting

2. Announce (correct) the agenda and issues to be discussed

3. Shortly summarize (make comments and corrections) the situation and already agreed issues

4. Invite your opponents for comments, correct them


Possible agendas (1)

1. Push: start with important issues

2. Procrastinate: you begin with less important issues

3. Assemble: put together groups of issues both parties are likely to agree, forming packages for agreement

4. Classify: classify issues like financial on one side, and all other issues on the other

5. Sort: review all issues to be negotiated and decide if there are any that can be settled


Possible agendas (2)

6. Select: you suggest the order of issues to be discusses. Never agree to this formula: who picks up an issue to be discussed gets strategic advantage7. Consult: you agree agenda prior to it and then revise the schedule and announce it8. Concede: put some issues on the table for discussion you willing to concede. Because of your concessions you can require and anticipate concessions in return9. Soften: make concessions not important for you on the first stage . When the opponents are comforted negotiated the real deal10. Appetizers: start with easy issues to agree on.” If we did it so easy, lets do this one as well “


Negotiations: a good start1. Pay attention to trivial information“I hope things go well this time”, “We reserved the hotel for two days”, “We’ve been having a good year, but stock has increased since…”

2. Create a diversionMake some jokes. Build self confidence, test the atmosphere. If they feel nervous or want to start immediately, expect hard negotiation…

3. Be diplomaticIntroduce the issues in relaxed manner, even if you intent to attack and play tough later on. Do not provoke immediate back fire.


Importance of the Beginning

The initial stage of negotiation is very important (even none of the issues are resolved) because the atmosphere and tone are set.

If your attitude differs radically from that of the other side, experience show that it is only during this initial phase that there is a chance of making any changes.


Negotiations: “don’ts”

1. Do not talk unprepared, talk to the point

2. Do not make long statements, use short sentences

3. Do not interrupt the opponents and the other members of your team

4. Do not change or modify the agreed strategy without proper analysis and common agreement

5. Do not let the other side to change your strategy and agenda, keep the initiative

Take breaks, do not act spontaneously!


Negotiations: “do’s”

1. Let the other side talk

2. Use pause and time intervals in your speech to stress the importance of the point you are making

3. Use prepared arguments: hard working in preparation – easy in improvisation

4. Ask questions, do not provide immediate answers

5. Ask for explanation and justification: why you consider its good for us both, for my company, for me?


Making the First Offer (1)

Making the offer first you do the anchoring

Setting the rules – taking the initiative

Your figures and arguments are first to be discussed

It puts the opponent into “must react” position

Explain: why you making this offer, but not what you are offering or proposing.


Making the First Offer (2)

If the situation is not completely clear, let the opponents to make the first offer

Ask the opponents their opinion how to solve the situation/come to the agreement

If you are not sure about your arguments, calculations etc., ask your opponents to discuss theirs

Let them disclose their intentions:

what we can do to solve this issue? or help us to help you


Negotiations, the Real Life: the factor of “nuclear bomb”

If there is a chance – make yourself “a nuke bomb” You don’t need to use it, but better to posses one, usually it makes your opponents more cooperative:

research for a sensitive information about your opponents

look for irregular business practices of your opponents

look for unsatisfied clients, bad business cases…

Let them know, that you know….


Negotiations: some rules to follow

1. Never (ever) accept the first offer

2. Leave yourself a room for maneuver: don’t be too detailed

3. Nothing is for free: let them work hard for every (even not important for you) concession

4. Be constructive, not destructive: don’t react to and be imprisoned by tricks and abuse from the other side

5. Always be ready to terminate negotiation if it brings bad results to you and let them know (and feel) it


Arguments: soldiers of your negotiating army

Arguments is opposite of persuasion. They deal with logic while the other deals with emotions

Arguments appeals to reason (or what seems to be a reason)

Argument play up your own points and minimize the importance of the other side


Make your arguments stronger

Use comparisons

Refer to best practices

Use expert opinion

Use presentations, statistics , reports, studies etc.

Visualize your argumentation: presentations, charts, samples etc.

People believe what they see…


Organize your arguments1. Deduction: What is true of a group is also true for its members. “This

consortium is solvent. The business is under the consortium, therefore it is solvent”

2. Induction: If a large number of members share the characteristic, it is very likely that other members will share it too. “This consortium is insolvent. This business is under the consortium, therefore it might well be in difficulty too”

3. Analogy: A particular situation is similar to another. “This business shows the same trend as another, the market is the same, so outcome of similar operation could well be the same”

4. Hypothesis: Let us suppose that we go ahead with your proposal. What do you think would happen? Suppose that the bank withdrew the credit or supplier abandoned us, or we did not get this order?


Making concessions (2)

1. Make your possible concessions list (invent and create as more as possible)

2. Group them to minor, less and really valuable to you and your opponents

3. Make the list of possible concessions you want to receive from your opponents and group them

4. Shape up your proposals in packages and make a trade-offs: exchange the package made of lower value concessions to one of real importance


Shaping up a proposal

Separate THE EXPLANATION phase and THE JUSTIFICATION phase

If you can meet the following conditions 1…, 2…, 3…, n…, we will be prepared to consider offering the following: 1…, 2…, 3…, n….. Our reason for doing so are a…, b…, c…, …z...


Phrasing a proposal1. Use a pause in your speech prior to making any offer

2. Use positive body language: lean forward slightly, establish a direct eye contact

3. Use short sentences, do not go into details

4. Explain why your offer is valuable for your opponent, the whole agreement and joint business

5. Ask the opponents to comment on your offer, let them repeat it with their own words

6. Make comment similar to “we are almost near the agreement on this issue”


The biggest mistake when making proposals

The biggest mistake inexperienced negotiators are making is warning the opponents about negative answer or tough offer. They signal about it in advance by introductory (warning) phrases and non verbal behavior

Decided to attack – do not warn your opponent

university of economics in bratislava, slovak republic

Documents

main goal of negotiation

opponents intentions

people problems

opponents perspective

team spiritresourceful

negotiating team

team formation

problem focus