What is negotiations?

Introduction to International
Verner Worm, Ph.D.
Professor of Chinese Business and Development
Asia Research Centre
Copenhagen Business School
[email protected]
What is negotiations?
Negotiation is one of the most important
global business skills
Two or more parties combining their
conflicting points of view into a single
decision of mutual interest.
Negotiation is about value claiming, value
creation and trust building
Learning Objectives
• Improved ability to negotiate
• General strategy (mental model)
for successful negotiation
• Enlightened model of
negotiation (fraternal twin)
Negotiation Skills as Core Leadership
Key communication & influence tool for
interdependent relationships (in & outside
the company)
Most people are not very good at
negotiation (e.g., over 80% of corporate
executives and CEOs leave money on the
People don’t realize this
Conditions of negotiations
• Perception of conflict
• People hold different perceptions. Objective conflicts
or perception of conflict
• Communication opportunities
• If people cannot communicate, they cannot negotiate.
In explicit bargaining people communicate with one
another. In tacit bargaining they coordinate through
their actions.
• Interdependence
• People are interdependent if their actions affect
others’ outcome. In the dyadic case parties must agree
to the outcome to occur. Veto power to walk away.
The role of conflict
• Predominantly negative
– Competitive processes
– Misperception and bias
– Emotionality
– Decreased communication
• Positive aspects of conflicts
– Discussing conflicts make people aware and able to
cope with problems.
– Create organizational changes
– Promote awareness of self and other
In negotiation, parties need each other to achieve their
preferred outcomes or objectives
• Interdependence and the structure of the situation shape
processes and outcomes
– Zero-sum or distributive – one winner (win-lose)
• Non-zero-sum or integrative – mutual gains situation
(win – win)
• A mix of convergent and conflicting goals characterizes
many interdependent relationships
Stages of negotiations
Relationship building
Information gathering
Information using
Making concessions and agreements
Closing the deal (final offer)
Implementing the agreement
Best Alternative To a Negotiated Agreement
• What are you going to do if you do not make
a deal with this person?
• Determined by your available alternatives
• Defines most you will pay (buyer) & least you
will accept (seller)
• Key source of power: Ability to walk away
• Strategic advice:
– Should you reveal your BATNA?
– Falling in love rule
Goals, Strategy and Planning
The Direct and Indirect Effects of Goals
on Strategy
• Direct effects
– Wishes are not goals
– Goals are often linked to the other party’s goals
– There are limits to what goals can be
– Effective goals must be concrete/specific and
• Indirect effects
– Forging an ongoing relationship
Strategy, tactics, Planning
• A negotiation strategy is an integrated set of
behaviors chosen because they are thought
to be the means of accomplishing the goal of
• Tactics are short-term moves.
• Planning/Implementation: The “action”
component of the strategy process; i.e. how will I
implement the strategy?
Getting Ready to Implement the
Strategy: The Planning Process
• Define the issues
• Assemble the issues and define the bargaining
– The bargaining mix is the combined list of issues
• Define your interests
– Why you want what you want
– Your “ideal” settlement
– Your bottom line
Getting Ready to Implement the
Strategy: The Planning Process
• Know your limits and alternatives
• Set your objectives (targets) and opening bids
(where to start)
– Target is the outcome realistically expected
– Opening is the best that can be achieved
• Assess constituents and the social context of
the negotiation
Getting Ready to Implement the
Strategy: The Planning Process
• Analyze the other party
–Why do they want what they want?
–How can I present my case clearly and
refute the other party’s arguments?
• Present the issues to the other party
Influencing negotiations
• Reciprocity (law of the universe)
– Pertain more to pattern of concessions than to degree.
• We feel upset if receiving a favor we cannot return.
• Consistency
• Need to appear to be consistent in our behaviors to others as well at to
ourselves (psychological commitment)
• Social proof
• The behavior of others determine what is desirable, correct.
• Liking. (Flattery can get you everywhere)
• Make concession to people they like
• Authority
• We are inclined to accept opinions of people we consider authorities
• Scarcity.
• Rare things appear more appealing.
Making the first move
• Making concessions
– Reciprocity (i.e.. conditional concessions)
– Size (Normally higher level concession in initial phase?)
• Bargaining in good faith
– Don’t falsify intention nor information (reputation again)
• Offers remain valid until rejected or even after
• Common concerns
– Sharing information about reservation price (NO)
• Negotiation is a matter of strategy, not trust.
– Lying about reservation price (NO), the liar gets caught.
– Tough or soft negotiation stance? Strategic creativity!
– Making the final offer (no rush).
Advice for direct information
• Ask questions about interests and priorities, things
that you are willing to share information about in
• Give a little information about your own interests
and priorities.
• Be sure to reciprocate information with
• Be honest when rejecting to give information.
• Build trust by meeting expectation.
Advice for indirect information
• Multi-issue proposals are more efficient in
getting information
• Do not make proposals that are unacceptable
to you
• Anchor proposal so that you receive an
adequate distributive outcome.
• Post proposals visually on a flipchart.
• Make 2 or 3 at most proposal at a time
• Analyse the proposal quickly (spreadsheet)
• Allow time for running the numbers
Mutual Adjustment and Concession
• When one party agrees to make a change in his/her
position, a concession has been made
• Concessions restrict the range of options
• When a concession is made, the bargaining range is
further constrained
Strategic Options
• Per Dual Concerns Model, choice of strategy is
reflected in the answers to two questions:
– How much concern do I have in achieving my
desired outcomes at stake in the negotiation?
– How much concern do I have for the current and
future quality of the relationship with the other
Mutual Adjustment
• Continues throughout the negotiation as both parties act
to influence the other
• One of the key causes of the changes that occur during a
• The effective negotiator needs to understand how people
will adjust and readjust and how the negotiations might
twist and turn, based on one’s own moves and the
other’s responses
The Dual Concerns Model
Avoidance: Don’t negotiate
Competition: I gain, ignore relationship
Collaboration: I gain, you gain, enhance relationship
Accommodation: I let you win, enhance relationship
Two Dilemmas in
Mutual Adjustment
• Dilemma of honesty
– Concern about how much of the truth to tell the
other party
• Dilemma of trust
– Concern about how much negotiators should
believe what the other party tells them
Closing the deal
Provide alternatives
• Assume the close
– Take out the contract form
• Split the difference
• Exploding offers
– Offers containing tight deadlines
• Sweeteners
– I will give you X if you agree
Summary on the Planning Process
“...planning is one of the
most important activities
in negotiation.”
[email protected]

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