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Negotiations

Assignment
Introduction

The general area of conflict management is concerned with the way that
interdependent people manage the opposition of goals, aims, and value
creation through communication. Communication plays an active role in
shaping how people experience and work through conflict, a task that is very
challenging given people’s interdependence where one party can interfere
with the other achieving their desired goal. Negotiation is defined as forms
of conflict management that involve two or more parties, who have a conflict
of needs and desires that choose to negotiate through a give and take
process involving proposals and counterproposals to search for a mutually
acceptable agreement. Negotiation does not rely on third parties to facilitate
the process and make decisions; rather, the process and agreements are
generated by the parties in conflict. Negotiating is most often learned by the
old fashioned "sink or swim" method when the representative for "our side"
is told to "go negotiate and do your best". Any early success can be
accidental. Success and failure will produce a pattern of behavior from which
the negotiator will learn how to negotiate.

We need to wary about our approach towards the opposite party and should
usually avoid the below listed strategies.
1. Starting with a win-lose approach
2. Inability to change negotiating style
3. Making concessions for the sake of client relationship
4. Bargaining instead of negotiating
5. Establishing objectives as a fixed point instead of a range
6. Not choosing team members wisely
7. Failing to establish priorities
8. Not planning for possible concessions
9. Attempting to negotiate with unclear authority
10. Failing to take notes

11. Talking and no listening

12. Miscalculated the ZOPA and did not re-evaluate during the
negotiation
Negotiation Approaches and Taking Positions to Achieve the
Ultimate Goal
All negotiations are similar in that they involve people taking initial positions,
offering proposals to help resolve the conflict, making counter-proposals,
offering concessions, and coming to agreement. However, negotiations can
be distinguished according to the strategy and tactics that are used to
conduct the negotiation.
There are two general strategies of negotiation tactics: (1) distributive, and
(2) integrative

Distributive
This type of bargaining emphasizes the importance of maximizing individual
gains and minimizing losses. It adopts a “fixed” pie approach where
resources are viewed as being limited and it becomes important to claim
one’s rightful share of the pie. Distributive bargaining is competitive with
each bargainer taking positions to achieve victory over the other side.
Distributive negotiators tend to use the following kinds of strategies and
tactics:
• Distributive negotiators try to keep the opposing side from gaining
information about their position or “bottom-line” while trying to collect
information about the resistance point of the other party.
• Distributive negotiators misrepresent and withhold information as well as
make exaggerated statements about their positions in order to mislead
people about their true objectives.
• Distributive negotiators may use bluffs, threats, and manipulation to
reduce the options of the other party.
• Distributive negotiators use threats, putdowns, demands, and blame
statements.
• Distributive negotiators develop their position by using more and more
facts to build the case for the validity of their proposals.

Integrative
This type of bargaining emphasizes the importance of maximizing joint
gains. Rather than viewing bargaining from a win-lose perspective,
integrative bargaining adopts a win-win orientation where parties try to
create agreements where both can prosper. Integrative bargaining assumes
that both parties share multiple overlapping issues and that the best way to
deal with these multiple issues is to be flexible in one’s position and to
engage in cooperative problem solving. By engaging in cooperative problem
solving the pie becomes expandable, as the focus becomes on developing
creative solutions that expand the pie in ways that ensure both parties can
get what they need. Integrative negotiators tend to use the following kinds of
strategies and tactics that are exactly opposite of what distributive
negotiators apply:
• Integrative negotiators share their information openly and divulge their
needs and objectives. Information disclosure is viewed as facilitating the
problem-solving process as it allows negotiators to define problems, identify
causes, develop solutions, and evaluate the merits of proposed solutions.
• Integrative negotiators tend to use soft rather than hard tactics. They tend
to make statements that support the other party and use exploratory
problem-solving messages.
• Integrative negotiators drop particular agenda items, separate issues, and
recombine issues in creative ways as they move through the negotiation.
This opens up the room for developing novel solutions to the problem.

Bargaining Mix

Another important question which needs to be asked before initiating a


negotiation is the about the Bargaining Mix. This relates to the interests part
of the negotiating parties where we need to ask what are the interests and
priorities of the key parties involved in negotiation. People generally fail to
assess their interests which may be due to a lack of insight or a consequence
of the bargaining process itself. Incorrect assessment of interests often leads
to failure of maximizing value out of a deal.

BATNA (Best Alternative to a Negotiated Agreement)

While approaching for a negotiation deal it is of utmost importance to know


your best alternatives or back up plans. Having a good BATNA increases the
negotiating power. Therefore, it is important to improve BATNA whenever
possible.

A BATNA is not interested in the objectives of a negotiation, but rather to


determine the course of action if an agreement is not reached within a
certain time frame. As a gauge against which an agreement is measured, it
prohibits a negotiator from accepting an unfavorable agreement or one that
is not in their best interests because it provides a better option outside the
negotiation.
Since BATNA is the alternative to what a negotiated agreement would be
otherwise, it permits far greater flexibility and allows much more room for
innovation than a predetermined bottom line. When a negotiator has a
strong BATNA, they also have more power because they possess an
attractive alternative that they could resort to if an acceptable agreement is
not achieved.

When creating a BATNA, a negotiator should:

• Brainstorm a list of all available alternatives that might be considered


should the negotiation fail to render a favorable agreement;
• Chose the most promising alternatives and expand them into practical
and attainable alternatives; and

Although it would be absurd to start a negotiation with a predetermined


decision not to find an agreement, a viable BATNA acts as an essential
insurance policy. A well conceived and clearly defined BATNA gives a
negotiator the advantage to break off the negotiation if it becomes clear that
a beneficial outcome is not possible. The negotiator would then know the
consequences should the negotiation fail. The 'willingness' of a negotiator to
break off a negotiation shall allow the negotiator to adopt a more firm and
forceful stance when proposing ideas and interests as the basis for an
agreement.

In deciding whether a BATNA should be revealed to the other party/ parties


will depend on the strength/attractiveness of the BATNA. If a negotiator has
a strong BATNA, it may be beneficial to disclose it, as this would prevent the
other party/ parties from acting as if a viable alternative didn't exist.
However, if a negotiator has a weak BATNA, it would be better not to disclose
the BATNA, especially if the other party indicates they are over-estimating
their own BATNA as this would prove to be a bonus that should not be
squandered through disclosure.

A negotiator who knows more about the alternatives available to the other
party/ parties will be more able to prepare for a negotiation. Should a
negotiator learn that the other party is over-estimating its BATNA before the
start of a negotiation, and then they will be able to effectively use this
information to lower the negotiation expectations of the other party?

In situations where both parties possess a strong BATNA, the negotiation


would seem rather fruitless because there would be very little incentive to
reach an agreement. In this scenario, both parties would be better off to
seek elsewhere to pursue their business.

The better a negotiator's BATNA, the greater that negotiator's power, given
the attractive alternative that negotiator could resort to if an acceptable
agreement is not reached. BATNA allows far greater flexibility and room for
innovation than is the case with a predetermined bottom line. Having
available options during a negotiation is a good alternative which empowers
you with the confidence to either reach a mutually satisfactory agreement,
or walk away to a better alternative.

RV (Reservation Price)

Once the BATNA is identified the next step is to vouch for the reservation
Price. The reservation price is the least favorable point at which one will
accept a negotiated agreement. For example, for a seller this means the
least amount (minimum) or bottom line they would 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 also sometimes referred to as the ‘walk
away’ point.

ZOPA

A "Zone of Possible Agreement" (ZOPA) exists if there is a potential


agreement that would benefit both sides more than their alternative options
do. For example, if Party A wants to buy a used car for $5,000 or less, and
Party B wants to sell one for $4,500, those two have a ZOPA. But if Party A
will not go below $7,000 and Party B will not go above $5,000, they do not
have a zone of possible agreement.

The ZOPA is critical to the successful outcome of negotiation, but it may take
some time to determine whether a ZOPA exists. It may only become known
once the parties explore their various interests and options. If the disputants
can identify the ZOPA, there is a good chance that they will come to an
agreement.
A negotiator should always start considering the ZOPA at the earliest stage
of his or her preparations and constantly refine and adjust these figures as
the process proceeds.
There are considerable disadvantages to a narrow ZOPA. Firstly the parties
generally, and often incorrectly, view their bottom-lines as sacrosanct and
non-negotiable, and thus form a psychological bond with these positions; of
course they may also be bound to their bottom-line positions by mandates
received from their principals. Unless the negotiators are able or willing to
review and relax their bottom-lines they become locked in to a narrow
bargaining range and, in these circumstances, settlement is most often
reached by way of compromise, invariably leaving value on the table.

If one finds oneself locked into a narrow ZOPA on one issue, and the situation
that stands to one’s disadvantage, consider linking one’s issue with other
issues. So for example: consider changing the volume of transaction.

The stages in Negotiation

1) CLARIFY THE OTHER PARTY’S OBJECTIVES


2) INFORMATION GATHERING
3) ACTION PLAN
- Analyzing the Situation
- Setting Objectives
- Develop a Strategy
- Determine Tactics
- Determine Time Frame
4) THE ACTUAL NEGOTIATION
Information gathering stage – before starting negotiation

1) Ask Questions
a. Directly from the person with whom you are negotiating
b. From other people who have dealt with the person/company in
the past
c. On the professional level
2) Where and when you meet your opponent will be a deciding factor in
how much information you are able to extract.
3) An important aspect of gaining information is letting your source
understand that you need the information to make the negotiations go
smoother, to better understand the needs of the company so that you
can help.

4) Be aware that you are not the only one gathering information.
5) Check of the validity of information; truth is often subjective.
6) Information is especially powerful for gaining concessions.

The Use of power to influence people – Title power, reward power,


coercion power, referent power, charisma power, expertise power, situation
power, information power.

Negotiation Gambits:

1) Be a reluctant negotiator: When you show overflowing enthusiasm


for a product, when you are interested in buying it, you will probably
face an uphill task in getting excellent price concessions. So be the
reluctant buyer or seller.

2) Planning: It is a truism that those who fail to plan to fail. Planning is


an essential aspect of negotiating. Every gambit must be planned well
in advance.
 Your negotiating range which must be well thought out should
include the best price
you could possibly hope for
 The price you expect to get at the end of negotiating,
 The very lowest price you will possibly settle on.
If you have planned your range well, and stick to it, you may
reasonably expect the final agreement to fall somewhere in the range
before you begin to bid but always leave room for compromise.

3) Feel/Felt/Found Theory: Addressing a conflict by answering


controversial/argumentative statements by explaining that you
understand how he feels and that many other people have felt exactly
the same way, but that you have studied the problem and have found
a solution. That way you have sidestepped a conflict and paved way for
the real negotiating.

4) The want it all approach: When making an offer, remember to make


the other party feel that this is your one and only chance to ask for
everything you really want. The underlying principle of this gambit is
that both parties – seller/buyer must leave the negotiating table feeling
like winners.

5) First Offers: Accepting first offers raises easily two questions in the
mind of the other party. Firstly, I could have done better. Secondly a
quick yes will arouse suspicion on the other side if something is wrong
with the product and this can stall a good negotiation.

6) Get the other side to make the first offer: Commence


negotiations by immediately asking for the other party’s best offer.
This tactic is designed to push the other party to make concessions
without having to make any.- by this move, you haven’t said I will buy
from you if you give me a good price. You only skilfully pinned him
down to a price.

7) Higher authority: The bargaining game could have been a lot easier
to play if the parties involved have the final authority to take decisions
for the deal to be tied – up. Always work to keep your own resort to
higher authority, while removing the other party’s ability to call on
higher authority.

8) Splitting the difference: Never offer to split the difference instead,


encourage the other party to offer to do so, this keeps you in a
controlling position and consequently gives you a leeway to work out a
split that is a little better for you than the standard fifty – fifty.
9) Get smart play dumb: Acting dumb immediately defuses the
competitive spirit – how for example can you fight someone who is
asking for your help.

10) The trade off: you give up something or a vantage position to


the other party only to gain something more priced in return.

11) Decoy and Red Herring: Being weary of an issue that is


deployed to divert from the real issue.

12) The Nibble: Asking for additional concessions once the deal is
closed.

Post-Negotiation Phase
Post-Settlement Settlement & Post-Settlement Negotiation

Post negotiation both parties must reduce all agreements made to writing,
agreeing on future sessions and tasks, as well as how and whether to
communicate their progress to the outside world are among the principle
ways in which parties can continue to move towards successful resolution. If
this work is overlooked, then the gains made and agreements reached
during the main negotiation may be undermined or even undone. The end of
a negotiation process often marks the beginning of a new relationship
between parties or a new phase of a long-standing relationship. Either way
live meetings, communications, public statements and implementation will
require continued diligence by all parties.

In general the following steps in the post settlement phase help conclude the
process:

• Seek verbal confirmation on every significant agreement.


• Stay calm during this confirmation period and be reassuring to the
other party.
• Honour the commitments your delegation’s made during the
negotiation session and expect the other parties to do the same.
• Be as clear and concise as the delegation can and try to avoid using
ambiguous or vague words easily capable of different interpretations.
A subject matter expert should review all drafts to ensure that the
written document accurately reflects the parties’ agreements.
• Be specific in enumerating and describing each party’s performance
obligations. One can include provisions that impose penalties for
noncompliance to maintain the integrity of your agreement.
• Upon the conclusion of each negotiation session, the parties must
agree on how they will communicate their progress or agreements to
their constituencies and to the public at large. Care should be given to
the considerably different views and points of interest of those who will
be receiving the message.
• Creating goodwill during the concluding steps is of great value, which
will help the delegation resolve post-transaction issues. When the
written confirmation of the negotiated agreement is concluded, it is
important to take the time to compliment the other parties to the
negotiation.
• One should have a contingency plan on the likelihood and source of
non-compliance with the agreement. This way, the parties can be
prepared for most acts of non-compliance. The parties should keep a
list of participants and their responsibilities, both during the
negotiations and afterward. The parties may choose to draft a
schedule delineating responsibilities and deadlines for completing
those responsibilities, as well as what happens in cases of non-
compliance. The parties should consider establishing a regular
schedule of post negotiation meetings or summits to enforce the
negotiated deadlines.