AGL 20 NEGOTIATION

SUMMARY LECTURE - PART I

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11.1 COURSE OBJECTIVES

The program provides members with the opportunity to use negotiation concepts, terms, techniques and skills and become more complete managers. The specific learning objectives are to: a. To analyze negotiation process to achieve goals exceeding BATNA b. To evaluate the impact of culture on negotiation. c. d. e. To practice international negotiation communication skills. To develop skills in achieving negotiation strategy. To motivate further study in the fut
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11.2

NEGOTIATION

The negotiation process includes: planning re-negotiation, initiating first moves, making the first moves, negotiating prices, closing business negotiation and undertaking renegotiation. The key objective is to achieve win-win goals for both parties which establish trust for short and long term relationships. BATNA - Best AlternaTive with No Agreement. Available alternative when negotiation fails. Close the deal or walk away to BATNA. BATNA affects: cash, culture, deadlines, interests, knowledge, and the experience of both parties. Assess your BATNA at the outset and estimate the opposing BATNA.

11.2 NEGOTIATION
Negotiation environment includes such complex factors as: instability and change, government control and policy, foreign exchange fluctuation, political and legal change, external stockholders and parties, ideological and cultural differences. The negotiation setting may includes: levels of conflict underlying potential negotiations, relationships before and during negotiation, desired outcomes, stockholder impacts, relative bargaining power and dependence and finally the negotiation style.
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11.3 PLANNING
Negotiation begins with research and prenegotiation planning with each party g with a different goal and hopes to achieve it. Thus there is need for clarification, comprehension and credibility, in order to create mutual values. As negotiation continues the parties reach convergence of view with discussion, leading to concessions, counter proposals and commitment. The final stage is conclusion.
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11.4

INITIATING

Making the first moved is critical, because the first impressions are difficult to change. An initial first competitive offer should meet the context of the surrounding discussion and must be defended with valid arguments. In competitive markets a higher initial offer may be lowered. In traditional less competitive markets, offers on the high side with concessions may be more acceptable.

The initial offer should be confident and yet flexible to enable the negotiator to learn other party objectives and reformulate to meet specific needs. The initial negotiation phase, is the opportunity to create trust and exchange strategic in formation, not the time to make concessions.
In the initial phase, the buyer keeps his goals in mind and is ready to say no and refer to competition. He may later seek concessions or a better offer or may ask if the proposal can be adapted achieve his needs. Thus is stage reflective cooperation.
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11. 5 PRICE NEGOTIATION

Price determines the total revenue and profitability of the business by considering: objective, cost, competition, customer and government regulations. Price negotiations may follow a cost or market approach. The cost approach computes relevant costs and adds markup to determine price. The market approach examines price setting from the customers and competitors viewpoint. Need to highlight the business and product attributes, maintain flexibility and differentiate from the competition. At closing reliability, reputation and financial stability may be critical.

11.6 CROSS BORDER CULTURES

Cross cultural negotiations may involve culture emotionally based upon traditions, etiquette. It may relate to group behavior or just to the chosen negotiator parties as freely choose to behave. Protocols involve dress and behavior deal with greetings, formalities, touching, eye contact, emotions, silence, eating, body language, and punctuality etc. Need to know the key players well and the informal cultural influences on the process.

11.6 CROSS BORDER CULTURES

Cross cultural negotiations may involve culture emotionally based upon traditions, etiquette. It may relate to group behavior or just to the chosen negotiator parties as freely choose to behave. Protocols involve dress and behavior deal with greetings, formalities, touching, eye contact, emotions, silence, eating, body language, and punctuality etc. Need to know the key players well and the informal cultural influences on the process.

11.7 SELECTING NEGOTIATING STYLE

Know your personal style and the style of the other party. Adjust to match, and ensure smooth negotiations. Define the style as influenced by task or relationship orientation, which directly relates to cultural values.

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11.8 PRE-NEGOTIATION PLANNING

In any negotiation the actual interface between the two parties is only one phase. The critical element is the research and planning for the preparatory stage, which must never be neglected. Experienced negotiators may sometimes be over prepared but should never be under prepared. With particular strengths and weaknesses, the party that is more committed works harder for its goals, and can always can achieve the best results. Preparation is the best negotiation investment! Pre-negotiation planning requires defining the issues, knowing the other side position, knowing the competition and the especially

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11.9 MANAGEMENT OF CONCESSIONS

Study Exhibit C which provides practicalguidance on achieving success on concessions, in complex negotiation environments

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11.10 LEARN FROM CASE EXPERIENCE

MULTIMODE: Need for quickly establishing trust with a cooperative strategy. Acceptance of the other partys interests, objectives and limitations Recognition of value differences. Define conflict areas.

Creative search for seven alternatives for every key issue.

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11.10 LEARN FROM CASE EXPERIENCE

MULTIMODE: Priority for fairness in long term relationships. Identifying the constraints on each party for future working in the company with the tough CEO Need for KSA in negotiation to achieve more than BATNA Personal reputation and status are critical factors in implementing negotiated agreements.

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11.10 LEARN FROM CASE EXPERIENCE

QUICK DRY PAINT:

Need to know about the legal complexities of Mexico and the risk of corruption and loss of patents. Need to be able to check on the specific actions of the licensee. Who will own improvements in reality? In LA, will licensing outcome depends more on trust which takes more time, than legal issues.

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11.10 LEARN FROM CASE EXPERIENCE

QUICK DRY PAINT
Who will bear foreign exchange risk? Dispute resolution with an agreed arbitrator able to implement his decisions. Poor outcome of possible litigation in Mexico or USA Lack of experience in international licensing creates high risk. If no agreement then BATNA is best. RESULT Deal made!!!

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11.11 Negotiation Analysis

The questions to analyze in a negotiation are: What is the BATNA of each party, with no agreement? Who are the real Parties in the negotiation?
What are the critical Interests of each party? How to create value for both parties? What Barriers must be overcome to achieve agreement? How can Power influence the process?

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11.11 Negotiation Analysis

What are ethical things to do? But rigorous negotiation analysis is necessary but not enough. Negotiation also needs: implementation strategy, ability to listen, persuasion, positive attitudes, patience and humour. Negotiation is an interactive process, directly related to attitude and creativity that needs to encourages cooperative behavior from the people with whom we deal.

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11.12

OVERALL

The six Ps of effective negotiation are : Parties, Process, Power, Product, Problem and Prognosis (outcome). The key objective is achieving a long term relationship of trust for mutual benefit and a win-win outcome. The BATNA is an alternative for a failed negotiation. So much depends upon the negotiation: environment, process and the setting, which can be managed!!

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11.12

OVERALL

Business success in negotiation may well depend upon: knowing your product, customer and competition; effective business decision making; finding your market niche. Quality products; creative diversity; finding expanding markets; network contacts; trust and honesty; control of cash, outcomes and risk; diffusing tension; customer loyalty; creativity and overall on your skills of negotiation
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11.12

OVERALL

So many things to learn now including Exhibit A on Protocols and deportment and Exhibit B Practical Advice and Exhibit C Managing Concessions

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EXHIBIT A - PROTOCOLS
Try hard to avoid making obvious mistakes with different nationalities: English - definite and polite with proper protocol and etiquette. French - expecting others to behave as if in France, conducting business, with the French language German - protocol important. Conservative dress and posture with manner expected. Seriousness of purpose and appropriate dress. Swedish - formal relationships without price disputes. Expect complete professional proposals without errors and of high quality.

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EXHIBIT A - PROTOCOLS
Italians - extremely hospitable and volatile. Make points with dramatic gestures and emotional expression. Japanese - may spend days or weeks creating a friendly, trusting atmosphere before discussing any business at all. Chinese - follow fixed protocol in negotiation, always preceded by small. Opposed to touching. Greeting with short bow and very brief handshake. Indians - formal business with polite relaxed manner. Connections are the key to trust. Always request permission before entering, sitting or smoking.
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EXHIBIT A - PROTOCOLS
Mexicans - practice negotiation with heavy emotion . Drama more important than logic. Negotiators often selected for skills in dramatic and distinguished performances. Brazilians - negotiating process valued more than the actual result. Discussions lively, heated, eloquent, and witty. Great hospitality to establish comfortable social climate. Russians Tend to distrust business managers. Extremely cautious when dealing with new parties.
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EXHIBIT B PRACTICAL ADVICE

a. Risk averse negotiators are sometimes desperate to avoid risk and may take a quick first offer. b. The target point is the point at which a negotiator would like to conclude negotiations; it is not the negotiator's bottom line;, not the first offer a negotiator quotes to his opponent; not the initial price set by the seller. c. Both tangible and intangibles factors can be the most powerful in any negotiation. f. Highly individualized (idiosyncratic) deals are much more common today, and they are not reserved only for a special few.
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EXHIBIT B PRACTICAL ADVICE

d. Coordinate (cooperative) adjustment, involves, making conscious changes to your approach to be more appealing to the other party. e. Both parties making mutual adjustments to find a common process for negotiation; crafting an approach that is specifically designed to achieve success in the negotiation situation
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EXHIBIT B PRACTICAL ADVICE

f. Multiparty negotiations differ from two-party deliberations in so many ways; more negotiators at the table; more issues and more information introduced; environmental changes from one-on-one dialogue to small group discussion. g. The parties approach multiple issues simultaneously; tend to achieve lower quality agreements; increase the likelihood of achieving some agreement; and yet exchange less information and have less insight into the preferences and priorities of all the other parties at the table.
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EXHIBIT B PRACTICAL ADVICE

f. Reputation in negotiation is a perceptual identity; a reflective of the combination of personal characteristics; demonstrated behaviour. All of these define reputation. g. The perceptual process involves a special order: stimulus, attention, recognition, translation, behaviour. Visibility is important as it involves centrality or criticality in negotiation network structures.
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EXHIBIT B PRACTICAL ADVICE

h. Hardball tactics are designed to be used primarily against powerful negotiators; to clarify ;to a distributive (zero-sum) bargaining approach and to pressure d parties to do things they would not otherwise do.. i. Frames are important in negotiation because disputes are often nebulous and open to different interpretations. Frames do not allow parties to develop separate definitions of the issues; frames can not be avoided; frames do not allow negotiators to articulate just one aspect of a complex social situation
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EXHIBIT B PRACTICAL ADVICE

j. The most dominant cause of breakdowns and failures in negotiation are distortions in perception, feedback, and behaviors; it is not just meaning or cognition.

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EXHIBIT C MANAGING CONCESSIONS

Plan concessions in advance, concentrating on the other partys underlying interests. Provide sufficient margins particularly in cultures that are extremely demanding.

Set aside a few concessions in reserve to be used when concluding the deal.
Trade small concessions early on to encourage the other party to share information and to promote trust. Insist on obtaining immediate reciprocity after making a concession (future promises lose value over time).
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EXHIBIT C MANAGING CONCESSIONS

Determine, the real value of the concessions and what other party is willing to pay for Remember that 80% of the concessions are traded in the 20% remaining time. Have the party work hard in obtaining concessions to be appreciated as well as encouraging the other party to reciprocate generously Provide justification/benefits for each concession to enhance its value. Keep a few nontangible concessions, including symbolic ones to break a deadlock or to conclude. Observe the other party's body language to detect hidden motives.

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EXHIBIT C MANAGING CONCESSIONS

Take into consideration that negotiators from different cultures concede differently Be aware that how you concede is just as important as what you concede. Trade concessions in fewer and fewer amounts requiring the -other party to spend more and more time and effort.

Manage time efficiently by concentrating on key issues.

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EXHIBIT C MANAGING CONCESSIONS

Know the competition to resist giving away unnecessary concessions.

Be aware of false concessions.

Build trust; otherwise reciprocity is not adhered to.
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11.13 LEARNING PATTERNS - REVIEW

Six Ps of effective negotiation

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11.13 LEARNING PATTERNS - REVIEW

Parties Process Power

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11.13 LEARNING PATTERNS - REVIEW

Product Problem Prognosis (outcome)

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11.14 INSTRUCTIONS (20 minutes)

Reassemble in SG Review the Summary Lecture for Part I Discuss questions arising

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11.14 INSTRUCTIONS (20 minutes)

Get the best out of Part II of the program, complete ALL of homework tonight: Study the course text book: Practical Solutions to Global Business Negotiations (Cellich & Jain) - Chapter 1 and explore the contents of the book for future study. Study again the AGL Summary Lecture Part 1 and Glossary in the Diary.
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11.14 INSTRUCTIONS (20 minutes)

Review the HBS Article (Investment Analysis). Very briefly review the two new cases: Quick Drying Paint and GE (handouts). Review your notes for Part I of the course and list outstanding questions to be resolved in Part II

Be sure to return the Workpack to the organizer now.

You have all you need in the Diary.
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END
END OF SUMMARY LECTURE 1

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3. SUMMARY LECTURE - 2

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12.1 COURSE OBJECTIVES

The program provides members with the opportunity to use negotiation concepts, techniques and skills so that they become more complete managers. The specific learning objectives are to: To analyze negotiation process to achieve goals exceeding BATNA To evaluate the impact of culture on negotiation. To practice international negotiation communication skills. To develop skills in achieving negotiation strategy . To motivate further study in the future.
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12.2 NEGOTIATION
The key objective is to achieve the goal exceeding BATNA. Helped during talks, when effective relationship negotiators focus on a variety of noncontractual issues, including: Getting to know the other side well. Establishing a positive personal chemistry between the leadership of the companies involved. Understanding and respecting each others cultures, expectations, and goals. Putting mechanisms in place to foster communication after the contract is signed. Ensuring that the proposed deal is balanced and advantageous for both sides. Identifying and planning for potential obstacles to implementation.

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12.3 COMMUNICATION
The exchange of messages between people to may achieve common meaning, in three forms: Instrumental/goal directed communication - where the sender seeks to achieve specific effects in the receiver - most important in work. Such deliberate communication is "transmitted".

Expressive communication - where an emotional state (e.g. joy or anger) or a motivational state (e.g. enthusiasm or frustration) is spontaneously "emitted"
Incidental and often un-conscious communication where the sender "imparts" information to others without intending to.

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12.3 COMMUNICATION
Be prepared for a practical reality face to face" communication, as information may transmitted as follows: 10% - in words 50% - in facial expressions 40% - in vocal intonation and inflection. Thus words themselves or the "rational component", may convey only about 10% of the communication message. 90% of each message depends on the "emotional feelings content", whether we are aware of it or not! Communication is helped by words and feelings.

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12.4 INTER-GROUP BEHAVIOR

In negotiation between groups, to survive and be effective, a group must work through differences with other groups. Inter-group relationships are fostered by the norm of reciprocity ie. exchange of favors - like a human resource bank account. Communication can fail when a group refuses to provide favors for another. Older more inflexible individuals and groups tend to become resistant to change. Such groups are "frozen". Frozen groups, contrast with dynamic groups that are more able to change. People who perceive their established positions, status, security, privileges etc. to be threatened by change will resist it more strongly.

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12.5

NEGOTIATION CONCEPTS

Everything is negotiable with the tools of: time, power and information and with a "win/win" style of negotiation. Win/lose negotiation styles do not support long term cooperation, Successful win/win negotiation lies in finding out what the other side "really" wants and showing them the way to get it while we get what we want. Most needs can be satisfied by the way we act and behave, when the goal is mutual satisfaction (but we must avoid "nibbles" - asking for extras AFTER a deal!).

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12.6 COMMUNICATION AND NEGOTIATION SKILLS FROM A-Z

Study the ideas in Exhibit A and recognize the ones which you have already learned.

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12.7 PRACTICAL THINGS NOT TO DO IN NEGOTIATION

Study the ideas in Exhibit B and recognize the ones which you have already learned.

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12.8 LEARN FROM EVERY CASE EXPERIENCE

QUICK DRYING PAINT CASE:
Clarify the different roles in licensing Recognize the complexity of licensing and the risk of patent loss. Define what the licensor must be sure to do Decide on the ownership of improvements Forecast outcomes with specific clauses and controls Decide who bears foreign exchange risk Provide for dispute resolution with an agreed arbitrator Be realistic on possible outcome of litigation in Mexico or USA Recognize the possible unequal parties in licensing With no agreement back to BATNA

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12.8 LEARN FROM EVERY CASE EXPERIENCE

GE CASE:

Contrast of cultural values. Possible joint venture despite highly different objectives. Several other alternatives available Why is tit that negotiations fail How to ensure fulfillment of Asian contracts Taking two years of meetings to agree a relationship Cross cultural behaviours and endeavours Nature of the win-win deal Need to accept and structure re-negotiation With trust for a long term potential together

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12.9 OVERALL

SWOT and KSA to achieve a goal exceeding BATNA. The six Harvard Ps of effective negotiation are : Parties, Process, Power, Product, Problem and Prognosis (outcome). The key negotiation objective is achieving a long term relationship of trust for mutual benefit and a win-win outcome. The BATNA is an alternative for a failed negotiation.

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12.9 OVERALL
So much in negotiation will depend upon you managing: environment, process and the setting, Now you can do it !!! On we go together when you have time be sure to study section 4.0 Cultural Challenges and you will find that you have absorbed the answer to each case instinctively after 2 days of AGL interaction negotiation instincts worth a million?
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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

A. "ACTIVE LISTENING" is the key to good communication!
B. Use outside consultants skilfully as "organizational symbols" who "take the BLAME" for necessary changes that MUST be introduced. C. The objective of communication is to ensure that expectations and reactions are CONGRUENT.

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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

D. Appreciate cultural DIFFERENCES. Many messages mean different things with different emotional consequences in different cultures!! E. EMPATHIZE with the receiver/sender.

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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

F. Seek continual FEEDBACK. Listen actively and accept, use and reward contributions from colleagues. G. GO for: trustworthiness, trust, empowerment and alignment. which build commitment and promote effective communication and delegation. H. Seek assistance from others who may be HELPFUL prior to communicating - ignoring them may be an insult!! I. Clarify IDEAS before communicating them.
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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

J. Recognize PREJUDICE (sexual/racial/national/religious/age ... oneself too!) ... is everywhere ... and communicate accordingly. K. Sometimes we all need a little KITA to improve our efficiency (doing things right) and effectiveness (doing the right things). L. Accept that personal needs and survival are everybody's normal first priority regardless of what they say. Look for the four "L's" : living, loving, learning and legacy. M. Consistent MEANING - don't keep changing your message.

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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

N. Recognize the cultural NORMS of the environment within which you communicate. O. Examine your OBJECTIVES and expectations for each communication (facts? attitudes? feelings?) P. PRACTICE what you preach because people judge you by your "action communication" (80%) not merely your "word communication" (20%). Q. Recognize that failure to use "politically correct" terminology could lead to significant adverse reactions.
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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

R. Good communication needs a "RELATIONSHIP" - to make it with a foreign speaker - make the effort to learn some of her/his language - even though you may work together in English. S. Recognize that people are committed to change only in terms of their own personal SAFETY systems. T. Remember that it is not only what you say but how you say it ("TONE") that determines the real effect of communication. U. Remember that to be a successful manager and communicator it is just as necessary for you to UNDERSTAND other people's point of view, as it is for them to understand yours.
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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

V. Seek organizational culture not by complete control or complete freedom but by the third domain of interdependent commitment expressed in meaningful mission statements that respond to the needs and VALUES of all of the stakeholders. W. Be very creative (brain storm) in seeking "WIN-WIN" solutions, by seeking out the magic "seven" alternatives for every problem. X. And remember that every Napoleon theory (X) always perceives himself/herself to be a tolerant, benevolent, participative theory (Y) manager ...!!!

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EXHIBIT A - COMMUNICATION AND NEGOTIATION SKILLS A-Z

Y. Recognize that when a manager says she/he is "LOYAL" to the company", she/he is really saying "my personal needs are being satisfied by this organization and therefore I want it to survive". Z. "Starters" achieve effective change but don't hesitate to replace them with "Runners" when the time comes.
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EXHIBIT B - PRACTICAL THINGS NOT TO DO IN NEGOTIATION

Study the ideas in Exhibit B and recognize the ones which you have already learned after two whole days of AGL effort. So please do not: Confuse cost and value. Accept concessions too easily. Be the first to make concessions on key issues. Offer a large concession early in the discussions, as it encourages the other party to ask for more. Give away important concessions under time pressure.

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EXHIBIT B - PRACTICAL THINGS NOT TO DO IN NEGOTIATION

Show too much enthusiasm when accepting concessions (winners curse) Accept future promises in exchange for valuable concessions. Assume that the other party values concessions the same way as you do. Suppose that the other party has similar priorities, needs, goals, and motivation. Trade concessions without first creating value
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EXHIBIT B - PRACTICAL THINGS NOT TO DO IN NEGOTIATION

Make concessions that affect the bottom line negatively. Claim value before creating value. Be arrogant when refusing a concession. Adopt a concession strategy that can be easily detected by the other party. Make quick decisions under time pressure.
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EXHIBIT B - PRACTICAL THINGS NOT TO DO IN NEGOTIATION

Give away information to the other party without reciprocity. Negotiate against yourself. Rush into concessions to satisfy the other party.

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LEARNING PATTERNS REVIEW

Six Ps of effective negotiation Parties Process Power Product Problem Prognosis

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FINAL NOTE

This ends our AGL program; one of a six part series: AGL 1 - Finance for Non-Financial Managers AGL 2 - Cost Control AGL 3 - Planning and Budgetary Control AGL 4 - Capital Investment Analysis AGL 10 - Management of Working Capital AGL 20 - Negotiation We hope it has inspired you to develop your skills by practical application. You are now ready to study the course text book which is excellent: Practical Solutions to Global Business Negotiations (Cellich & Jain)
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FINAL NOTE
Thank you for your interest and hard work. Keep the glossary handy as a daily reference for finance and other negotiations. Follow up by doing sections 5, 6, 7 and 8 of eh Diary and giving feedback after the course. We hope that you have much enjoyed the AGL experience and that it motivates you to read widely in finance and accounting and to continue your studies in the future. We suggest the The Economist weekly and the WSJ (Wall Street Journal) every morning - as good as an MBA!!! Be sure to reinforce your learning with the all the activities set out in the Diary and with the LRT (Learning Recall Tape) routine, as explained by the organizer.

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FINAL NOTE
In the month following completion of the program. Please send us the Final Feedback Summary on day 28. We trust that you have found AGL to be both "efficient" (doing things right) and "effective" (doing the right things). Thank you for being a member of the program. RGAB drbobboland@hotmail.com www.crelearning.com

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END

End of Summary Lecture 2

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