Lecture

#5

© 2006  International Training Consortium, Inc.  Office: 301-428-0670  Fax: 301-972-3906 2

‘Let us never negotiate out
of fear. But let us never fear
to negotiate.’ John F.
Kennedy

3
Recap: Preparation Phase

4
 Preparation Phase
continues……
• BATNA---the Best Alternative To a Negotiated Agreement

• Always decide your BATNA before entering any negotiation!

• BATNA = the value or point at which you will choose no

agreement over a settlement

• BATNA is similar to the “walk-away” value or point

5
How to Determine Your BATNA!
• If the other party withdrew from negotiations today, what
are your alternatives?

• Can you list and place an estimated value on all the

economic variables such as price, timing, warranty,
options, etc.?

• How important is your long-term relationship with the

other party? Can you assign a dollar value to it? Does it
override other factors?

• Can you improve your BATNA by seeking new

alternatives to no agreement?

6
Before entering the opening phase we
must understand the characteristics of
negotiation
• (i) There are a minimum of two parties present in any
negotiation
•
(ii) Both the parties have pre-determined goals which
they wish to achieve
•
(iii) There may be a clash of pre-determined goals, that
is, some of the pre-determined goals are not shared by
both the parties

7
• (iv) Both the parties believe the outcome of the
negotiation to be satisfactory.
•
(v) Both parties are willing to compromise, that is, modify
their position.
•
(vi) The incompatibility of goals may make the
modification of positions difficult.
•
(vii) The parties understand the purpose of negotiation

8
Now you are ready for

© 2006  International Training Consortium, Inc.  Office: 301-428-0670  Fax: 301-972-3906 9

Phase 2: Opening Session

10
In Short:

Ball Park: American Term meaning “Area or Range…….” 11

• Here the two sides come face
to face. Each party tries to
make an impression on the
other side and influence their
thinking at the first opportunity.
Psychologically, this phase is
important because it sets the
tone for the negotiation to a
large extent.

12
 Consider the 5 Ws
• In our example of buying Prado:

• WHO speaks for each party, is authorized to make/reject

offers, and how many people will be on each team?

13
• In our example of buying Prado:

• WHERE will negotiation take place, and what will be the

seating arrangement?

14
• In our example of buying Prado:

• WHEN will negotiations begin, and how long will

sessions last?

15
• In our example of buying Prado:

• HOW will offers be made, issues included in the discussion?

16
• In our example of buying Prado:

• WHAT form of final agreement is acceptable

(handshake, verbal, written, notarized)?

17
Bargaining Styles used in opening phase: Howard
Raiffa’s FOTE & POTE

• FOTE = Full, Open, Truthful Exchange, which includes a

completely open, honest, and truthful exchange of
interests. e.g. Family and friends

Howard Raiffa was an American academic Professor (Emeritus) of Managerial Economics 18

• POTE = Partial, Open,
Truthful Exchange which
includes the concealment
of real interests, self
importance, bluffing, etc.

• POTE is used by most

negotiators.

• Why is POTE used

more? The parties lack
the trust required to
engage in FOTE

19
“Saving Face” in Opening Phase

• Both parties need to “save face” or avoid embarrassment

during and at the end of opening phase of negotiation

20
• Both parties need some “gains” to advertise, if not why
would they settle?

21
• Win-lose is considered a style of negotiation whereby
some negotiators will only close a deal if they feel that
they have won and the other side has lost.

• For example, Prado owner will only sell when he feels

the buyer has negotiated poorly and is willing to pay
more than the market price or price he had in mind

22
• Both parties should keep in mind future
encounters/meetings

23
References
• Negotiation experts. (2017, 14th August). Win lose
negotiation. Retrieved from
https://www.negotiations.com/definition/win-lose/

• Anna, Mar. (2018, April 18th ). 8 Examples of Win-Lose.

Simplicable.
Retrieved from: https://simplicable.com/new/win-lose

24
 Class Activity

• After the break

© 2006  International Training Consortium, Inc.  Office: 301-428-0670  Fax: 301-972-3906 25

 Reality Based Scenario on Opening Statement

• Group of 4 Students
• There is a company ABC selling ideas on business
development

• You 4 represent a company XYZ who wants to buy those

ideas at a cheaper price but ABC is not willing to sell you
at that rate

• Conflict has emerged.

• After careful preparation your group has decided on the

following opening statement:

26
 Complete the Opening Statement to the best of
your knowledge
• Well, thank you _____ _____ _____ _____.

• May I begin by _____ _____ _____ _____...

• First of all, we see it very much as a first meeting, a _____

_____ to _____ _____ in which we can perhaps________

• There are two, possibly three, ways in which we _____

_____ _____

• I'd like to _____ these under three headings #1________

#2_______________ #3____________________

27