COURSE:

BUSINESS
CORRESPONDENCE
 BUSINESS NEGOTIATIONS
OBJECTIVES:
To get acquainted with the business negotiation
strategies and techniques
To assimilate a basic algorithm of a typical
business negotiation round
To organize a simulation and discuss on a case
study
 DEFINITIONS:
Negotiations is:
Dialogue between two or more parties, with
the intent of coming to a mutually agreed
solution, because each party has something
the other wants
Communication process between two or
more people in which they consider
alternatives to arrive to mutually agreeable
solutions or mutually satisfactory objectives
 STRATEGIES VS TECHNIQUES

 Strategy is the overall approach for

conducting the negotiation.
 Tactics are particular actions used to
implement a strategy.
Categories of Negotiation Goals
Aggressive goals
Competitive goals
Cooperative goals
Self-centered goals
Defensive goals
Combinations of goals
 AGGRESSIVE GOALS
Seeks to undermine, deprive, damage or
otherwise injure a rival or opponent.
Example: Taking a customer or supplier
away from a competitor in order to hurt
the competitor.
 COMPETITIVE GOALS
 One side seeks to gain more from the
negotiation than the other side.
 In fact the negotiator hopes to obtain as large a
comparative advantage as possible.
Example:
 Receiving the highest possible price.
 Paying the lowest possible price.
COOPERATIVE GOALS
Cooperative goals are achieved through
an agreement that leads to mutual gain
for all negotiators and their respective
sides.
This achievement is also referred to as
win-win negotiating.
Example: Forming a joint venture,
partnership, or corporation to engage in
business opportunities to achieve a
mutual profit.
 SELF-CENTERED GOALS
 Self-centered goals are those that depend solely
on what one’s own side achieves.
• Scenario: two large accounting firms
merge. The tremendous size of the new
firm raises a self centered goal to find
sufficient prestigious space in a single
location. The goal is reached when the new
firm negotiates a lease for 15 floors in a
major midtown New York office building.
 DEFENSIVE GOALS
 One seeks to avoid a particular outcome.
 Examples:
•Avoiding a loss of respect.
•Preventing a strike.
•Avoiding the loss of a customer or
supplier.
 COMBINATION OF NEGOTIATION
GOALS
 Each negotiation usually has multiple goals.
– Case: In a collective bargaining negotiation, a
transportation firm seeks to have its employees
make prompt deliveries in order to maintain its
business volume. This is a self-centered goal. A
defensive goal is suggested if the maintenance of
volume is intended to avoid a loss of customers.
The goal is also aggressive to the extent that the
same activity lures new customers away from
competitors, a result which is likely to weaken
the latter.
 QUOTATIONS
Negotiation involves the art and science of
drawing up deals that create lasting value
[David A. Lax and James K. Sebenius]
Negotiation is the process by which people
deal with their differences
[Harvard Business School, Roger Fisher]
Let us never negotiate out of fear, but let us
never fear to negotiate
[John F. Kennedy]
Types of negotiations
1. Distributive negotiation
2. Integrative negotiation. Most business
negotiations combine elements of both
types
 Distributive negotiation
 Parties compete over the fixed sum or value. The key question
is who will get the biggest part of the pie? A gain of one side
is made at the expense of the other
 The Seller’s goal is to negotiate as high price as possible, the
Buyer’s goal is to negotiate as low price as possible. This is
known as Win-Lose or Zero-sum negotiation
 Thus, the deal is simple, no need forcreativity. Neither party
is interested in long term relations. They take and defend
their positions
POSITIONAL BARGAINING
 Positional bargaining
 Hard style of bargaining dominates a soft one
 If the hard style bargainer insists on concessions
while soft bargainer avoids confrontation, the
negotiation ends in favor of the hard bargainer
 The negotiation will produce an agreement, although
it may not be a wise one
 Arguing over positions endangers an ongoing
relationship and is inefficient
 In multiparty negotiations positional bargaining is
even worse
 Integrative negotiation
 Integrative negotiations tend to occur when the deal
involves many financial and non-financial terms
 Parties cooperate to achieve maximum benefit by
integrating their interests into an agreement
 This is also known as Win-Win negotiation. Both sides
try “to make the pie bigger”
 There are many items and issues to be negotiated ant
the goal of each side is to create as much value as
possible for itself and the other side
Distributive vs Integrative Negotiation
 Negotiator’s Dilemma:
COOPERATE OR COMPETE?
The law of win/win says “Let’s not do it your way
or my way; let’s do it the best way”
Greg Anderson
The 22 Non-negotiable
Ways of Wellness
 The Answer to Negotiator’s dillema
The tit-for-tat strategy is the solution. This
process involves starting out with a
cooperative approach: responding to
competitive
:
moves with a competitive move
and responding to a cooperative move with a
cooperative move
In real world there is no purely Distributive,
Integrative as well as Multiphase or Multiparty
negotiations
Every individual Negotiator decides upon
his/her style to which extent he/she wants or
needs to be Cooperative or Competing
ACTIVE ENGAGEMENT STRATEGIES
STAGE 1: PREPARATION
PREPARATION: PRACTICAL ASPECTS
STAGE 2: EXCHANGE OF INFORMATION
TEAM FORMATION
NEGOTIATION ALGORITHM
Aronoff and Wilson’s negotiation style
model
 BATNA vs WATNA
 BATNA: (Best Alternative To a Negotiated Agreement) - another
choice or substitute action that may produce
an outcome superior to any outcome we might gain from a
negotiation process
 WATNA: (for Worst Alternative To a Negotiated Agreement) -
another choice or substitute action that may produce an
outcome inferior to any outcome we might gain from a
negotiation process
 MLATNA: (Most Likely Alternative to a Negotiated Agreement)
another choice or substitute action that may produce an
outcome superior to any outcome we might gain from a
negotiation process — usually less extreme and more
realistic than some BATNAs and WATNAs
PATNA: (Probable Alternative to a Negotiated Agreement) —
same as MLATNA
 APPLICATION
SITUATION WATNA BATNA
A person is thinking of Keep driving current faulty Buy direct from other owners
vehicle until it breaks down. who advertise their vehicles in
buying a used car from newspapers or online, cutting out
a car yard. the cost of the middleman.

Country B depends on oil

Country A is invaded and revenues to wage war. The price
Country A receives occupied permanently by of oil declines dramatically, as
military threats from country B. country A’s intelligence
country B. predicted. Country B stops
making threats.

Market value of company stock

Union wants a 30 per Union goes on strike, even suddenly rises. All employees
though strike fund has been have stock, so become wealthier
cent wage increase.
embezzled by corrupt official. as a result. Union
representatives decide to defer
No-one pays and the claims until better organized and
Two lovers cannot agree restaurant resourced.
over owner calls the police.
who is to pay a The restaurant owner, a romantic
restaurant bill. at heart, tells them the food is on
the house.
 SITUATIONS
• A country is intent on developing nuclear weapons, but it is under pressure from other nations
not to do so. The country plays for time by entering into negotiations, giving the public
impression of bargaining on outcomes but in reality having no intention of negotiating.
• A person on a job selection panel sees the outstanding candidate as a potential threat
to his position. Rather than state the true position, or be seen as unreasonably rejecting
the candidate, he instead offers the candidate an insultingly low starting salary and
package, which is duly rejected.
• A prosecutor perceives that an upcoming jury trial will give her much media exposure,
and will thus boost her career. Because of this, she only goes through the motions of
negotiating a settlement before the case goes to court, and she finally rejects such a
settlement.
• Party A rejects negotiating with party B because party A says that party B is a villain
who should never be negotiated with. Refusal to negotiate, or ‘phoney bargaining’, constitutes
a major blockage to the negotiation process. Some counters are (Wallihan 1998):
• Name the game: identify the tactics being used; accuse the other side of not being
serious — of going through the motions and only being interested in making offers that
must be refused.
• Appeal to those behind the other side (e.g. the union rank and file, the board and shareholders,
the car yard owner, the other parent).
• Bring in a third party.
• Shift the negotiation to issues on which real bargaining is more likely to take place
 AVOIDANCE STRATEGY
(The Nonengagement Strategy)
Reasons of why negotiators might
choose not to negotiate:
1. If one is able to meet one’s needs
without negotiating at all, it may make
sense to use an avoidance strategy.

2. It simply may not be worth the time and

effort to negotiate.
 AVOIDANCE STRATEGY
3. The decision to negotiate is closely
related to the desirability of available
alternatives.
Alternatives are the outcomes that can be
achieved if negotiations don’t work out
4. Avoidance may be appropriate when the
negotiator is responsible for developing
others into becoming better negotiators.
 Active-Engagement Strategies

• Competition
• Collaboration
• Accommodation
 COMPETITIVE STRATEGY

Distributive Bargaining
Win-Lose Bargaining (I win, you lose)

Zero-sum game: whatever extent one party

wins something, the other party losses
 COMPETITIVE STRATEGY
Distributive Bargaining refers to the
process of dividing or distributing scarce
resources

 Two parties have different but

interdependent goals
 There is a clear conflict of interests
Examples of Distributive Bargaining :
• A wage negotiation
• A price negotiation
• A boundary or territorial negotiation
 COLLABORATIVE STRATEGY
 Integrative Bargaining
 Win-Win Bargaining (I win, you win)

Positive-sum situations are those where

each party gains without a corresponding
loss for the other party.
 Integrative Bargaining
Integrative Bargaining is about searching
for common solutions to problems that
are not exclusively of interest to only one
of the negotiators.
 ACCOMMODATIVE STRATEGY

Win-lose strategy (I lose, you win)

The negotiator wants to let the other win,
keep the other happy, or not to endanger
the relationship by pushing hard to
achieve some goal on the substantive
issues
Accommodative Strategy is often used;
When the primary goal of the exchange is
to build or strengthen the relationship
and the negotiator is willing to sacrifice
the outcome.
If the negotiator expects the relationship
to extend past a single negotiation
episode.
NEGOTIATION STRATEGIES
1. No-Concessions
2. No Further Concessions
3. Making Only Deadlock-Breaking
Concessions
4. High Realistic Expectations With
Systematic Concessions
5. Concede First
6. Problem Solving
7. Goals Other Than To Reach Agreement
8. Moving For Closure
9. Combining Strategies
You cannot shake hands with a clenched
fist. [Indira Gandhi]