NEGOTIATION

Chapter 7

Z. A. Patel

BARGAINING

Dispute on;

Price Nature of transaction

Agreement

BARGAINING STRATEGIES

DISTRIBUTIVE INTEGRATIVE

Distributive Negotiation

Zero sum, Win-Lose: one partys gain is another partys loss Used fixed resources to allocate Example: Union & Management

Characteristics of Distributive bargaining

Used when dividing something Goal: Each party tries to win more share Competitive Result: one party wins and the other loses Price the major factor Used by people who are aggressive, ruthless, stubborn, cunning, manipulative etc

TACTICS USED IN DISTRIBUTIVE BARGAINING

Set HIGH price. Make comparisons - House rent Lower aspirations salary hike Provide incentives recommend others Reduce time to create tension More negotiators in a team

INTEGRATIVE BARGAINING

Win-Win type Co-operation

Features

Used for maximum cooperation Goal: both parties must win Non-competitive Result: both parties win Attitude is to solve the problem Each party complements the other Each party discloses information fully

TACTICS

Find differences two book owners Open communication channels Climate of cooperation and not competition Clear message of willingness to solve the problem

NEGOTIATION PROCESS

By Stephen Robbins

Preparation and planning, Definition of ground rules, Clarification and justification, Bargaining and problem solving and Closure and implementation.

STEP 1: PREPARATION AND PLANNING

Do your homework.

Anticipate opponents position

Once you have gathered your information, use it to develop a strategy. Determine your and the other sides Best Alternative To a Negotiated Agreement (BATNA).

Your BATNA determines the lowest value acceptable.

Any offer you receive that is better than your BATNA is better than an impasse.

STEP 2: DEFINITION OF GROUND RULES

Who will do the negotiating? Where will it take place? What time constraints, if any, will apply? To what issues will negotiation be limited? Will there be a specific procedure to follow if an impasse is reached?

STEP 3: CLARIFICATION & JUSTIFICATION

About initial position / demand Must not be confrontational Educate each other about its importance Show proof, if required

STEP 4: BARGAINING & PROBLEM SOLVING

STRATEGIES

Distributive Integrative

STEP 5: CLOSURE & IMPLEMENTATION

Drafting Procedure for implementation

THIRD PARTY NEGOTIATION

NEGOTIATIONS MAY SUFFER

SLOW STOPS

HENCE THIRD PARTY IS REQUIRED

Reasons for using third party: both parties are not willing to communicate both parties do not move ahead in communication both the parties do not agree on certain issues both the parties are not sure of the rights of each other.

Types of Third Parties

ARBITRATORS MEDIATORS CONCILIATORS CONSULTANT

ARBITRATORS

a third party with the authority to dictate an agreement.

a. b. c. d. e.

It can be voluntary or compulsory The authority varies Free to choose the judgement It always results in a settlement. Negative depends on how heavyhanded the arbitrator appears

Advantages & Disadvantges

a. Solutions are only suggestions and opinions b. more trusted

Disadvantages: a. solution may not be beneficial and increase cost b. It could be costly if no solution of the arbitrator is implemented.

2. MEDIATORS

The mediator does not provide a solution to a problem, but only help the negotiating parties.

a. labor-management disputes b. Their settlement rate is approximately 60 percent c. The key to successthe conflicting parties must be motivated to bargain and resolve their conflict, and the mediator must be perceived as neutral and noncoercive.

Mediation can contribute to solve the problem if : the parties have a commitment each side has a high motivation for settlement

3. CONCILIATORS

He is a trusted third party who provides an informal communication link among parties.

a. This role was made famous by Robert Duval in the first Godfather film. b. Conciliation is used extensively in international, labor, family, and community disputes. c. Comparing its effectiveness to mediation has proven difficult.

4. CONSULTANT

a skilled and impartial third party who attempts to facilitate problem solving through communication and analysis, aided by his or her knowledge of conflict management.

a. the consultants role is to improve relations between the conflicting parties so that they can reach a settlement themselves. b. This approach has a longer-term focus: to build new and positive perceptions and attitudes between the conflicting parties.

INDIVIDUAL DIFFERENCES IN NEGOTIATION

1. The role of personality traits in negotiation no impact 2. Gender differences in negotiations

Men and women do not negotiate differently. A popular stereotype is that women are more cooperative, pleasant, and relationship-oriented in negotiations than are men. The evidence does not support this. Comparisons between experienced male and female managers find that women are:

a. Women are Neither worse nor better negotiators. b. Women are Not more cooperative.

Neither more nor less persuasive nor threatening than are men. The belief that women are nicer is not found true. Womens attitudes toward negotiation and toward themselves appear to be different from mens.

Managerial women demonstrate less confidence in anticipation of negotiating and are less satisfied with their performance despite achieving similar outcomes as men.

CULTURAL DIFFERENCES IN NEGOTIATION

1. Negotiating styles clearly vary across national cultures.

The French like conflict.

a. They gain recognition and develop their reputations by thinking and acting against others. b. They tend to take a long time in negotiating agreements, and they are not overly concerned about whether their opponents like or dislike them. The Chinese also draw out negotiations but that is because they believe negotiations never end. a. Just when you think you have reached a final solution, the Chinese executive might smile and start the process all over again. b. Like the Japanese, the Chinese negotiate to develop a relationship and a commitment to work together. Americans are known around the world for their impatience and their desire to be liked. a. Clever negotiators often turn these characteristics to their advantage.

Indian style of negotiation

Indian Negotiation Style: Indian negotiation style is divided between the precise, logical approach which Indians learn in business schools and the instinctive, emotional approach which comes from wider Indian culture. Both styles may appear during negotiations with Indians. Indians are comfortable in an emotional style of negotiation. In India people might say things to be polite which they do not necessarily mean in practice. Therefore it is essential to watch out for some nonverbal clues to aid understanding. Establishing a relationship with the person is helpful, and getting the balance between personal and professional exchange is an important part of doing business.

Indians like harmony, so aggressiveness is not always seen. Furthermore, being considerate to both the other sides network, and demonstrating the strength of your own group is also an important aspect of negotiating in India. Short-term goals are an important consideration for Indians. Wider social and environmental impact is often ignored during business negotiations. Decision-making power is concentrated in the hands of senior people who are usually personally involved with negotiation. Private discussions with these people can be the most productive part of the whole negotiation process.