Negotiation

Negotiation is a dialogue between two or

more people or parties, intended to reach
an understanding, resolve point of
difference, or gain advantage in outcome
of dialogue, to produce an agreement upon
courses of action, to bargain for individual
or collective advantage, to craft outcomes
to satisfy various interests of two
people/parties involved in negotiation
process.
“ Negotiation is an interactive process by
which two or more people seek jointly
and cooperatively to do better than they
could otherwise”.
(Lax & Sebenius)
 The content of Negotiation
It involves many factors as:

 Perception: the attributions, assumptions and

bias with which we view problems.

 Information: the relevance, meaning and

importance we assign to facts or data.

 Issues: what we believe the problem to be.

 Interests: the wants or needs we need to
achieve.

 Relationship: The respect, communication

or power we want from another.

 Process: the way we resolve differences.

 Outcomes: the solutions we are willing to

accept.
 Basic reasons for negotiation in
business

To agree on how to share or divide a

limited resource, such as land, or property,
or time.

To create something new that neither party

could do on his or her own.

To resolve a problem or dispute between

the parties.
 Nature of Negotiation

 It requires two parties

 It is continuous in nature
 It is pervasive
 Usually there is no winner/loser
 Conflict of interest between parties
 Attitudes, Knowledge, Interpersonal skills
 Requires flexibility
 Two way communication
Process of Negotiation
 Preparation

Relationship Building

Information Gathering

Information Using

Bidding

Closing the deal

Implementing the agreement

 Preparation:
who is to negotiate
with whom you will negotiate
defining goals

 Relationship Building:
getting to understand other party
how you are similar and different
to others
building commitment towards achieving
mutually beneficial outcomes

 Information Gathering:
collecting the required information about
other party and its needs.
 Information Using:
focus is on selling the negotiator’s
preferred outcome to other

 Bidding:
each party states their opening offer.
solutions being put forward
determination for concessions

 Closing the deal:

both parties need to assure
themselves that they reached a deal.
Signing of an agreement
 Implementing the agreement:
determining who needs to do what
to monitor the implementation
to deal with arising problems
Importance of Negotiation

 Dynamic nature of business

 Competition
 Information Age
 Interdependence
 Globalization
Types of Negotiation

 Distributive Negotiation

 Integrative Negotiation
Distributive Negotiation

 When resources are fixed & limited

 Competition to get maximum for oneself
 Egocentric self-interest
 Goals/objectives of both parties is
diametrically opposite
 Involve arguments
 Relationship sacrificing
 Tactics used in Distributive
bargaining:

Bluffing: it refers to the making of a false

statement of position or a promise which the
individual/party has no intentions to carry
out.

Delays: for reaching favorable settlements,

discussions are often deliberately prolonged
to put time pressure on the other
individual/party.
 Snow Job: it refers to putting pressure on
the other individual/party by presenting a
long list of issues to be discussed , most of
which may not have any significant for the
individual/party presenting them.

 Temper Tantrums: these are often used to

show one’s anger, frustration or
dissatisfaction either with the progress of
negotiation or on the nature of the counter
proposals.
 Nibble: when after hard and prolonged
bargaining the party is about to agree
with the other, the former is asked for
some small favor before the final
agreement is signed.

 Limited Authority: is used to push a

particular proposal & emphasizing that
this proposal is within the authority of the
bargainer.
Integrative Negotiation
 There is no fixed pie
 Focus on mutually acceptable solution
 Cooperation
 Emphasis is on trustworthiness
 Problem solving approach
 Gain of one party is not at the cost of
other
 Relationship Building
 Tactics used in Integrative
Negotiation

 Bridging: it refers to inventing new,

mutually acceptable solutions by integrating
individually held proposals.

 Non specific compensation: in it relevant

compensation is offered to offset the loss of
not getting one’s preferences fulfilled.
 Logrolling: it suggests that parties must
establish more than one issue in a conflict;
at least one of them of greater significance
to each of the individuals/parties, so that
trading off can be done.

 Expanding pie: it refers to increasing the

resources.
 Types of Negotiator

Soft Negotiator:

 They chose a gentle style of bargaining

 The offers they make are not always in
their bets interests
 Avoid confrontation
 Avoid contest of will and insists on
building relationship
Hard Negotiators:

 They use contentious strategies to

influence
 Insist on their position & apply pressure
to negotiate
 Ultimate goal is victory
 They make threats and are also distrustful
Principled Negotiators:

 They seek integrative solutions

 Focus is given on problem rather than on
intentions
 Independent of personal will
 Choices are based on objective criteria
rather than power, pressure, self interest
Non Verbal Communication in
Negotiation

Participants in a negotiation will

communicate information not only
verbally but non-verbally through body
language and gestures.
Reading non-verbal communication

 Nervous laugh
 Improper eye contact
 Shrugged shoulders
 Positive words but negative body language
 Hands raised in a clenched position
 Facial expressions
 Conveying Receptivity
 Receptive negotiators smile, make plenty of
eye contact.
 To show receptivity, negotiators should spread
arms and open hands on table or relaxed on
their lap.
 Receptive negotiators sit with legs together or
one leg slightly in front of the other.
 Receptive negotiators sit on the edge of their
chair, unbutton their suit coat with their body
tilted toward the speaker
Negotiation Strategies

R.G. Shell identified five styles/responses to

negotiation:
 Accommodating
 Avoiding
 Collaborating
 Competing
 Compromising
When to use these styles:

Competing:
 Quick, decisive action is vital (e.g. in
emergencies).
 An important issue requires unpopular
action.
 You know you are right.
 The other party would take advantage of
co-operative behavior.
Collaborating :

 The issues are too important to be

compromised.
 The objective is to integrate different
points of view.
 You need commitment to make the
solution work.
 You wish to build or maintain an
important relationship.
Avoiding :

 The issues are not important.

 There are more pressing issues to tackle.
 There is no chance of achieving your
objectives.
 The potential ‘aggravation’ of negotiating
outweighs the benefits.
 People need to cool down and regain
their perspective.
 You need time to collect more
information.
Accommodating :

 You find out that you are wrong.

 You wish to be seen as reasonable.
 You wish to build ‘credits’ for later issues.
 The issues are more important to the
other party.
 You wish to minimize loss when you are
in a weak position,
 Harmony and stability are more
important.
Compromising :

 Issues are important but you cannot afford

to be too controlling.
 The relationship is important but you
cannot afford to accommodate.
 Opponents of equal power are committed
to mutually exclusive goals.
 You need to achieve temporary
settlements to complex issues.
 You need to find an expedient solution
under time pressure.
 It is the only alternative to no solution.
 Some more strategies for
negotiation:
 Assess your BATNA (Best alternative to a
Negotiated agreement) and improve it.

 Determine your reservation point, but do

not reveal it.

 Research the other party’s BATNA and

estimate their reservation point.
 Set high aspirations (be realistic, but
optimistic)

 Make the first offer

 Immediately reanchor if the other party

opens first

 Plan your concessions

unilateral / bilateral
degree
timing
 Use an objective-appearing rationale to
support your offers

 Appeal to norms of fairness

 Compromises should be around shared

interests

 Don’t agree to a deal until your team

agrees
 Be prepared to leave the table at any
point

 If negotiation fails, don’t take it seriously