Lodi Wine Grape Growers
Jim Olson
January 9, 2017
Graduate School of Management
University of California, Davis
PREPARING INNOVATIVE
LEADERS FOR GLOBAL IMPACT
What is negotiation?
• Negotiation is a form of decision
making in which two or more parties
talk with one another in an effort to
resolve their opposing interests.
(Pruitt, 1981, p. xi)
• A “win-win” decision-making process
by which two or more parties are
trying to find a mutually acceptable
solution to a complex conflict.
• NOT a “win-lose” process
PREPARING INNOVATIVE
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The Science of Negotiation
PREPARING INNOVATIVE
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Common Negotiation Process
• Preparation
• Strategy selection
• Information Exchange
• Explicit talking and listening
• Agreement
• Commitment
PREPARING INNOVATIVE
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How to Practice “Principled”
Negotiation
• Separate the people from the
problem
• Focus on interests, not positions
• Generate a variety of options
before making a decision
• Insist the result be based on
some objective standard
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Important Concepts in Principled
Negotiation
• Interests: Underlying desires, goals, needs
• Issues: Tangible points of agreement that can help
you achieve your interests
• Positions: Specific values for the interests you
define above. A range of values for acceptable
agreements or just a starting position
• BATNA: Best Alternative To a Negotiated
Agreement (NOT A NUMBER!)
• Reservation Price:
• Price at which you are indifferent to whether a
negotiation reaches agreement or doesn’t
• Closely related to your BATNA
PREPARING INNOVATIVE
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Important Concepts in Principled
Negotiation
• Interests: Underlying desires, goals, needs
• Region prominence
• Region affluence
• Individual wealth and derivatives
• Issues: Tangible points of agreement that can help
you achieve your interests
•
•
•
•
•
•
•
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Price
Length of contract
Yield
Variety
Farm plan
Brix
Other
Important Concepts in Principled
Negotiation
• Positions: Specific values for the interests you
define above. A range of values for acceptable
agreements or just a starting position
• BATNA: Best Alternative To a Negotiated
Agreement (NOT A NUMBER!)
• Other customers
• Other uses
• Other products
• Reservation Price:
• Price at which you are indifferent to whether a
negotiation reaches agreement or doesn’t
• Closely related to your BATNA
PREPARING INNOVATIVE
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Prepare
1. Answer the following questions:
• What are my interests, what do I want to
achieve?
• What are the specific issues that will help me
achieve these interests?
• What are my target and bottom-line positions
on each issue?
• What are my opponent’s interests?
• What are the specific issues that will help my
opponent achieve those interests?
• What are my opponent’s target and bottomline positions on each issue?
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Prepare
2. Develop several alternative agreements
•
•
Set aside time for creative brainstorming before
the negotiation
Put together several agreements with various
outcome positions for each issue
3. Define your BATNA
•
•
The more attractive your BATNA, the more
power you have
The best alternative for you may be no
agreement
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Define your strategy and carry out
tactics
• Strategies can be based on:
• Your desire/concern for OUTCOMES
• Price, power, working conditions, etc
• Your desire/concern for the RELATIONSHIP
• Trust, friendship vs. distrust, antagonism
• 5 Basic Strategies
•
•
•
•
•
Collaborative
Competitive
Accommodating
Avoiding
Compromising
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Negotiation Strategies
High
Accommodating
Lose to win
Compromise
Importance of
Relationship
Low
Split the difference
Avoiding
Lose-lose
Competitive
Win-lose
Win at all costs
Low
PREPARING INNOVATIVE
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Collaborative
Win-win
Importance
of Outcomes
High
Distributive dimensions of negotiation
• The goal of any negotiation is not
just to reach an agreement, but to
reach one that is better than what
you could get without negotiating
(Better than your BATNA)
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Prescriptions for rational distributive
bargaining
• Define the interests, issues, positions,
BATNAs, and reservation prices for you and
your opponent
• Determine the bargaining zone for
quantitative issues (e.g. Price)
• Bargaining Zone (or ZOPA – zone of
potential agreement)
• Quantitative range of settlements where both
parties are better off than without the negotiation
• Range of prices where both parties’ reservation
prices overlap
• Reservation Price:
• Price at which you are indifferent to whether a
negotiation reaches agreement or doesn’t
• Closely related to your BATNA
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Positive Bargaining Zone
• Seller’s lowest price overlaps with buyer’s
highest price
• No bargaining zone is when there is no
overlap in reservation prices
$50
$20
Buyer’s Target Price
Positive
$75
$100
bargaining
zone
Buyer’s Reservation Price
($75)
Seller’s Reservation Price ($50)
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Seller’s Target
Make tables assessing potential
outcomes at different settlement prices
Settlement price Seller interest satisfied
Buyer interest satisfied
$50
$60
$70
$25 below reservation
$15 below reservation
$5 below reservation
$0 above reservation
$10 above reservation
$20 above reservation
$20
$50
Buyer’s Target Price
Positive
$75
$100
bargaining
zone
Buyer’s Reservation Price
($75)
Seller’s Reservation Price ($50)
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Seller’s Target
Consider the potential integrative
dimensions of the negotiation
• Determine if other issues exist
besides price
• Determine what interests price may
represent (i.e. price may be a proxy
for status)
• Determine if other costs can be
incorporated into the negotiation and
treated as interests
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Knight Excalibur Negotiation Exercise
In carrying out this negotiation, remember
to think about:
• Interests
Mine
Counterpart’s
• BATNA, Target and Reservation Price
Mine
Counterpart’s
• Bargaining Zone (ZOPA)
• Potential Trade-offs
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Knight/Excalibur Positions, BATNAs,
and Reservation Prices
• Knight Positions
• Excalibur Positions
• $500?
• $470?
• $600?
• $480?
• Knight BATNA
• Excalibur BATNA
• Buy from someone else?
• No bid government deal?
• Knight RP
• Hank’s SM Tractor
• Excalibur RP
• $600
• $100
RP
$100
Knight
Excalibur
RP
$600
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Impact of the First Offer
• First offers often act as an anchor
from which people fail to adjust
appropriately
• Final agreements are more strongly
influenced by initial offers than by
subsequent concessionary behavior
• Initial offers provide an anchor
• Re-anchor!!
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How Do You Re-Anchor?
• Make a quick counter-offer that is
just as aggressive
• Threaten to walk away
• Ask the other person to try again
• Ask them to explain their reasoning
• Make a joke
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Concessions
• Allow yourself room to make concessions
• Develop a rationale around each of your
concessions
• Make bi-lateral, not uni-lateral concessions:
Don’t reward obstinate behavior with
concessions!!
• Signal information in the size of your
concessions
• Make your concessions smaller as you approach
your goal
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A word about power, influence, and
leverage
• Power: A position or attribute that
allows one to use influence to get
individuals and groups to behave in
desired ways
• Influence: The processes used to
affect the beliefs, perceptions, and
motivations of individuals and groups
to behave in desired ways
• Leverage: A situational advantage
based on the balance of needs and
fears
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The Art of Negotiation
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Game Theory
• Game Theory
• Branch of applied mathematics devised to analyze certain
situations in which there is an interplay between parties
that may have similar, opposed, or mixed interests.
“Britannica”
• Developed by John von Neumann and Oscar Morgenstern in
their book The Theory of Games and Economic Behavior
(1944)
• Players try to outsmart one another by anticipating the
others’ decisions or moves
• A solution to a game prescribes the optimal strategy(s)
for each player and predicts the average, or expected,
outcome.
• Simple to extremely complex applications and very useful
in negotiations
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Game theory in negotiations
• Know as much about your opponent as
possible
• In addition to interests, positions, BATNAs
and reservation prices…
• Know what “makes them tick”
• Order the “discussion agenda” to your
maximum advantage
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The “art” of agenda design
“I want a raise”
1.
2.
3.
4.
1. Let’s discuss my
salary
2. We won a huge
contract
3. We lost a
medium contract
4. We know why
and are going to
win the next one
PREPARING INNOVATIVE
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“I want a raise”
1.
2.
3.
4.
1. We lost a medium
contract
2. We know why
and are going to
win the next one
3. We won a huge
contract
4. Let’s discuss my
salary
Movie and dinner “game”
• You and your partner don’t care whether you go
see Hunger Games (near the Chinese restaurant)
or Star Wars (near the Italian restaurant)
• But you definitely want Italian food for dinner
• Your partner loves Chinese food
• How do you order the agenda?
PREPARING INNOVATIVE
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28
Business strategy as driver of
negotiation strategy
•
•
•
•
•
Well defined interests, issues, BATNA of yourselves
Well understood interests, issues BATNA of your customers
What are your strategic and tactical alternatives?
Expanding the pie beyond your competitor’s reach
Identify and exercise sources of power, influence, and
leverage
• Marketing strategy – push
• Social network marketing strategy – pull
• Branding
• Inglenook  Niebaum Coppola  Rubicon  Inglenook
• More
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Top Ten Key Success Factors
1. HUGE customer value proposition
2. LACK of competitor presence
3. HIGH barriers to entry/scale
4. SIGNIFICANT core competence
5. HUGE market and growth opportunity
6. HIGH revenue potential
7. HIGH profit potential
8. LOW cost of entry (for you!)
9. LOW business risk
10. HIGH long term strategic value
10/29/2023
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WestShore Management Group Proprietary
and Confidential
30
The Business Plan Outline
1.
2.
3.
4.
Business summary
“The problem”
The company solution
Customer/market
opportunity
5. Product roadmap
6. Competition matrix
10/29/2023
PREPARING INNOVATIVE
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7. Marketing/distribution
strategy
8. Manufacturing (if any)
strategy
9. Business model/3-year
financial plan
10. The team
11. Financing terms
12. Summary
WestShore Management Group Proprietary
and Confidential
31
The Lodi “problem”
• Every single business problem has a solution
• A key part of the solution is solid negotiation strategy and
tactics
• Lasting solutions come from ”inside” knowledge, fresh “outof-the-box”-thinking, patience, perseverance, trial and error,
and execution
• There is a Lodi “solution”
PREPARING INNOVATIVE
LEADERS FOR GLOBAL IMPACT
Lodi Wine Grape Growers
Jim Olson
January 9, 2017
Graduate School of Management
University of California, Davis
PREPARING INNOVATIVE
LEADERS FOR GLOBAL IMPACT