Overview
Win-Lose
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Books like “Winning through Intimidation”
May get a better deal some of the time.
Damage Relationships
Miss creative agreements
Make a deadlock
Win-Win
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Books like “Getting to Yes”
Focus on creativity
Have better relationships
May give up achievable gains especially
against tough negotiators
Win-Lose Playbook
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Find opponents weak spots
Who makes first offer
Make demands
Overcome objections
Threaten
Using tactics
Win-Win Playbook
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Build trust
Communicate clearly
Probe for real interests
Find common ground
Brainstorm new options
Cross-cultural communication
Counter tactics
Question
• Are you more of a win-win or win-lose
negotiator?
3-D negotiation
• 1. Tactics
• 2. Deal Design
• 3. Set-up
Deal Design
• Drawing Board metaphor – Creativity,
invention and fresh thinking
• Find hidden sources of economic and
non-economic value. e.g. include risk
sharing provisions
• Focus on substance and outcomes.
Deal Design
• Finding common ground and also
analyzing differences.
• Egypt and Israel, Mount Sinai boundary
negotiation
• Egypt – Sovereignty
• Israel – Security
• Solution – DMZ with Egyptian flag.
Deal Design
• Understanding differences can help to
separate different parts and give each party
what it wants at least cost to the other.
• An entrepreneur and a buyer have different
forecasts for the future of a company.
• Buyer can pay based on future performance.
• Risk, Patience, costs, deal image.
Set-up
• Negotiation moves away from the table
that set-up the most promising situation
once you’re at the table.
• If the set-up is not right they take action
away from the table to make it better.
Set-up
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Right parties
Right Sequence
Right Issues
Right set of interests
Right table
Right time
Right expectations
Right Consequences for walking away
Set-up
• Staples founder Thomas Stemberg
wanted a second round of financing from
venture capitalists.
• The VCs refused to value the company as
highly as he hoped.
• How could he “break the VC cartel?”
• Ask who are the potential “high value
players” and approach them directly to
set-up the right players and interests.
Creating and claiming value
• Your negotiating objective should be to
create and claim value for the long term
by crafting and implementing a deal that is
satisfactory for both or all parties
• One-shot negotiations - reputation
• Long-term relationships – parties live up
to their side of the bargain
Question
• What kind of things can create value?
Creating value
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Discounted cash flow
Precedent
Relationships
Reputation
Political Appearance,
Fairness
Self-Image
Claiming value
• Competitive side of negotiations where
one side gets a bigger slice of the value
pie.
Creating and claiming value
• What are the barriers to creating value?
• What are the barriers to claiming value?
Preparing for a negotiation
Should we negotiate?
Question
• Have you ever tried to negotiate about a
price where you normally don’t e.g. A
restaurant or a department store?
Assignment
• Try to negotiate a lower price when
purchasing something. It cannot be a
place like a market where negotiating is
normal. Tell us how you got on.
Question
• How do you feel when negotiating?
Question
• A negotiation professor buys a big screen
TV, he does lots of research on different
models and on dealer costs. He visits
several dealers, and he packages, he
bundles the price of the TV with
installation, satellite dish and other
features. And he obtains a last price
concession, by mentioning a competitors
offer and as a result he saved $120. Now,
what do you think about this?
• Some people love to negotiate, some
people have no problem with this. Other
people might ask, is this the way we want
to spend our brief time on Earth
Case
• A college offering a job to a professor, and she replies
by e-mail, granting some of the following provisions
would make my decision whether to accept your job
offer easier. Let me know what you think for example,
she wondered if they would consider a higher salary,
and she wondered if they would consider no more than
three new class preparations per year for the first three
years. Well, the college search committee received her
e-mail and replied immediately, we have decided to
withdraw the offer of employment to you
Summary
• You have to consider the risks, and
balance those against the benefits.
• You have to consider your feelings about
negotiating in general
• Do a cost benefit analysis of the rewards
Interest or Position based
negotiations
• Traditionally, negotiations were positional.
• I take one position. I want a high price.
• You take the other position, low price.
Question
• How would we divide a pizza that we both
want?
Positional Answer
• I cut the Pizza and you decide which half
to eat. Both of us could be happy
Interest based Answer
• Find out why we want the pizza and what
we like about it
• For example it’s a chicken pizza.
• You love chicken but don’t like the crust
• I like the crust but am not worried about
the chiken.
• You get the centre part and I get the
outside part.
Vocabulary
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Competitive versus cooperative.
Win-lose versus win-win.
Zero sum negotiation versus non zero sum.
Adversarial negotiation versus problem solving.
Distributive versus integrated.
Claiming value versus creating Value
• Which side is position based left or right?
Summary
• Whether a negotiation appears to be
position-based or interest-based, always
try to search for the underlying interests in
an attempt to build a larger pie.
• Always be ready for positional bargaining,
even when you are able to build a larger
pie
Dispute Resolution Vs Deal
Making
Deal making
• Forward looking.
• Focused on interest of the parties.
• Focused on problem solving
Dispute resolution
• Positional
• Adversarial
• Focus on the interests of the parties to
develop a solution that benefits both sides
e.g. Joint Venture for Intellectual property
dispute
Question
• Write down a list of processes that might
be possible for resolving any personal
dispute or any business dispute
Answer
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Avoidance
Negotiation
Mediation
Arbitration
Litigation
Power
Question
• Which of these processes would you call
third party processes, that is involve a
third person?
Answer
• Mediation
• Arbitration
• Litigation
Question
• Which of these processes are rights
oriented (where the third person decides
who's right or wrong usually based on a
legal rule)
• Which of these processes are interests
oriented?
Answer
• Rights – Litigation and Arbitration
Summary
• Traditionally arbitration and mediation are
seen as more useful for dispute resolution
but they can also be used for deal making.
• We should search for interests, even
when it is a dispute resolution negotiation.
Negotiation Analysis: An
introduction
• Develop a strategic framework for a
negotiation.
• Mapping, analyzing issues
7 questions
1. BATNA – What will we do if there is no
agreement?
2. Parties – Who are the real parties
3. Interests – What are their needs and priorities
4. Value – How can it be created and who gets it?
5. Barriers – What obstacles might prevent an
agreement
6. Power – How can the different parties influence
the outcome
7. Ethics – What is the right thing to do?
1. BATNA
• Best Alternative to a Negotiated
Agreement
• We either agree or walk away.
• If we walk away what is our preferred
course of action?
BATNA factors
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Competing offer
Time pressure
Relationships
Acceptance of Risk
BATNA considerations
• A rigid bottom line can be dangerous by
getting a result close to the minimum or not
think of creative solutions.
• Decision analysis tools such as decision
trees can help in weighing alternatives.
People are usually over-optimistic about their
BATNA.
• The other parties BATNA should be guessed
to try to give a picture of the ZOPA – Zone of
potential agreement.
2. Parties
• Who are the real parties in a negotiation?
• There may be influential players who are
not visible at the table.
• For example car salesman and manager
• Can the representatives at the table make
a binding commitment?
• List of negotiating parties can be
expanded e.g. finding another bidder or
purchasing competitors.
3. Interests
• What are their fundamental needs and
priorities?
• E.g. Timing might be important
• Probe for underlying interests
• Sometimes people lose focus of their own
objectives and can miss opportunities.
4. Value
• How can value be created and who is likely
to get it?
• There is more at stake than just price
• Visualize how much value is generated and
who gets what.
• It is possible to create a mutual gain.
• Manage the tension between creating and
claiming value.
• Value is created by capitalizing on
differences as well as common ground
5. Barriers
• What obstacles might prevent an
agreement and how can they be
overcome?
• Strategic behavior e.g. hard bargaining
• Interpersonal e.g. stereotypes, emotions
• Institutional e.g. legal
6. Power
• How can the various parties influence the
negotiation process and its outcome?
• Bargaining power is assumed to be the strength
of your BATNA.
• Try to favorably change the basic architecture of
a negotiation.
• Sometimes people can try to weaken the others
BATNA.
• Bargaining power can also be a reflection of
your knowledge and skill.
7. Ethics
• What is the right thing to do?
1. How honest should you be?
2. How fair should you be?
3. How much pressure can we apply?
4. How much should we think about those n
ot at the bargaining table?
5. If we are an agent should we do somethi
ng against the wishes of our client if we f
eel it is better for them?
Summary
• Effective negotiation needs a clear framework inclu
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– BATNAs
– Identifying fundamental interests to create value
– Recognizing barriers to agreement
– Thinking about ethical issues
• You can develop your own framework through study
and experience.
• The strategy must also be implemented with strong
communication skills and creativity
BATNA
BATNA
• A comparison of your options, your best
option might be walking away.
• For example using another supplier,
making something yourself, going to court
etc.
• Perception and reality of BATNA play a
key role in most negotiations.
• Often not given enough time by
negotiators.
BATNA
1. Use your best BATNA and that of the other
parties to find a ZOPA (Zone of potential
agreement)
2. Make sure the other side sees you as able to
walk away.
3. Protect your BATNA
4. Consider worsening your BATNA in carefully
selected circumstances
5. Use your understanding of BATNAs to
understand if negotiation can change things.
ZOPA
• ZOPA means the set of possible
agreements that is better for each side
given its interests than their BATNA.
• Sellers minimum is lower than buyers
maximum.
• Joe will sell his house for a min of
$200,000 and Mary will buy it for a max of
$250,000
Question
• Let's assume that you're preparing to negotiate the
sale of your car to a possible buyer, John. John is the
only person who responded to an ad that you posted
a week ago. You need at least $4,000 from the sale to
finance the purchase of a truck that you have ordered.
You want to keep your car for three more weeks,
which is when the truck will arrive. The reasonable
value of the car is $5,000. You've done a lot of
research on this. You've looked at a lot of online
calculators in coming up with this value. If you can't
find a buyer willing to pay at least $4,500, you'll sell
the car to a friend, Mary for 4,000. You know that
Mary will let you keep your car for the next three
weeks.
Questions
1. What's your overall goal in reaching the
negotiated agreement with John?
2. What issues are most important to you in
reaching that goal?
3. What is your best alternative to a negotiated
agreement?
4. what is your reservation price? (The lowest price
That you will accept)
5. What is your most likely price? What's a
reasonable price that you would be happy with?
6. And then finally what is your stretch goal?
Stretch Goal
• Negotiation research shows that the
people who select the largest stretch goal
Are the most successful in negotiations
overall.
• If the stretch goal is completely
unreasonable people might walk away
from the deal.
Answers
1. Sell the car.
2. Price is an important issue and the reason
is that you need the money to buy a truck.
The transfer date is important, because you
need the car in the next 3 weeks.
3. Selling the car to your friend, Mary
4. 4,500.
5. 5,000.
6. 6,000.
ZOPA
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Johns reservation price is 5,500.
Reasonable price is 4,500
Stretch goal is 3,500.
What two numbers is the zone of potential
agreement between?
Finding agreement
• What if John needs the car immediately?
How can you respond?
• Ask why?
• Focus on his interests and maybe you can
meet those interests e.g. give John a ride
to work every day.