UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
INTERNATIONAL NEGOTIATION –
UCL – JANUARY, 2014
lecturer Milan Oresky
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
5. Negotiation in Business
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Preparation
 Identify the main goal of negotiation: yours and opponents
 Make necessary economic and financial calculations
 Prepare technical and other documentation
 Design your negotiating team and get the mandate to negotiate
 Prepare your position and best alternative (BATNA)
 Set the agenda for negotiations
 Gather and analyze information about your opponents
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Preparation: practical aspects
 Inform your team about your goals, strategy and agenda. Discuss their
roles in negotiation process
 Offer opponents to negotiate at your territory
 Propose to write down minutes of negotiations
 Be the first to send draft agenda
 Meet former employees, business partners or clients of your opponents
 Invite your opponents to meet informally: dinner or lunch, beer or coffee
prior to negotiations
 Be the first to send them drafts of documents: contract, technical
specification, samples etc.
 Offer your help to the other side: interpreter, driver, office, hotel reservation
etc.
 Take time to relax and be ready to make decisions
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Ask yourself : are we ready?
Do we really have enough information
or
just see what we want to see and make wrong perceptions?
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Exchange of information
Main rule: only the necessary minimum of valuable information to the
other side
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Possible exchange of preliminary positions
Composition and authority of the teams
Final agenda of negotiations
Exchange of the draft documents
Practical arrangements: meeting room, refreshments etc.
Informal meeting with the opponents: dinner, lunch, coffee prior to
negotiations
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Team formation (2)
 Small and flexible
 Knowledgeable and well informed
 United: team spirit
 Resourceful and creative
 All necessary areas well represented
 Team members know their roles and functions
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Main principles of integrative negotiation
“Getting to YES”
 Separate the people from the problem
 Focus on interests, not positions
 Invent options for mutual gain
 Use objective criteria
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
1. Separate the people from the problem
Separating the people from the problem means separating relationship issues (or "people
problems") from substantive issues, and dealing withthem independently. Face the
problem, not the people.
1.
2.
3.
4.
5.
6.
Try to see the situation from your opponents perspective
Dont deduce your opponents intentions from your own fears
Avoid blaming your opponent for the problem
Discuss each others perceptions
Seek opportunities to act inconsistently with your opponents misperceptions
Give your opponent a stake in the outcome by making sure they participate in the
negotiation process
7. Make your proposals consistent with the principles and self-image of your opponent
8. Recognize , understand and acknowledge emotions: theirs and yours
9. Don’t react to emotional outbursts and allow to let off steam
10. Listen actively and speak to be understood
11. Speak about yourself, not about them
12. Build a working relationship
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
2. Focus on interests, not positions
Negotiating about interests means negotiating about things that people really
want and need, not what they say that they want or need
1. Behind opposed positions lie shared and compatible interests, as well as conflicting
ones
2. Identify the interests: ask “Why?” and “Why not”
3. The most powerful interests are basic human needs: security, economic well-being, a
sense of belonging, recognition, control over one’s life
4. Give your interest and reasoning first and your conclusions or proposals later
5. Look forward, not back. Instead of asking to justify what they did yesterday, ask who
should do what tomorrow?
6. Be concrete but flexible. Think about options that meet your interest, use “illustrative
specificity”
7. Be hard on the problems, soft on the people. Help the other side to solve their
problems
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
3. Invent options for mutual gain
This means negotiators should look for new solutions to the problem thatwill
allow both sides to win, not just fight over the original positionswhich assume
that for one side to win, the other side must lose.
1. Brainstorm: invent as many options as possible to reach an agreement
2. Broaden your options by the expertise and changed scope or focus of
possible agreement
3. Look for mutual gain indentifying shared interests and matching differing
interests
4. Make the opposite side decision easy. Look to agreement from your
counterpart perspective and involve him/her in designing the right solution.
Invent first, decide later.
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
4. Use objective criteria
Insist on objective criteria for decisions. While not always available, if some
outside, objective criteria for fairness can be found, this can greatly simplify
the negotiation process
1. Find fair standards: market value, precedent, scientific judgment, technical
requirements etc.
2. Follow fair procedures: reciprocity, moral standards, reciprocity etc.
3. Agree first on principles and be open to reason. Search for objective
criteria together
4. Never yield to pressure, only to principle
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
5 main conceptual instruments
 BATNA – Best Alternative to Negotiated Agreement
 Reservation price: walk away price
 ZOPA – Zone of Possible Agreement
 Value creation through trade-offs
 Negotiating power
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
BATNA: Best Alternative to Negotiated Agreement
1. Invent a list of actions you might conceivably take if no agreement
is reached
2. Improve some of the promising ideas and convert them into
practical alternatives
3. Select one option that seems the best
Do not mix it with a Bottom Line: negotiators try to protect themselves by
establishing in advance the worst acceptable outcome. The Bottom Line
inhibits imagination and creativity
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
BATNA
 The better your BATNA, the greater your power
It gives you additional confidence in negotiations and you can negotiate on the
merits.
 Identify and consider the other side’s BATNA
Knowing their alternatives, you can realistically estimate what you can expect
from negotiations
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Reservation Price
The reservation price is the least favorable point at which one will
accept a negotiated agreement.
For a seller this means the least amount (minimum) or bottom line theywould
be prepared to accept, while for a buyer it would mean the most(maximum) or
bottom line that they would be prepared to pay. It is alsosometimes referred
to as the “walk away” price
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations: opening (1)
Create cooperative and constructive atmosphere:
1. Inquire about trip, hotel, flight etc.
2. Introduce your team
3. Announce time table: information about coffee breaks, lunch,
production site visit etc.
4. Ask whether sent documents and information were well received, are
sufficient and understood by the other side
5. Ask does the other side need some other help or assistance: separate
room, copying or other office services
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations: opening (2)
Take the initiative:
1. Propose and agree the goal of the meeting
2. Announce (correct) the agenda and issues to be discussed
3. Shortly summarize (make comments and corrections) the situation
and already agreed issues
4. Invite your opponents for comments, correct them
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Possible agendas (1)
1. Push: start with important issues
2. Procrastinate: you begin with less important issues
3. Assemble: put together groups of issues both parties are likely to
agree, forming packages for agreement
4. Classify: classify issues like financial on one side, and all other
issues on the other
5. Sort: review all issues to be negotiated and decide if there are any
that can be settled
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Possible agendas (2)
6. Select: you suggest the order of issues to be discusses. Never agree to this
formula: who picks up an issue to be discussed gets strategic advantage
7. Consult: you agree agenda prior to it and then revise the schedule and
announce it
8. Concede: put some issues on the table for discussion you willing to
concede. Because of your concessions you can require and anticipate
concessions in return
9. Soften: make concessions not important for you on the first stage . When
the opponents are comforted negotiated the real deal
10. Appetizers: start with easy issues to agree on.” If we did it so easy, lets do
this one as well “
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations: a good start
1. Pay attention to trivial information
“I hope things go well this time”, “We reserved the hotel for two days”, “We’ve
been having a good year, but stock has increased since…”
2.
Create a diversion
Make some jokes. Build self confidence, test the atmosphere. If they feel
nervous or want to start immediately, expect hard negotiation…
3.
Be diplomatic
Introduce the issues in relaxed manner, even if you intent to attack and play
tough later on. Do not provoke immediate back fire.
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Importance of the Beginning
 The initial stage of negotiation is very important (even none of the
issues are resolved) because the atmosphere and tone are set.
 If your attitude differs radically from that of the other side,
experience show that it is only during this initial phase that there is
a chance of making any changes.
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations: “don’ts”
1. Do not talk unprepared, talk to the point
2. Do not make long statements, use short sentences
3. Do not interrupt the opponents and the other members of your team
4. Do not change or modify the agreed strategy without proper analysis
and common agreement
5. Do not let the other side to change your strategy and agenda, keep
the initiative
Take breaks, do not act spontaneously!
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations: “do’s”
1. Let the other side talk
2. Use pause and time intervals in your speech to stress the
importance of the point you are making
3. Use prepared arguments: hard working in preparation – easy in
improvisation
4. Ask questions, do not provide immediate answers
5. Ask for explanation and justification: why you consider its good for
us both, for my company, for me?
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Making the First Offer (1)
 Making the offer first you do the anchoring
 Setting the rules – taking the initiative
 Your figures and arguments are first to be discussed
 It puts the opponent into “must react” position
Explain: why you making this offer, but not what you are offering or
proposing.
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Making the First Offer (2)
 If the situation is not completely clear, let the opponents to make
the first offer
 Ask the opponents their opinion how to solve the situation/come to
the agreement
 If you are not sure about your arguments, calculations etc., ask
your opponents to discuss theirs
Let them disclose their intentions:
what we can do to solve this issue?
or help us to help you
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations, the Real Life: the factor of “nuclear bomb”
If there is a chance – make yourself “a nuke bomb” You don’t need to
use it, but better to posses one, usually it makes your opponents
more cooperative:
 research for a sensitive information about your opponents
 look for irregular business practices of your opponents
 look for unsatisfied clients, bad business cases…
Let them know, that you know….
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Negotiations: some rules to follow
1. Never (ever) accept the first offer
2. Leave yourself a room for maneuver: don’t be too detailed
3. Nothing is for free: let them work hard for every (even not
important for you) concession
4. Be constructive, not destructive: don’t react to and be imprisoned
by tricks and abuse from the other side
5. Always be ready to terminate negotiation if it brings bad results to
you and let them know (and feel) it
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Arguments: soldiers of your negotiating army
 Arguments is opposite of persuasion. They deal with logic while the
other deals with emotions
 Arguments appeals to reason (or what seems to be a reason)
 Argument play up your own points and minimize the importance of
the other side
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Make your arguments stronger
 Use comparisons
 Refer to best practices
 Use expert opinion
 Use presentations, statistics , reports, studies etc.
 Visualize your argumentation: presentations, charts, samples etc.
People believe what they see…
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Organize your arguments
1. Deduction: What is true of a group is also true for its members. “This
consortium is solvent. The business is under the consortium, therefore
it is solvent”
2. Induction: If a large number of members share the characteristic, it
is very likely that other members will share it too. “This consortium is
insolvent. This business is under the consortium, therefore it might
well be in difficulty too”
3. Analogy: A particular situation is similar to another. “This business
shows the same trend as another, the market is the same, so outcome
of similar operation could well be the same”
4. Hypothesis: Let us suppose that we go ahead with your proposal.
What do you think would happen? Suppose that the bank withdrew the
credit or supplier abandoned us, or we did not get this order?
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Making concessions (2)
1. Make your possible concessions list (invent and create as more as
possible)
2. Group them to minor, less and really valuable to you and your
opponents
3. Make the list of possible concessions you want to receive from your
opponents and group them
4. Shape up your proposals in packages and make a trade-offs:
exchange the package made of lower value concessions to one of
real importance
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Shaping up a proposal
Separate THE EXPLANATION phase and THE JUSTIFICATION
phase
If you can meet the following conditions 1…, 2…, 3…, n…, we will be
prepared to consider offering the following: 1…, 2…, 3…, n….. Our
reason for doing so are a…, b…, c…, …z...
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
Phrasing a proposal
1. Use a pause in your speech prior to making any offer
2. Use positive body language: lean forward slightly, establish a direct eye
contact
3. Use short sentences, do not go into details
4. Explain why your offer is valuable for your opponent, the whole agreement
and joint business
5. Ask the opponents to comment on your offer, let them repeat it with their
own words
6. Make comment similar to “we are almost near the agreement on this issue”
INTERNATIONAL NEGOTIATION – UCL, JANUARY 2014
The biggest mistake when making proposals
 The biggest mistake inexperienced negotiators are making is
warning the opponents about negative answer or tough offer. They
signal about it in advance by introductory (warning) phrases and
non verbal behavior
 Decided to attack – do not warn your opponent