International NegotiationStephan Langdon, MBA M.Ed

Negotiation Case• While on vacation you

go into a jewelry store and see an attractive looking watch. You ask the store’s owner how much it costs and he replies $4.095.670

• How much would you offer to pay for this watch?

• Should you offer anything?

When should you negotiateWhen should you never negotiate

Lewicki:When Should You Never Negotiate

• When you don’t care.• When you could lose

everything.• When there is nothing

you could gain (the other has nothing you want).

• When the demands are illegal or unethical.

• When they act in bad faith.

• When you don’t have time.

• When waiting would improve your position.

• When you’re not prepared.

• Cuando usted no cuida. • Cuando usted podría

perder todo.• Cuando no hay nada

usted podría ganar (el otro hace que nada usted quiera).

• Cuando las demandas son ilegales o inmorales.

• Cuando actúan con maldad.

• Cuando usted no tiene tiempo.

• Cuando el esperar mejoraría su posición.

• Cuando le no preparan. 4

Distributive Negotiation• Goals of one party are in

fundamental, direct conflict to another party.

• Resources are fixed and limited.

• Maximizing the share of resources is the goal.

• Distributive negotiation is all about who gets (or pays) how much. It is also where more for me means less for you.

• Las metas de un partido están en el fundamental, conflicto directo a otro partido.

• Los recursos son fijos y limitados.

• La maximización de la parte de recursos es la meta.

• La negociación distributiva está todo sobre quién consigue (o paga) cuánto. Está también donde más para mí los medios menos para usted.

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Integrative Negotiation• Create a free flow of

information.• Attempt to understand

the other negotiator’s real needs and objectives.

• Emphasize the commonalties between the parties and minimize the differences.

• Search for solutions that meet the goals and objectives of both sides.

• Cree un libre flujo de información.

• Intente a entender las necesidades verdaderas y los objetivos del otro negociador.

• Acentúe los las cosas en campo común entre los partidos y reduzca al mínimo las diferencias.

• Busque para las soluciones que logran las metas y los objetivos de ambos lados.

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Positions and Interests

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Position/Interest

• Positions are concrete things that you say you want.

• Interests are the tangible motivations that lead you to take that positions – needs, desires, concerns, fears and aspirations.

• Las posiciones son cosas concretas que usted dice que usted quiere.

• Los intereses son las motivaciones tangibles que le llevan a tomar que las posiciones - las necesidades, desean, las preocupaciones, los miedos y las aspiraciones.

Managing simple conflict• Clarify both

perceptions of message• Focus discussion

on issues• Use facts not

opinions• Use structured

problem solving • Compromise

• Make conflict group concern• Tackle one issue;

most important• Find areas of

agreement• Postpone

decision while conducting additional research

Managing ego - conflict

• Encourage active listening

• Keep discussion on key issues

• Turn discussion to problem to solve, rather than conflict to win

• Seek cool, calm climate

• Be descriptive rather than evaluative

• Develop rules or procedures that permit differences of opinions

• Agree to disagree & return to areas of agreement

Two Types of Negotiations

Cooperativ

e: Long term relationshi

p

Competitiv

e Negotiation: One time deal

Negotiator's Dilemma• In any negotiation, the parties must decide

whether to be competitive, cooperative, or some of both.

• David Lax and James Sebenius call this the negotiator's dilemma• Joint value• Joint gains • new developments are considered improvements by both

sides.

Key Concepts

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Principled Negotiation

• Key Principles – PIOC Model.– People.– Interests.

• (BATNA).– Options.– Criteria.

• Principios Dominantes Modelo de GIOC.– Gente. – Intereses.

• (MANA). – Opciones. – Criterios.

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People

• Partnership in problem-solving, not adversarial.

• Future relationship importance considered.

• Research on Influence.– Normative

Influence.• “peripheral cues”

nonverbal, tone, posture, likable.

– Informational Influence.• “central cues” – logic,

reasoning, facts.

• Sociedad en la solucion de problemas, no adversarial. • La importancia futura de la relación consideraba. • Investigación sobre influencia. • Influencia Normativa.

– "señales periféricas" nonverbal, tono, postura, agradable.

• Influencia Informativa.– “señales centrales" - lógica, razonamiento, hechos.

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Interests

• What you need vs. what you say you want.– Know your own.– Know your audiences’.

• Must prepare, do homework.

• Allows for creative solutions.

• Qué usted necesita contra lo que usted le dice desee. – Sepa sus el propios. – Conozca a sus audiencias.

• Debe prepararse, hace la preparación. • Tiene en cuenta soluciones creativas.

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BATNA/MANA

• Best Alternative to a Negotiated Agreement.– If you can’t come to an

agreement, what is your walk away alternative?

– Weigh every suggested outcome against your BATNA.

– Example: Jerry McGuire clip.

• El mejor alternativa a un acuerdo negociado. – ¿Si usted no puede venir a un acuerdo, cuál es su

camina alternativa ausente? – Pese cada resultado sugerido contra su BATNA. – Ejemplo: Clip jerry de McGuire.

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Importance of BATNA

• If no BATNA, risk escalating commitment.– example: negotiating

condo, stocks.• Need to know when it

is in your best interest to walk away.

• Si ningunos BATNA, arriesgan el extender de ejemplo de la comisión: – condo de negociación, acción.

• La necesidad de saber a cuando está en su mejor interés camina lejos.

Improving Your Position

A Weak BATNA

• A weak BATNA is not the end of the world. Whatever hand you’ve been dealt, here are three potential approaches to strengthening your position:

•  

Strengthening a BATNA

• Improve your BATNA. • Identify the other

side’s BATNA. • Weaken the other

party’s BATNA.

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Options

• Expand the pie.• Brainstorm solutions.• Involvement in

solution = higher likelihood of persuasion.

• Amplíe la Pie. • Soluciones de la buena inspiración. • Implicación en la solución = más arriba

probabilidad de la persuasión.

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“Expanding the Pie”

• Negotiation is about more than a fixed division of a single resource (Pie).

• “Win-win” situation.• Make the “Pie” bigger

so that you both get.• More than half.

• La negociación está sobre más que una división fija de un solo recurso (pastel).

• "Ganar-gane" la situación. • Haga la " pastel" más grande de modo que usted

ambos consiga. • Más que medio.

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“Expanding the Pie”

• Clear Opportunities for Win-Win.

• Negotiation on more than one issue.

• Possibility of side deals.

• Different issue preferences between.

• Las oportunidades claras para Ganar-Ganar. • Negociación en más de una cuestión. Posibilidad

de repartos laterales. Diversas preferencias de la cuestión en medio.

Distributive Concepts• Resistance Point.• ZOPA.• Range.• Frame.• Anchor/

Counteranchoring • Concession. • Leverage.

• Punto de la resistencia. • ZOPA. • Gama. • Marca. • Ancla/Contra Ancla• Concesión. • Palancada.

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Reservation Price/Ultima Precio• The least favorable point

where one will accept.• The “walk-away”.• Example: you are

looking for larger office space. You set your BATNA at $20 and your Reservation Price at $35

• If owner won’t budge from $35, you walk away and take advantage of your BATNA

• El menos punto favorable donde uno aceptará.

• El "walk-away". • Ejemplo: usted está

buscando un espacio más grande de la oficina.

• Usted fijó su BATNA en $20 y su precio de reservación en $35.

• Si el dueño no bulle a partir del $35, usted camina lejos y se aprovecha de su BATNA

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ZOPA• Zone of Possible

Agreement (ZOPA).• The difference between

the Seller’s Reservation Price and the Buyer’s Reservation Price.

• What happens if positions below are reversed?

• Zona del acuerdo posible (ZOPA).

• La diferencia entre el precio de reservación del vendedor y el precio de reservación del comprador.

• ¿Qué sucede si se invierten las posiciones abajo?

ZOPA

$275k$250k

Seller’s Reservation Price

Buyer’s Reservation Price

Anchoring / Counteranchoring

Attempt to establish a reference point around which negotiations will make adjustments

If the other side makes the first offer, you should recognize and resist that offer’s potential power as a psychological anchor.

Anchoring / Counter-anchoring

REMEMBER anchors are

most powerful

when uncertainty is highest

Concessionary Moves

Negotiation experts generally interpret a large concessionary move as an indicator of significant additional flexibility

The best advice about concessions is to avoid the impulse to make them.

Look to your BATNA before you consider making a concession. If your BATNA is very strong (especially relative to the other side’s), a concession may be unnecessary in making a deal.

Negotiation

• Isabella has worked as the executive assistant to Martina for ten years.  Isabella has worked overtime on many occasions when Martina had special projects to complete.  Martina has not given Isabella a raise in her salary for three years and Isabella is thinking about looking for a new position which could pay her more money.  Martina is concerned about losing Isabella to another employer but is worried that her own company has not made a profit in the last two years.  Isabella and Martina sit down in the conference room to negotiate a possible raise in salary for Isabella.

• ROLE #1: ISABELLA• ROLE #2: MARTINA• ROLE #3: OBSERVER (Take notes and report about

negotation)

More Theory

32Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 13.

Contract Negotiation Competencies• Mark H. McCormack, best-selling author of “What

They Don’t Teach You at Harvard Business School,” has stated the perfect negotiator should have:

• Faultless people sense

• A strong competitive streak

• A view of the big picture

• An eye for the crucial detail

• Unimpeachable integrity

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Contract Negotiation Competencies

Negotiation Process

Negotiation Process 3 Steps (Cronkite)

Find opponents

bottom line.

Find your bottom

line.

Push’s opponent

to lower bottom

line.

Negotiation Process 4 Steps (Shell)

Negotiation planning and preparation. • Extremely

important.

Beginning to interact• orientation to

situation, • relationship with

other side,

• information exchange.

Initial proposal• offer or demand• making

concessions• narrowing of

differences.

Closing• Getting

commitment.

Seven Stages (Folberg, Golann)

Preparation and Setting Goals

Initial Interactio

n and Offers

Exchanging &

Refining Informati

on

Bargaining

Moving toward Closure

Bridging impasse & make

decisions

Finalizing Agreeme

nt

Negotiation Considerations

Cooperation

Competition

Enlightened self-

interest.

Negotiation Considerations

Triad of Concerns

Economic

Social

Emotions

• Social• How will others view the

agreement

• Emotional• How will you feel about

the agreement• Successful Negotiations • Lewicki and Fisher

• Economic• Will you be satisfied with

the economic results

Triad of concerns

Power of Pre-negotiation

Step #1: Preparing Your Strategy• Assess the situation.• There are four basic bargaining situations

depending on: (1) The perceived importance of the ongoing relationship and (2) the perceived conflict over the the stakes involved (to what degree do both sides want the same limited resource such as money, power, terms, etc.)

The Situational Matrix

I: Balanced Concerns (Business partnership, joint venture, or merger)

II: Relationships (Marriage, friendship, or work team)

III: Transactions (Divorce, house sale, or market transaction)

IV: Tacit Coordination (Highway intersection or airplane seating)

HighLow

Perceived Conflict Over Stakes

High

Low

Importanceof Relationship

Negotiating in the Quadrants• Quadrant IV: Tacit Coordination - Calls for tactful

avoidance of conflict, not negotiation.• Quadrant III: Transactions - Stakes are

substantially more important than relationships. Leverage counts. Competition, problem solving.

• Quadrant II: Relationships - Treat the other party well, generously, the stakes are secondary. Accommodate. (Einstein job offer, e.g.)

• Quadrant I: Balanced Concerns - Problem solving or compromise

Prepare a Bargaining Plan• Make a list of questions you intend to ask at the

beginning of the negotiation in order to assess the assumptions of the other side:• Is a relationship most important to them?• Are the stakes most important to them?• Do they believe it is a Balanced Concerns situation?

• Prepare your bargaining plan based on the other side’s assumptions.

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Bargaining Mix

• Set of issues that are or could be considered in the negotiations.

• Often, substantial differences between the parties in the importance of various issues.

• Having multiple items in the bargaining mix and being creative in dealing with them can be very helpful - in both competitive and collaborative negotiations.

• Sistema de las ediciones que son o se podrían considerar en las negociaciones.

• A menudo, diferencias substanciales entre los partidos en la importancia de varias ediciones.

• Tener artículos múltiples en la mezcla de negociación y el ser creativos haciendo frente a ellos pueden ser muy provechosos - en negociaciones competitivas y de colaboración.

Step #2: Exchanging Information• The information exchange step has several

phases:• Developing rapport between the individual negotiators• The surfacing of underlying interests, issues, and

perceptions that concern both parties• The initial testing of expectations

• As we share information, we test our counterpart’s commitment to the norm of reciprocity.

Developing Rapport• The “liking rule.”• We prefer to say “yes” to someone we like and trust.• We like and trust people exactly like ourselves -- similarity.• Research the decision maker’s likes and dislikes,

hobbies, sports, etc. thoroughly

• Negotiate face-to-face, not online or over the phone -- tough to build trust, rapport, and understanding.

Relationships according to Salacuse

Sincere

Interest

Human

relations

Build working

relationships

Obtaining Information on Interests, Issues, and Perceptions (reconassance)

• Exchange information without giving up anything.• Ask questions -- don’t be a blabbermouth -- and

remember the cardinal rule of discovery:• Probe first, disclose later.

• Test for understanding• Make sure you understand

• Summarize

Signaling Expectations and Leverage• Deliver bad news (deal breakers, threats) early in

a negotiation.• Sell all the deal terms early.• Indicate where you can and cannot be flexible (credibility).

• Signal your expectations and leverage.

Signaling Leverage

Make confident demands and credible threats. Display your alternatives and leave the decision to the other side.

Emphasize the uncertain future. Bluff (act strong when you are not)

Show the other side you are investing in the relationship. Be generous.

Acknowledge the other side's power and stress the potential gains from future cooperation. Appeal to the other side's sympathy. What would they do in your position?

Strong Weak

Your Leverage as You See It

Firm

Flexible

HowYou

Want toAct

If You Are Going to Be Flexible, Get Credit for It• Let the other side know what alternatives you

have before you show you are not going to use the alternatives (BATNAs).• By revealing your alternatives and not using them, you

get credit for being generous and reasonable.• Be fair, but always make sure you get credit for being fair.

Match the Other’s Side’s Style• Tit for tat in style, too.• If the they are screaming, tough, fierce competitors, they

will like and respect you if you are like them.• Yell back

• If they are bullies, confront them early.

• Once again, the reciprocity principle at work.• Train people to be cooperative.

Step #3: Opening and Making Concessions• The bargaining stage is dominated by tactics,

which depend on the situation.• Competitor Vs competitor, relationship vital, etc.

• Bargaining formally begins when negotiators on one side open with a concrete, plausible (in their mind) offer.

Opening Tactics: Open First?• If you are uninformed about the other side’s

business, interests, or demands, never open first.• If you are well informed, always open first:• It lets you fix the range -- the zone of realistic

expectations.• Sometimes forces the other side to rethink its goals.• Most important, allows you to set the anchor.• We tend to be heavily influenced by first impressions.

Anchoring

• When the other side hears a high or low number, they adjust their expectations (unconsciously) accordingly.• The first offer anchors the other side’s perception of your walk-away price (NBC Super Bowl).• First offer must be somewhat reasonable (no more than

50% higher than you will settle for).• As high as possible--as close to the other side’s walk-

away as possible (that’s the home run).

• Outlandish numbers at the beginning can kill the deal or destroy your credibility if you drastically reduce the offer later.

Framing• Framing is a process of describing or explaining a

situation a particular way. • Framing is the use of analogy, metaphor, or

characterization to define the problem or to advocate a solution of that problem.

Framing

• Frame all of your offers.• Framing emphasizes the value of your offer.• Framing provides justification for the other side to make concessions.• “Just pennies a day” frames an offer.

• To those who like to win, frame as a gain, a win -- emphasize benefits.

• For those who are afraid to lose (losses loom larger than gains to many), frame as a possible loss -- emphasize the pain and shame of losing.

Opening: Optimistic or Reasonable• Depends on the situation:• Relationship - High, generous• Transaction - Open optimistically (high, but not too high) -

the highest for which there is a supporting standard or argument enabling you to make a presentable case.• Make the highest opening you can “with a straight

face.” • Don’t open high if you have no leverage and the other

side knows it.

Optimistic Openings• Take advantage of two psychological tendencies:

The Contrast Principle and the Norm of Reciprocity.• The contrast principle: If I want you to pay me $500,000

for a schedule, and I open with $750,000 (supported by presentable, “straight-face” argument), my settlement of $500,000 seems reasonable and gives the perception of getting a good deal. If I had opened for $550,000 and only come down to $500,000, the contrast would have been small and the deal not satisfying.

Optimistic Openings• The Norm of Reciprocity:• I make an optimistic opening ($750,000), and you reject

it.• I moderate my offer by making a significant concession

($650,000), and you feel obligated to accept it (reciprocity).• Big then small offer -- “door in the face” -- second offer

seems reasonable.

Concession Tactics• Open optimistically and have room to make

concessions.• Concessions are the language of cooperation.

They tell the other side in concrete, believable terms that you accept the legitimacy of their demands and recognize the necessity to cooperate and sacrifice to get a fair deal.

Concession Tactics

• To get movement, offer a small trade -- show that agreement is possible.• Give a trade or concession in your least important area.

• Price to get a desired deal term or payment, e.g.

• The other side’s first concession is in its least important area of concerns.

• Try not to give the first major concession (it raises expectations and confuses people).• Put the major issues aside, agree on small, easy issues

first.

Concession Tactics• Give small concessions and give them slowly.• The slower you give them, the more value they have.• A fast concession makes the buyer feel awful and

devalues the product.• Make them work hard for every concession, they will

appreciate it more.• Make concessions progressively smaller.

Concession Tactics• Which tactic is best?

1. 25% 25% 25% 25%2. 0 50 % 0 50% 3. 0 0 0 100%4. 100% 0 0 05. 10% 20% 30% 40%6. 30% 20% 10% 5%

Split the Difference?• Not unless it’s in your favor.• If the other side offers it, it usually isn’t.

• Split the split.

Integrative Bargaining

• Tactics for integrative bargaining in which both sides start with a complete bundle of offers, demands, and interests are as follows:• After a discussion of all the issues (without offers), both sides trade issues and try to problem solve.• No issue is closed until all issues have been decided.• Sides trade issues in clusters: “If you give me what I want on issues A and B, I’ll give you what you want on X and Y” -- the “If-Then…” scenario.• For example, you can throw away deal points you don’t

need (set this up in advance).