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Business Negotiation. I. Introduction to Negotiation Negotiation can be divided into many types, such as: Diplomatic negotiation, political negotiation,

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Presentation on theme: "Business Negotiation. I. Introduction to Negotiation Negotiation can be divided into many types, such as: Diplomatic negotiation, political negotiation,"— Presentation transcript:

1 Business Negotiation

2 I. Introduction to Negotiation Negotiation can be divided into many types, such as: Diplomatic negotiation, political negotiation, military negotiation, economic negotiation, etc.

3 II. Business Negotiation I. Definition: A process which the parties involved carry A process which the parties involved carry out to realize a certain economic purpose and define each other’s rights and obligations. It is a type of economic negotiation, including selling and purchase of goods, project lease, technological transfer and negotiation for fund raising.

4 II. Business Negotiation II. Features of Business Negotiation 1. With gain of economic benefits as a purpose. This feature determines price is the center of a business negotiation for it reveals the economic benefits in the most direct way. 2. With negotiation of value as a core In negotiation, we should also take into account other benefits and, In negotiation, we should also take into account other benefits and, if necessary, can use the gains in these aspects to make up for our losses in price. There is no need to confine ourselves to economic value (price as its manifestation). 3. With great emphasis on accuracy and preciseness of contract clauses Try to avoid contract traps set by your rival, who has during Try to avoid contract traps set by your rival, who has during negotiation agreed to take your view on these problematic issues.

5 II. Business Negotiation 4. The nature of equality of a business negotiation Business negotiation must follow the principle of equal value exchange. In negotiation, Business negotiation must follow the principle of equal value exchange. In negotiation, parities involved are equal in terms of the value law and mutual relation, regardless of their strength or size. This, however, doesn’t mean every party involved in a negotiation should share the benefits equally. Rather, it means every party concerned should have some benefits and thus to achieve a balance. This is also what is called win-win. 5. The feature of multilayer of a business negotiation This means the participants of business negotiations are from different levels. Some negotiations are between states, This means the participants of business negotiations are from different levels. Some negotiations are between states, others between organizations, enterprises or legal persons, etc. 6. The binding feature of business negotiations This refers to the fact that business negotiations, both in content and result, This refers to the fact that business negotiations, both in content and result, are confined to the influence of environment and relevant laws.

6 II. Business Negotiation III. Functions of Negotiations It is a means for enterprises to realize economic goals, obtain information on market, and open new markets for their products. It is a means for enterprises to realize economic goals, obtain information on market, and open new markets for their products.

7 II. Business Negotiation IV. Stages of Business Negotiation 1. Stage of preparations 1. Stage of preparations 2. Negotiation on the way 2. Negotiation on the way 3. Enter into a contract 3. Enter into a contract 1. Stage of preparations There are many things to do before a negotiation, including collecting information, formulating targets and strategies, arranging for venue and schedule, etc. There are many things to do before a negotiation, including collecting information, formulating targets and strategies, arranging for venue and schedule, etc. 1> Collect information about the negotiation rival 1> Collect information about the negotiation rival Several aspects of information must be collected before a negotiation starts. They are as follows: Several aspects of information must be collected before a negotiation starts. They are as follows: A: information about the negotiation rival as a team A: information about the negotiation rival as a team This includes their level of technology, market influence, scale of This includes their level of technology, market influence, scale of production, management, finance, credit standing, products, etc. production, management, finance, credit standing, products, etc. B: information about the negotiators B: information about the negotiators This includes the position, power, negotiation style, negotiation ability, habits, This includes the position, power, negotiation style, negotiation ability, habits, personality, likes and dislikes, etc. personality, likes and dislikes, etc.

8 II. Business Negotiation C: information about the negotiators ‘ country This covers the situation of the negotiator’s homeland, both economic and political, their country’s taboos and customs, regulations on trade, etc. This covers the situation of the negotiator’s homeland, both economic and political, their country’s taboos and customs, regulations on trade, etc. D: information about international situation and international regulations concerning this negotiation. D: information about international situation and international regulations concerning this negotiation. E: information about your competitors and your negotiation rival’s competitors, including their products, technology, price, advantages and disadvantages, etc. E: information about your competitors and your negotiation rival’s competitors, including their products, technology, price, advantages and disadvantages, etc. F: information about the policies, laws and regulations in your negotiation rival’s country. F: information about the policies, laws and regulations in your negotiation rival’s country.

9 II. Business Negotiation 2> Formulating negotiation targets Set flexible targets, including an ideal one, an acceptable one and a bottom-line one. The targets in a negotiation is a scale. negotiation targets are not set up at random. Instead, they are formulated on the basis of taking into consideration of the other party’s reasonable needs and benefits. Only in this way can the negotiation go on smoothly. Set flexible targets, including an ideal one, an acceptable one and a bottom-line one. The targets in a negotiation is a scale. negotiation targets are not set up at random. Instead, they are formulated on the basis of taking into consideration of the other party’s reasonable needs and benefits. Only in this way can the negotiation go on smoothly. 3> Objective analysis An objective analysis of one’s own advantages and disadvantages before negotiation can make one fully prepared for the negotiation. An objective analysis of one’s own advantages and disadvantages before negotiation can make one fully prepared for the negotiation.

10 II. Business Negotiation 4> Formulate a detailed and contact negotiation plan a negotiation plan is a guideline directing the negotiator’s concrete arrangements for negotiation. It is made before the negotiation. In drawing up a negotiation plan, the following things should be included in the plan: a negotiation plan is a guideline directing the negotiator’s concrete arrangements for negotiation. It is made before the negotiation. In drawing up a negotiation plan, the following things should be included in the plan: A> the content of negotiation A> the content of negotiation A: requirement for product quality (quality, model number, brand) A: requirement for product quality (quality, model number, brand) B: trade volume (intended trade volume) B: trade volume (intended trade volume) C: price object (expected price for reaching an agreement) C: price object (expected price for reaching an agreement) D: mode of delivery D: mode of delivery E: requirement for quality warranty (coverage, time and means) E: requirement for quality warranty (coverage, time and means) F: means of transportation and expenses F: means of transportation and expenses G: insurance and inspection G: insurance and inspection B> The theme of negotiation B> The theme of negotiation The theme of negotiation is the aim of negotiation. The theme should be highly summed up and it is the spirit of a negotiation. The theme of negotiation is the aim of negotiation. The theme should be highly summed up and it is the spirit of a negotiation.

11 II. Business Negotiation C> specific targets for negotiation After setting up the theme of negotiation, negotiation targets should be specified and detailed. The negotiation process should center around these specific targets and serve for them. After setting up the theme of negotiation, negotiation targets should be specified and detailed. The negotiation process should center around these specific targets and serve for them. While setting up specific targets, the following points must be taken into consideration: While setting up specific targets, the following points must be taken into consideration: A: whether the deadline of this negotiation forms an obstacle to the establishment of specific targets. A: whether the deadline of this negotiation forms an obstacle to the establishment of specific targets. B: which party wants to maintain the status quo and how large is the difference between our requirement and the status quo. B: which party wants to maintain the status quo and how large is the difference between our requirement and the status quo. C: what are our interests? What are we seeking after in negotiation? What do we need? C: what are our interests? What are we seeking after in negotiation? What do we need?

12 II. Business Negotiation D: what price will we have to pay to solve any deadlock that may appear? Will this price be far away from our fixed targets? E: what means will both parties use to communicate? How reliable will the information be? E: what means will both parties use to communicate? How reliable will the information be? Negotiation targets can be divided into three Negotiation targets can be divided into three types: the ceiling target ( the ideal target), the bottom-line target ( the basic target), the medium target (a realistic target).

13 II. Business Negotiation 5> Building up sound interpersonal relation Sound interpersonal relation helps to reduce difficulties arising in negotiation. Remember, a negotiation rival is a friend and partner instead of an enemy. Sound interpersonal relation helps to reduce difficulties arising in negotiation. Remember, a negotiation rival is a friend and partner instead of an enemy. 6> Creating a good atmosphere a good atmosphere can be of great benefit to the smooth development of a negotiation. Therefore, much care should be given to the arrangement and decoration of the venue for negotiation. Here, cultural factors and personal habits must be taken into account. Meanwhile, try to be sincere by smiling and shaking hands with the other party. Topics like sports, personal hobbies, which are not triggering any dispute are good ones to relax both parties before they enter into formal negotiation. a good atmosphere can be of great benefit to the smooth development of a negotiation. Therefore, much care should be given to the arrangement and decoration of the venue for negotiation. Here, cultural factors and personal habits must be taken into account. Meanwhile, try to be sincere by smiling and shaking hands with the other party. Topics like sports, personal hobbies, which are not triggering any dispute are good ones to relax both parties before they enter into formal negotiation.

14 II. Business Negotiation 2. Negotiation on the way This stage can be divided into three steps: This stage can be divided into three steps: claiming value, creating value, overcoming barriers to agreement. In the step of claiming value, each party In the step of claiming value, each party should conduct sufficient communication on their respective needs and benefits, and stating their ways and advantages to meet the other’s needs. The crucial point here is to make clear what is the real need of the other party. To achieve this goal, questions should be widely used. The middle phase of negotiation on the way is to create The middle phase of negotiation on the way is to create values. After knowing the other party’s real needs and benefits, both party should strive together to reach find out an optimal plan to meet both party’s demands. This is because what has been claimed by both parties respectively is not, in most cases, the maximum and most desirable results of both parties. At least, it’s not real.

15 II. Business Negotiation The step of overcoming barriers to agreement is the last and the hardest phase in negotiation. The main task in this step, as the name has indicated, is to settle disputes and seek agreement. The barriers in this step result from two aspects. On one hand, they may be the result of benefit conflict of two parties, which should be solved through coordination between the two parties. On the other, they may arise because of decision-making procedure problems facing one party. In this case, the other party should help the party with problems to overcome such barriers. The step of overcoming barriers to agreement is the last and the hardest phase in negotiation. The main task in this step, as the name has indicated, is to settle disputes and seek agreement. The barriers in this step result from two aspects. On one hand, they may be the result of benefit conflict of two parties, which should be solved through coordination between the two parties. On the other, they may arise because of decision-making procedure problems facing one party. In this case, the other party should help the party with problems to overcome such barriers.

16 II. Business Negotiation V. Efficiency of Business Negotiation As an economic activity, business As an economic activity, business negotiation also involves costs and efficiency. Generally speaking, the costs of negotiation includes: 1> The total losses arising from concessions. 1> The total losses arising from concessions. The value of this part is the margin between the The value of this part is the margin between the expected benefits and real benefits. That is, the balance between optimal target and benefits stated in the final agreement. 2> Cost of resources used: 2> Cost of resources used: This refers to the cost combining human resources, materials, This refers to the cost combining human resources, materials, money and time spent on negotiation. 3> The total losses caused for the use of human resources, materials, 3> The total losses caused for the use of human resources, materials, money and time to negotiation. It means the value to be created by these means of production if they are used in daily production of the enterprise rather than used in negotiation. Generally speaking, people care more about the first one and often neglect the Generally speaking, people care more about the first one and often neglect the latter two. A typical example is to negotiate repeatedly without considering the cost.

17 II. Business Negotiation VI. Standards to Judge the Success of a Negotiation 1. Gain of economic benefits 2. Win-win result 3. Interpersonal relation

18 II. Business Negotiation VII. Elements of Negotiation 1. negotiation subject (主体) : participants of a negotiation 1. negotiation subject (主体) : participants of a negotiation 2. negotiation object( 客体 ): as a core of a negotiation, it includes issues and content of a negotiation. 2. negotiation object( 客体 ): as a core of a negotiation, it includes issues and content of a negotiation. 3. negotiation aim: a talk with only subject and object but not a specific aim is called a casual talk instead of negotiation. 3. negotiation aim: a talk with only subject and object but not a specific aim is called a casual talk instead of negotiation. 4. negotiation result: some action or promise made by the opposite side after negotiation. 4. negotiation result: some action or promise made by the opposite side after negotiation.

19 II. Business Negotiation VIII. Basic Negotiation Principles: 1. equality and mutual benefit 1. equality and mutual benefit This means status equality and balance of interests. This means status equality and balance of interests. 2. the principle of seek common points while reserving difference 2. the principle of seek common points while reserving difference This principle can be understood from several aspects: taking a fair attitude towards the rival; the emphasis of the negotiation should be on respective interests rather than each party’s stance; seeking common ground to reach an agreement; preserving the differences and resolve them later. This principle can be understood from several aspects: taking a fair attitude towards the rival; the emphasis of the negotiation should be on respective interests rather than each party’s stance; seeking common ground to reach an agreement; preserving the differences and resolve them later. 3. the principle of compromise and complementation 3. the principle of compromise and complementation In negotiation, compromise is a must but attention should be paid to the following points: In negotiation, compromise is a must but attention should be paid to the following points: A: each party should define the point where one is ready to compromise on. A: each party should define the point where one is ready to compromise on. B: compromise falls into two kinds: active compromise (积极妥协) and passive compromise (消极妥协). The former is intentional compromise. It is to lose for the sake of gain. In such kind of compromise, no concessions are made on fundamental interests. The latter is compromise made as a result of fear of the opposite party or just because of wishing to reach an agreement. This type of compromise often hurts the fundamental interests and thus is not recommended. B: compromise falls into two kinds: active compromise (积极妥协) and passive compromise (消极妥协). The former is intentional compromise. It is to lose for the sake of gain. In such kind of compromise, no concessions are made on fundamental interests. The latter is compromise made as a result of fear of the opposite party or just because of wishing to reach an agreement. This type of compromise often hurts the fundamental interests and thus is not recommended.

20 II. Business Negotiation In terms of means of compromise, compromise In terms of means of compromise, compromise can be divided into reciprocal compromise ( 对等式 妥协 )or complementary compromise (互补式妥 协)。 The former means that both parties make the same amount of compromise on a certain issue for they need to break the deadlock concerning this issue. The latter means that one party make concessions on issue A while the other party does so on issue B. This is a good way to reach an agreement. C: In making negotiation plans, one should make clear that what can’t be compromised, what can be compromised and what are just used for compromise. C: In making negotiation plans, one should make clear that what can’t be compromised, what can be compromised and what are just used for compromise. 4. Principle of fairness and objectivity Take truth and facts as the sole standard. To be specific, this means the yardsticks must be fair, objective and applicable. Take truth and facts as the sole standard. To be specific, this means the yardsticks must be fair, objective and applicable. 5. principle of integrity=good faith 5. principle of integrity=good faith 6. principle of mutual understanding 6. principle of mutual understanding negotiators should be generous and learn to give up minor interests for major interests. negotiators should be generous and learn to give up minor interests for major interests. 7. principle of optimal interests negotiators should strive to obtain more interests for their own side in light of negotiators should strive to obtain more interests for their own side in light of cooperation and mutual benefits.

21 II. Business Negotiation IX. Principles on Negotiation Language 1. objectivity be honest and tell the truth be honest and tell the truth 2. pertinence( 针对性 ) talk should be to the point talk should be to the point 3. flexibility 4. adaptability 5. being logical 6. implicity to be ambiguous, if necessary to be ambiguous, if necessary

22 II. Business Negotiation X. The Responsibility of Main Negotiator The main negotiator is the formal speaker of a negotiation team. He represents the team and should shoulder the responsibility. The main negotiator is the formal speaker of a negotiation team. He represents the team and should shoulder the responsibility. 1. Make preparations for negotiation 1. Make preparations for negotiation A> be sure of understanding all information about the negotiation under question. A> be sure of understanding all information about the negotiation under question. B> make sure the negotiation targets have specific quantitative and qualitative indexes. B> make sure the negotiation targets have specific quantitative and qualitative indexes. C> make sure all negotiation team members have a clear and correct understanding of negotiation targets and strategies. C> make sure all negotiation team members have a clear and correct understanding of negotiation targets and strategies. D> make sure every team member understand their own work regulations and codes of behavior. D> make sure every team member understand their own work regulations and codes of behavior.

23 II. Business Negotiation The main negotiator should avoid wrong answering and careless Promise. To achieve this goal, the main negotiator should: A> first understand the intention of the other party and then consider how to answer the questions (from which aspect and to what degree) A> first understand the intention of the other party and then consider how to answer the questions (from which aspect and to what degree) B> for questions on which one party has the biggest assurance, answers should be given by leaving oneself the biggest leeway. B> for questions on which one party has the biggest assurance, answers should be given by leaving oneself the biggest leeway. C> for questions which are the hardest to answer, they should be put off to answer. C> for questions which are the hardest to answer, they should be put off to answer. Remember, not all questions must be answered. 2. Find the weak points of the other party and use this to disturb the plan of the other party. 3. Motivate the initiative of team members

24 II. Business Negotiation XI. Reasons for Deadlock in Negotiation 1. only one party talks 1. only one party talks 2. too silent and slow reaction 2. too silent and slow reaction 3. dispute on stances 3. dispute on stances 4. go to extremes 4. go to extremes 5. low quality of negotiators 5. low quality of negotiators 6. barriers to communication 6. barriers to communication 7. purposeful delay 7. purposeful delay 8. change of environment 8. change of environment

25 II. Business Negotiation XII. Organization of a negotiation team a main negotiator, assistant, expert and other members a main negotiator, assistant, expert and other members XIII. Etiquette in arranging seating There are mainly two ways to arrange seating: There are mainly two ways to arrange seating: 1. a horizontal pattern( 横桌式 ): 1. a horizontal pattern( 横桌式 ): It refers to putting the negotiation table horizontally. Guest members sit with their faces towards the door while host members sit on the opposite. With each party’s main negotiator sitting in the center, members of each group sitting on both sides according to their ranks, with the right superior to the left. On the immediate right side of the main negotiator can seat the assistant in home negotiation and the translator in negotiation abroad. It refers to putting the negotiation table horizontally. Guest members sit with their faces towards the door while host members sit on the opposite. With each party’s main negotiator sitting in the center, members of each group sitting on both sides according to their ranks, with the right superior to the left. On the immediate right side of the main negotiator can seat the assistant in home negotiation and the translator in negotiation abroad. 2. a vertical pattern ( 竖桌式 ) 2. a vertical pattern ( 竖桌式 ) It refers to putting the negotiation table vertically. Taking the door as a line, on the right side of negotiation table sit guest members while on the left side sit host members. It refers to putting the negotiation table vertically. Taking the door as a line, on the right side of negotiation table sit guest members while on the left side sit host members.


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