Presentation on theme: "1 Negotiation Skills – 2 nd Session. 2 Business Negotiations 2: Preparation 2.1 Preparation This section introduces the concept of uncertainty – which."— Presentation transcript:
1 Negotiation Skills – 2 nd Session
2 Business Negotiations 2: Preparation 2.1 Preparation This section introduces the concept of uncertainty – which creates the opening dilemma, the importance of preparation, and the need to be aware of the prevailing market conditions.
3 Negotiating Dilemmas In negotiating, we don’t know what the other side will accept, and in some cases, we don’t even know our interests properly. This creates the following dilemmas: When and how to open. How far to move and when. How long to hang on.
4 Doing your Research Preparation involves information gathering. Know the market value of the deal. Your information should be as good, if not better than the other side. Don’t assume that the other side has this information.
5 Question 4 You are about to meet with a client who places monthly orders with your organisation. You have just become aware that one of your leading competitors has launched a 25% across the board discount as a special promotion to attract new business. Would this information fundamentally change your approach at the meeting? a) Yes b) No
6 Solution Option B is correct. It is not in your interest to furnish the buyer with information about the competitors discounts. You should not assume that the buyer has the same information as you – they may not be aware of this promotion. Even if they are, they may have their own reasons for not changing supplier. However, if the buyer raises your competitors promotion as an issue, your should have prepared a contingency position.
7 Preparing for the Negotiation 2.2 Knowing the Marketplace This section deals with gaining commercial intelligence about your leading competitors, and researching both the organisation and the individual that you’ll be negotiating with.
8 Preparing for the Negotiation Commercial Intelligence should be gathered from as many sources as possible. Research can turn up information that can fundamentally change a negotiating position. Organizational and personal factors.
9 Question 5 You are preparing to negotiate the sale and support contract for some high value capital equipment. Which of the following is the single most important factor to determine at the outset? a) The other side’s negotiating style. b) The other side’s credit rating.
10 Solution Option B is correct. Before committing you should establish that the other side is in a position to pay and that their credit history is satisfactory.
11 Preparing for the Negotiation Preparation is the most important stage of negotiation. Too often, people go badly prepared and end up giving more concessions. Ask questions like: What are my objectives? What does the other side want? What information is important? More time spent on planning and preparation is more beneficial in getting the outcome.
12 Preparing for the Negotiation Assessing your Objectives What exactly do I wish to achieve from this negotiation? Which of my following objectives: a) Must I achieve? b) Do I intend to achieve? c) Would I like to achieve? What options or alterations would be acceptable to me? What are the other sides’ objectives? How does the other side see the negotiation?
13 Preparing for the Negotiation Information Information is power. In early phases, both sides spend time finding out more information. What information do I have that the other side also has? What information do I have that the other side does not have? What information do I need to have before I negotiate? What information do they need to have before they negotiate?
14 Preparing the Negotiation Concessions In most negotiations have to be worked out where concessions are given. This is the area where the profitability of the outcome is decided. Concessions have two elements: cost and value Concede on issues which have little cost to you, but more value to the other.
Preparing Concessions Determine a range of acceptable agreement terms – from least to most desirable – for each of your objectives List and then rank the concessions you're willing to make, based on the ranges you identified High point Low point Walk away point Rank the concessions based on the objectives 15
16 Preparing the Negotiation Like, Intend and Must Positions The Best deal, like The Acceptable deal, intend The Worst deal, must
17 The Power Dimension The more sources from which you can obtain what you want, the stronger your position; and fewer such options you have, the weaker your position. Most sellers are overly concerned with the power of the buyers and the extent of competition. Get the power dimension to work for you. It is important that you feel confident while negotiating. This confidence comes from power. Power is not absolute. The power balance moves with time as negotiation progresses.
18 The Power Dimension The critical question is not who is the buyer? And who is the seller? – But who can get the power dimension to work for them.
19 Key Points Altering the other side’s view of the power relationship can strengthen your position. It is not an article of faith that the buyer holds the stronger negotiating position.
20 Question 6 When you turn up for a sales appointment you recognize one of your leading competitors in the reception area. Would this lead you to lower your expectations of the deal that you can secure? a) Yes b) No
21 Solution Option B is correct. Your preparation should make you confident about the market value of your goods and services. Would you really expect to be the only supplier in the frame? The bottom line is that there is a deal to be done – be confident and make sure that it is you that wins the contract.
22 Planning Your Objectives 2.4 Planning your Objectives This section introduces Negotiating Range which is similar to like, must, and intend.
23 Negotiating Range This is similar to the exercise we did earlier to Like, Acceptable, and Intended. Ideal Minimum Target Don’t forget the other side also has the same criteria.
24 Negotiating Range SETTLEMENT RANGE Target Minimum Maximum Target Maximum Minimum Only when your target zones overlap, a settlement can take place.
25 Business Negotiations 3: Opening 3.1 Opening This section describes briefly the nuances of opening.
26 Opening Opening is the most important opportunity to influence the other side. It’s always in your best interest to adopt a tough opening position. Careful preparation is a must for this. Opening Dilemma If you open first, you will reveal key information. There is an old saying in Negotiation. “The guy to quote the dollar first usually loses.”
27 Opening Ask questions. Listen and talk less. Think of different ways that you could put to use to get them to reveal their opening position. Analyze the opening statement. Identify what is non negotiable. Use positive body language (communication, posture, facial expressions, tone of voice). Make them speak longer, not you.
28 Opening Intelligent listening Example: Usually, we don’t accept price cuts, under our standard terms, this is not our usual practice. Non Negotiable items can be a powerful bargaining lever. The Power of Silence. If you open first, reveal less, no more. See if their opening is credible. Shock Opening.
29 Business Negotiations 4: Bargaining 4.1 The Bargaining Phase This sections looks into the details of the Bargaining phase.
30 Bargaining Guidelines Don’t talk too much yourself. Don’t just say “No”. Don’t overstate your case. Don’t highlight your own shortcomings. Don’t deny obvious weaknesses in your position.
Negotiating Behavior 31 3 types of behaviour that we can display and encounter when in a negotiating situation RED BLUEPURPLE
32 RED Behaviour Manipulation Aggressive Intimidation Exploitation Always seeking the best for you No concern for person you are negotiating with Taking People behave in this manner when they fear exploitation by the other party, but by behaving this way to protect themselves, they provoke the behaviour they are trying to avoid.
33 BLUE Behaviour Win win approach Cooperation Trusting Pacifying Relational Giving Do you cooperate (blue) or defect (red)?
34 PURPLE Behaviour Give me some of what I want (red) I’ll give you some of what you want (blue) Deal with people as they are not how you think they are Good intentions Two way exchange Tit for tat strategies To the red behaviourist the message is loud and clear, ‘You will get nothing from me unless and until I get something from you’.
Negotiation Tactics No Deal Tactic Force you to accept the worst deal Can do better by walking away Anchoring Tactic Customer makes an extreme offer Compromise is higher than seller expects Hard bargaining Concealing Information Customers keep changing their stance 35
Negotiation Tactics Contd… Making Last Minute Demands Vulnerable to accept The Krunch You’ve got to do better than that Mostly used by buyers Boulwarism Named after Lemuel Boulware Ultimate offer with no revisions Refers to “Take-it or Leave-it” 36
Types of Negotiation Distributive Involve win–lose, fixed-amount situations wherein one party’s gain is another party’s loss Integrative Involve joint problem solving to achieve results benefiting both parties Positional The more you clarify your position and defend it against attack, the more committed you become to it 37
Integrative Negotiation Both sides work to increase the value of the solution Goals are to: Create as much value for yourself and the other side Claim value for yourself Open about information and circumstances 38