Introduction to International Negotiations Verner Worm, Ph.D. Professor of Chinese Business and Development Asia Research Centre Copenhagen Business School vw.int@cbs.dk

What is negotiations? Negotiation is one of the most important global business skills Two or more parties combining their conflicting points of view into a single decision of mutual interest. Negotiation is about value claiming, value creation and trust building

Learning Objectives Improved ability to negotiate General strategy (mental model) for successful negotiation Enlightened model of negotiation (fraternal twin) The other party is as motivated as you. Don’t outsmart

Negotiation Skills as Core Leadership Competency Key communication & influence tool for interdependent relationships (in & outside the company) Most people are not very good at negotiation (e.g., over 80% of corporate executives and CEOs leave money on the table) People don’t realize this

Conditions of negotiations Perception of conflict People hold different perceptions. Objective conflicts or perception of conflict Communication opportunities If people cannot communicate, they cannot negotiate. In explicit bargaining people communicate with one another. In tacit bargaining they coordinate through their actions. Interdependence People are interdependent if their actions affect others’ outcome. In the dyadic case parties must agree to the outcome to occur. Veto power to walk away.

The role of conflict Predominantly negative Competitive processes Misperception and bias Emotionality Decreased communication Positive aspects of conflicts Discussing conflicts make people aware and able to cope with problems. Create organizational changes Promote awareness of self and other

Interdependence In negotiation, parties need each other to achieve their preferred outcomes or objectives Interdependence and the structure of the situation shape processes and outcomes Zero-sum or distributive – one winner (win-lose) Non-zero-sum or integrative – mutual gains situation (win – win) A mix of convergent and conflicting goals characterizes many interdependent relationships

Stages of negotiations Preparation Relationship building Information gathering Information using Persuasion Making concessions and agreements Closing the deal (final offer) Implementing the agreement

B.A.T.N.A.: Best Alternative To a Negotiated Agreement What are you going to do if you do not make a deal with this person? Determined by your available alternatives Defines most you will pay (buyer) & least you will accept (seller) Key source of power: Ability to walk away Strategic advice: Should you reveal your BATNA? Falling in love rule

Goals, Strategy and Planning

The Direct and Indirect Effects of Goals on Strategy Wishes are not goals Goals are often linked to the other party’s goals There are limits to what goals can be Effective goals must be concrete/specific and measurable. Indirect effects Forging an ongoing relationship

Strategy, tactics, Planning A negotiation strategy is an integrated set of behaviors chosen because they are thought to be the means of accomplishing the goal of negotiators. Tactics are short-term moves. Planning/Implementation: The “action” component of the strategy process; i.e. how will I implement the strategy?

Getting Ready to Implement the Strategy: The Planning Process Define the issues Assemble the issues and define the bargaining mix The bargaining mix is the combined list of issues Define your interests Why you want what you want Your “ideal” settlement Your bottom line

Getting Ready to Implement the Strategy: The Planning Process Know your limits and alternatives Set your objectives (targets) and opening bids (where to start) Target is the outcome realistically expected Opening is the best that can be achieved Assess constituents and the social context of the negotiation

Getting Ready to Implement the Strategy: The Planning Process Analyze the other party Why do they want what they want? How can I present my case clearly and refute the other party’s arguments? Present the issues to the other party

Influencing negotiations Reciprocity (law of the universe) Pertain more to pattern of concessions than to degree. We feel upset if receiving a favor we cannot return. Consistency Need to appear to be consistent in our behaviors to others as well at to ourselves (psychological commitment) Social proof The behavior of others determine what is desirable, correct. Liking. (Flattery can get you everywhere) Make concession to people they like Authority We are inclined to accept opinions of people we consider authorities Scarcity. Rare things appear more appealing.

Making the first move Making concessions Bargaining in good faith Reciprocity (i.e.. conditional concessions) Size (Normally higher level concession in initial phase?) Bargaining in good faith Don’t falsify intention nor information (reputation again) Offers remain valid until rejected or even after Common concerns Sharing information about reservation price (NO) Negotiation is a matter of strategy, not trust. Lying about reservation price (NO), the liar gets caught. Tough or soft negotiation stance? Strategic creativity! Making the final offer (no rush).

Advice for direct information Ask questions about interests and priorities, things that you are willing to share information about in return. Give a little information about your own interests and priorities. Be sure to reciprocate information with information Be honest when rejecting to give information. Build trust by meeting expectation.

Advice for indirect information Multi-issue proposals are more efficient in getting information Do not make proposals that are unacceptable to you Anchor proposal so that you receive an adequate distributive outcome. Post proposals visually on a flipchart. Make 2 or 3 at most proposal at a time Analyse the proposal quickly (spreadsheet) Allow time for running the numbers

Mutual Adjustment and Concession Making When one party agrees to make a change in his/her position, a concession has been made Concessions restrict the range of options When a concession is made, the bargaining range is further constrained

Strategic Options Per Dual Concerns Model, choice of strategy is reflected in the answers to two questions: How much concern do I have in achieving my desired outcomes at stake in the negotiation? How much concern do I have for the current and future quality of the relationship with the other party?

Mutual Adjustment Continues throughout the negotiation as both parties act to influence the other One of the key causes of the changes that occur during a negotiation The effective negotiator needs to understand how people will adjust and readjust and how the negotiations might twist and turn, based on one’s own moves and the other’s responses

The Dual Concerns Model Avoidance: Don’t negotiate Competition: I gain, ignore relationship Collaboration: I gain, you gain, enhance relationship Accommodation: I let you win, enhance relationship

Two Dilemmas in Mutual Adjustment Dilemma of honesty Concern about how much of the truth to tell the other party Dilemma of trust Concern about how much negotiators should believe what the other party tells them

Closing the deal Provide alternatives Assume the close Take out the contract form Split the difference Exploding offers Offers containing tight deadlines Sweeteners I will give you X if you agree Good offter that expires within 24 hours

Summary on the Planning Process “...planning is one of the most important activities in negotiation.” rk.hr@cbs.dk