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Business Negotiations


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Business Negotiations, part 2. How to make offers, organize your arguments and make concessions. Other parts will follow

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Business Negotiations

  1. 1. Business Negotiations Part 2 Osvaldas Čiukšys
  2. 2. Main stages of negotiationPreparation Exchange of Information DirectNegotiation/ Bargaining Closure and Commitment 2 © Business Negotiations, Osvaldas Čiukšys
  3. 3. “8 step” approach by John Benson Gavin Kennedy John McMillanTheory is based on 4 crucial phases of negotiation and 4 minorsteps within the major phases: A. PREPARE B. ARGUE C. Signal D. PROPOSE E. Package F. BARGAIN G. Close H. Agree 3 © Business Negotiations, Osvaldas Čiukšys
  4. 4. Negotiations Bargaining zone Offers Counteroffers ArgumentationOpponents Discussion Opponents Trade – offs Concessions Deal zone 4 © Business Negotiations, Osvaldas Čiukšys
  5. 5. 7 stages of direct negotiation (bargaining): 1 • Opening 2 • Presenting positions 3 • Influencing positions 4 • Looking for possible agreement 5 • Adjusting positions 6 • Agreeing solutions 7 • Closing © Business Negotiations, Osvaldas Čiukšys
  6. 6. Negotiations: opening (1) Create cooperative and constructive atmosphere:1. Inquire about trip, hotel, flight etc.2. Introduce your team3. 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 side5. Ask does the other side need some other help or assistance: separate room, copying or other office services © Business Negotiations, Osvaldas Čiukšys
  7. 7. Negotiations: opening (2) Take the initiative:1. Propose and agree the goal of the meeting2. Announce (correct) the agenda and issues to be discussed3. Shortly summarize (make comments and corrections) the situation and already agreed issues4. Invite your opponents for comments, correct them © Business Negotiations, Osvaldas Čiukšys
  8. 8. Possible agendas (1)1. Push: start with important issues2. Procrastinate: you begin with less important issues3. Assemble: put together groups of issues both parties are likely to agree, forming packages for agreement4. Classify: classify issues like financial on one side, and all other issues on the other5. Sort: review all issues to be negotiated and decide if there are any that can be settled quickly © Business Negotiations, Osvaldas Čiukšys
  9. 9. 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 advantage7. Consult: you agree agenda prior to it and then revise the schedule and announce it8. Concede: put some issues on the table for discussion you willing to concede. Because of your concessions you can require and anticipate concessions in return9. Soften: make concessions not important for you on the first stage . When the opponents are comforted negotiated the real deal10. Appetizers: start with easy issues to agree on.” If we did it so easy, lets do this one as well “ © Business Negotiations, Osvaldas Čiukšys
  10. 10. During the Negotiation Your ultimate goal: to learn and find out what theyreally want and aiming for Benefit from the momentum of the first impression Listen Listen to how Analyze and carefully to they say it observe what they say © Business Negotiations, Osvaldas Čiukšys
  11. 11. Negotiations: a good start1. 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 diversionMake some jokes. Build self confidence, test the atmosphere. If theyfeel nervous or want to start immediately, expect hard negotiation…3. Be diplomaticIntroduce the issues in relaxed manner, even if you intent to attack andplay tough later on. Do not provoke immediate back fire © Business Negotiations, Osvaldas Čiukšys
  12. 12. Importance of the Beginning The initial stage of negotiation is veryimportant (even none of the issues areresolved) because the atmosphere and toneare set If your attitude differs radically from thatof the other side, experience show that it isonly during this initial phase that there is achance of making any changes © Business Negotiations, Osvaldas Čiukšys
  13. 13. Negotiations: “don’ts”1. Do not talk unprepared, talk to the point2. Do not make long statements, use short sentences3. Do not interrupt the opponents and the other members of your team4. Do not change or modify the agreed strategy without proper analysis and common agreement5. Do not let the other side to change your strategy and agenda, keep the initiative Take breaks, do not act spontaneously! © Business Negotiations, Osvaldas Čiukšys
  14. 14. Negotiations: “do’s”1. Let the other side talk2. Use pause and time intervals in your speech to stress the importance of the point you are making3. Use prepared arguments: hard working in preparation – easy in improvisation4. Ask questions, do not provide immediate answers5. Ask for explanation and justification: why you consider its good for us both, for my company, for me? Take breaks, do not act spontaneously! © Business Negotiations, Osvaldas Čiukšys
  15. 15. 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” positionExplain: why you making this offer but not what you are offering or proposing © Business Negotiations, Osvaldas Čiukšys
  16. 16. 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 theirsLet them disclose their intentions: what we can do to solve this issue? or help us to help you © Business Negotiations, Osvaldas Čiukšys
  17. 17. 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 itmakes your opponents more cooperative: research for a sensitive informationabout your opponents look for irregular business practices ofyour opponents look for unsatisfied clients, bad businesscases… Let them know, that you know…. 17 © Business Negotiations, Osvaldas Čiukšys
  18. 18. Negotiations: some rules to follow1. Never (ever) accept the first offer2. Leave yourself a room for maneuver: don’t be too detailed3. Nothing is for free: let them work hard for every (even not important for you) concession4. Be constructive, not destructive: don’t react to and be imprisoned by tricks and abuse from the other side5. Always be ready to terminate negotiation if it brings bad results to you and let them know (and feel) it © Business Negotiations, Osvaldas Čiukšys
  19. 19. 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 © Business Negotiations, Osvaldas Čiukšys
  20. 20. 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… © Business Negotiations, Osvaldas Čiukšys
  21. 21. Organize your arguments1. 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? © Business Negotiations, Osvaldas Čiukšys
  22. 22. Prepare the order of your arguments First come strong arguments. These put the others side on the defensive. You show your seriousnessSecondly, present the weaker arguments. They are weaker but it doesn’t mean that they are not justifiable. Make as much of them as you can. Let them be tired to work on itFinally, come with your “sledgehammer” arguments which will have the strongest impact on the solidity of their position © Business Negotiations, Osvaldas Čiukšys
  23. 23. Formulating your offer (1)Find the common interest and exchange it to concession from the opponentYou 1 2 3 4 5 Opponent 23 © Business Negotiations, Osvaldas Čiukšys
  24. 24. Practical example:Buyer’s (Your) interest: to buy 10 computers with maintenance service forpossibly lowest price to arrange new officeSeller’s interest: to sell to you 12 computers (at least 10) with maintenanceserviceYour tasks:1. Lowest price2. 10 computers3. Maintenance 1 2 3 4 5Seller’s tasks:5. 12 computers4. 10 computers3. Maintenance 24 © Business Negotiations, Osvaldas Čiukšys
  25. 25. Making concessions (1)Concessions Negotiation rounds 10 2 2 2 2 2 10 1 2 3 4 10 4 3 2 1 • Start from small, not important concession and finish with bigger one • Trade your concession for a bigger one from your opponents • Package: “ we are ready to give up on issue A if you agree to give us B and C” 25 © Business Negotiations, Osvaldas Čiukšys
  26. 26. 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 opponents3. Make the list of possible concessions you want to receive from your opponents and group them4. Shape up your proposals in packages and make a trade-offs: exchange the package made of lower value concessions to one of real importance © Business Negotiations, Osvaldas Čiukšys
  27. 27. Shaping up a proposalSeparate 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... © Business Negotiations, Osvaldas Čiukšys
  28. 28. Phrasing a proposal1. Use a pause in your speech prior to making any offer2. Use positive body language: lean forward slightly, establish a direct eye contact3. Use short sentences, do not go into details4. Explain why your offer is valuable for your opponent, the whole agreement and joint business5. Ask the opponents to comment on your offer, let them repeat it with their own words6. Make comment similar to “we are almost near the agreement on this issue” © Business Negotiations, Osvaldas Čiukšys
  29. 29. 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 29 © Business Negotiations, Osvaldas Čiukšys
  30. 30. Questions?