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  1. 1. International Business NegotiationProfessor Kuochung ChangDepartment of International Business1
  2. 2. CHAPTER ONEThe Nature of Negotiation
  3. 3. NegotiationsNegotiations occur for several reasons:• To agree on how to share or divide a limitedresource• To create something new that neither partycould attain on his or her own• To resolve a problem or dispute between theparties1-3
  4. 4. Characteristics of a Negotiation Situation• There are two or more parties• There is a conflict of needs and desires betweentwo or more parties• Parties negotiate because they think they canget a better deal than by simply accepting whatthe other side offers them• Parties expect a “give-and-take” process1-4
  5. 5. Negotiation is something thateveryone does, almost daily1-5
  6. 6. Relationship TypesWhen the parties depend on each other toachieve their own preferred outcome they areinterdependent; they are characterized byinterlocking goals.• Independent parties are able to meet their ownneeds without the help and assistance of others.• Dependent parties must rely on others for whatthey need; the dependent party must accept andaccommodate to that provider’s whims andidiosyncrasies.
  7. 7. InterdependenceIn negotiation, parties need each other to achieve theirpreferred outcomes or objectives• This mutual dependency is calledinterdependence• Interdependent goals are an important aspect ofnegotiation1-7
  8. 8. Interdependence• Interdependent parties are characterized byinterlocking goals• Having interdependent goals does not mean thateveryone wants or needs exactly the same thing• A mix of convergent and conflicting goalscharacterizes many interdependent relationships1-8
  9. 9. Alternatives Shape Interdependence• Evaluating interdependence depends heavily on thealternatives to working together• The desirability to work together is better for outcomes• Best available alternative: BATNA( Best Alternative to a Negotiated Agreement)1-9
  10. 10. Mutual Adjustment• Continues throughout the negotiation as bothparties act to influence the other• The effective negotiator needs to understand howpeople will adjust and readjust and how thenegotiations might twist and turn, based on one’sown moves and the other’s responses1-10
  11. 11. Concession Making• When one party agrees to make a change inhis/her position, a concession has been made• Concessions restrict the range of options• When a concession is made, the bargaining rangeis further constrained1-11
  12. 12. Two Dilemmas in Mutual Adjustment• Dilemma of honesty– Concern about how much of the truth to tell the otherparty• Dilemma of trust– Concern about how much should negotiators believewhat the other party tells them1-12
  13. 13. Game theoryNot confessNot confess ConfessConfessNot confessNot confess EachEachOne YearOne YearAA 10 Years10 YearsBB 3 Months3 MonthsConfessConfess BB 10 Years10 YearsAA 3 Months3 MonthsEachEach8 Years8 YearsSuspect BSuspect BAA
  14. 14. GAMBLINGFour students gamble with professor in the negotiationclass. Students are asked to puts their money into anenvelope. Professor Chang claims if the total amount isgrater than or equal to 500 NT$ dollars, then everyonecan get 150 back, otherwise the money will belong toProfessor.• How much money will you put into?• Everyone does own decision, communication is notallowed.14
  15. 15. Value Claiming and Value Creation• Opportunities to “win” or share resources– Claiming value: result of zero-sum or distributivesituations where the object is to gain largest pieceof resource– Creating value: result of non-zero-sum orintegrative situation where the object is to haveboth parties do well– Most actual negotiations are a combination ofclaiming and creating value processes1-15
  16. 16. Conflict"sharp disagreement or opposition" and includes"the perceived divergence of interest, or a beliefthat the parties current aspirations cannot beachieved simultaneously"1-16
  17. 17. Levels of Conflict• Intrapersonal or intrapsychic conflict– Conflict that occurs within an individual• We want an ice cream cone badly, but we know that icecream is very fattening• Interpersonal conflict– Conflict is between individuals• Conflict between bosses and subordinates, spouses,siblings, roommates, etc.1-17
  18. 18. Levels of Conflict• Intragroup Conflict– Conflict is within a group• Among team and committee members, within families,classes etc.• Intergroup Conflict– Conflict can occur between organizations, warring nations,feuding families, or within splintered, fragmented communities– These negotiations are the most complex1-18
  19. 19. Dysfunctions of Conflict1. Competitive, win-lose goals2. Misperception and bias3. Emotionality4. Decreased communication5. Blurred issues6. Rigid commitments7. Magnified differences, minimized similarities8. Escalation of conflict1-19
  20. 20. Functions of Conflict1. Makes organizational members more aware and able tocope with problems through discussion.2. Promises organizational change and adaptation.3. Strengthens relationships and heightens morale.4. Promotes awareness of self and others.5. Enhances personal development.6. Encourages psychological development—it helps peoplebecome more accurate and realistic in their self-appraisals.7. Can be stimulating and fun.1-20
  21. 21. The Dual Concerns Model1-21
  22. 22. CHAPTER TWOStrategy and Tactics ofDistributive Bargaining
  23. 23. The Distributive Bargaining Situation• Goals of one party are in fundamental, direct conflict toanother party• Resources are fixed and limited• Maximizing one’s own share of resources is the goal forboth parties2-23
  24. 24. The Distributive Bargaining SituationPreparation—set a• Target point, aspiration point• Walkaway, resistance point• Asking price, initial offer2-24
  25. 25. The Distributive BargainingSituationParty B - BuyerParty A - SellerWalkaway Point Target Point Asking PriceInitial Offer Target Point Walkaway Point2-25
  26. 26. Role of Alternatives to a NegotiatedAgreement• Alternatives give the negotiator power to walk away fromthe negotiation– If alternatives are attractive, negotiators can:• Set their goals higher• Make fewer concessions– If there are no attractive alternatives:• Negotiators have much less bargaining power2-26
  27. 27. The Distributive BargainingSituationParty B - BuyerParty A - SellerWalk away Point Target Point Asking PriceInitial Offer Target Point Walk away PointAlternativeAlternative2-27
  28. 28. Fundamental Strategies• Push for settlement near opponent’s resistancepoint• Get the other party to change their resistancepoint• Convince the other party that the settlement isthe best possible• If settlement range is negative, either:– Get the other side to change their resistance point– Modify your own resistance point2-28
  29. 29. Keys to the StrategiesThe keys to implementing any of the fourstrategies are:• Discovering the other party’sresistance point• Influencing the other party’s resistancepoint2-29
  30. 30. Review & Question• Describe the what kinds of strategies whichsales used in the film?• How do you define the relationship types withyour course instructors? And your classmates?
  31. 31. Positions Taken During Negotiations• Opening offer can anchor a negotiation– Where will you start?• Opening stance--- is the attitude the negotiator willadopt during a negotiation– What is your attitude?• Competitive? Moderate?• Initial concessions– Should any be made? If so, how large?2-31
  32. 32. Positions Taken During Negotiations• The role of concessions– Without them, there is either capitulation or deadlock• Patterns of concession making– The pattern contains valuable information• Final offers (making a commitment)---there is nofurther room for movement.– “This is all I can do”2-32
  33. 33. Ways to Create a Commitment• Public pronouncement• Linking with an outside base• Increase the prominence of demands• Reinforce the threat or promise2-33
  34. 34. Closing the Deal• Provide alternatives (2 or 3 packages)• Assume the close• Split the difference--- used when an agreement is close,suggesting that the parties split the difference.• Exploding offers--- An offer that contains an extremely tightdeadline in order to pressure the other party to agree quickly.• Deal sweeteners2-34
  35. 35. Typical Hardball Tactics• Good Cop/Bad Cop• Lowball/Highball• BogeyNegotiators use this tactic to pretend that an issue is of little or noimportance to them, when it actually is quite important.The Nibble (asking for a number of smallconcessions to)2-35
  36. 36. Typical Hardball Tactics• Chicken---using threat• Intimidation---An attempt to force the other party to agree bymeans of an emotional ploy.• Aggressive Behavior---asking other party to justify• Snow Job (overwhelm the other party withinformation) that he/she has trouble determining which facts arereal or important, and which are distractions2-36
  37. 37. SummaryNegotiators need to:• Set a clear target and resistance points• Understand and work to improve their BATNA• Start with good opening offer• Make appropriate concessions• Manage the commitment process2-37
  38. 38. • The film is a dramatization of the true story of ErinBrockovich, played by Julia Roberts, who fought againstthe US West Coast energy corporation Pacific Gas andElectric Company (PG&E). It turned into a massive boxoffice hit, and critical reviews are highly positive.
  39. 39. QuestionWhat kind of negotiation tactics or skills have bee used inboth parties? And do you think it is helpful to achievegoals?
  40. 40. CHAPTER THREEStrategy and Tactics ofIntegrative Negotiation
  41. 41. What Makes Integrative Negotiation Different?negotiators must practice these requisite behaviors andperspectives• Focus on commonalties rather than differences• Address needs and interests, not positions• Commit to meeting the needs of all involved parties• Exchange information and ideas• Invent options for mutual gain• Use objective criteria to set standards3-41
  42. 42. Integrative Negotiation Process• Create a free flow of information ----to reveal their trueobjectives and to listen to each other carefully.• Attempt to understand the other negotiator’s real needsand objectives• Emphasize the commonalties between the parties andminimize the differences• Search for solutions that meet the goals and objectivesof both sides3-42
  43. 43. Key Steps in the Integrative NegotiationProcess• Identify and define the problem• Understand the problem fully– identify interests and needs on both sides• Generate alternative solutions• Evaluate and select among alternatives3-43
  44. 44. Identify and Define the Problem• Define the problem in a way that is mutually acceptableto both sides• State the problem with an eye toward practicality andcomprehensiveness• State the problem as a goal and identify the obstaclesin attaining this goal• Depersonalize the problem• Separate the problem definition from the search forsolutions3-44
  45. 45. Understand the Problem Fully—Identify Interests and Needs• Interests: the underlying concerns, needs, desires, orfears that motivate a negotiator– Substantive interests relate to key issues in thenegotiation--- economic and financial issues.– Process interests are related to the way the dispute issettled intrinsic or instrumenta ?– Relationship interests indicate that one or both partiesvalue their relationship3-45
  46. 46. Observations on Interests• There is almost always more than one type of interestunderlying a negotiation• Parties can have different interests at stake• Often stem from deeply rooted human needs or values• Interests can change• Surfacing interests3-46
  47. 47. Generate Alternative Solutions• Invent options by redefining the problem set:– Expand or modify the pie--- add resources– Use nonspecific compensation – allow one person to obtain hisobjectives and pay off the other person for accommodating hisinterests.– Cut the costs for compliance – one party achieves her objectivesand the other’s costs are minimized if he agrees to go along.– Find a bridge solution --- invent new options by reformulatingof the problem so that the parties are not discussing theirpositions but disclosing information that will satisfy needs.3-47
  48. 48. Generate options to the problem• Brainstorminggenerating as many solutions to the problem as possible• Surveysasking a large number of people to list all possiblesolutions they can imagine.
  49. 49. Evaluate and Select Alternatives• Narrow the range of solution options– focus on thosethat one or more negotiators strongly support.• Agree to evaluation criteria in advance• Be willing to justify personal preferences• Take time to “cool off”• Keep decisions tentative and conditional until afinal proposal is complete3-49
  50. 50. Factors That Facilitate Successful IntegrativeNegotiation• Some common objective or goal— to reach common goal orshared goal?• Faith in one’s own problem-solving ability----parties who believethey can work together are more likely to do so• A belief in the validity of one’s own position and the other’sperspective-- to accept both their own and the other’s attitudes, interests,and desires as valid.• The motivation and commitment to work together ---the partiesmust be motivated to collaborate rather than compete.3-50
  51. 51. Factors That Facilitate Successful IntegrativeNegotiation• Trust---each negotiator must believe that both he/she and the other partychoose to behave in a cooperative manner.• Clear and accurate communication --negotiators must be willingto share information about themselves, for example, revealing what theywant and why.• An understanding of the dynamics of integrativenegotiation ---training in integrative negotiation enhances the ability3-51
  52. 52. Why Integrative Negotiation isDifficult to Achieve• The history of the relationship between the twoparties• A belief that an issue can only be resolveddistributively• The mixed-motive nature of most negotiationsituations
  53. 53. CHAPTER FOURNegotiation Strategyand Planning
  54. 54. Goals – The Focus That Drives NegotiationStrategy• Determining goals is the first step in the negotiationprocess• Negotiators should specify goals and objectives clearlyThe criteria used to determine goals depend on your specific objectives andyour priorities among multiple objectives• The goals set have direct and indirect effects on thenegotiator’s strategy4-54
  55. 55. Goals, Strategy and Planning4-55
  56. 56. Direct and Indirect Effects of Goals on Strategy• Direct effects– 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• Indirect effects– Short-term thinking affects our choice of strategy4-56
  57. 57. Strategy versus Tactics• Strategy: The overall plan to achieve one’s goals in anegotiation• Tactics: Short-term, adaptive moves designed to enactor pursue broad strategies– Tactics are subordinate to strategy– Tactics are driven by strategy• Planning: The “action” component of the strategyprocess; i.e. how will I implement the strategy?4-57
  58. 58. Strategic Options• Per the Dual Concerns Model, choice of strategy isreflected in the answers to two questions:– How much concern do I have in achieving my desiredoutcomes at stake in the negotiation?– How much concern do I have for the current and futurequality of the relationship with the other party?4-58
  59. 59. The Dual Concerns ModelAvoidance: Don’t negotiateCompetition: I gain, ignore relationshipCollaboration: I gain, you gain, enhance relationshipAccommodation: I let you win, enhance relationship4-59
  60. 60. The Nonengagement Strategy: Avoidance• If one is able to meet one’s needs withoutnegotiating at all, it may make sense to use anavoidance strategy• It simply may not be worth the time and effort tonegotiate• The decision to negotiate is closely related tothe desirability of available alternatives4-60
  61. 61. Active-Engagement Strategies• Competition – distributive, win-lose bargaining• Collaboration – integrative, win-win negotiation• Accommodation – involves an imbalance of outcomes (“Ilose, you win”)4-61
  62. 62. The Flow of Negotiations: Stages andPhasesNegotiation proceeds through distinct phases or stages• Beginning phase (initiation)• Middle phase (problem solving)• Ending phase (resolution)4-62
  63. 63. Key Steps to an Ideal Negotiation Process• Preparation– What are the goals?– How will I work with the other party?• Relationship building– Understanding differences and similarities– Building commitment toward a mutually beneficial set ofoutcomes• Information gathering– Learn what you need to know about the issues4-63
  64. 64. Key Steps to an Ideal Negotiation Process• Information using– Assemble your caseDetermine which issues are most important and which are lessimportant and determine whether the issues are linked together or areseparate.• Bidding– Each party states their “opening offer”– Each party engages in “give and take”• Closing the deal– Build commitment• Implementing the agreement4-64
  65. 65. Key Steps to anIdeal Negotiation Process4-65
  66. 66. planning is the most critically importantactivity in negotiation.4-66
  67. 67. Getting Ready to Implement the Strategy: ThePlanning Process• Define the issues:-- begins with an analysis of what is to be discussed in thenegotiation• 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 want4-67
  68. 68. The Planning Process• Know your limits and alternatives• Set your objectives (targets) and opening bids– Target is the outcome realistically expected– Opening is the best that can be achieved• Assess constituents and the social context of thenegotiationconstituents who will evaluate and critique system of laws, customs, common business practices,cultural norms, and political cross-pressures4-68
  69. 69. 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’sarguments?• Present the issues to the other partyWhat facts support my point of view?Whom may I consult or talk with to help me elaborate or clarifythe facts?4-69
  70. 70. Information Needed to Prepare Effectively• Resources, issues, and bargaining mix• Interests and needs• Walkaway point and alternative(s),Targets and openingbids• Reputation and negotiation style• Likely strategy and tactics• Define the protocol to be followed in the negotiation4-70
  71. 71. What protocol needs to be followed in thisnegotiation?• The agenda• The location of negotiation• The time period of negotiation• Other parties who might be involved in the negotiation• What might be done if negotiation fails?• How will we keep track of what is agreed to?• How do we know whether we have a good agreement?
  72. 72. CHAPTER FIVECommunication
  73. 73. Communication in NegotiationCommunication processes, both verbal andnonverbal, are critical to achieving negotiationgoals and to resolving conflicts.• Negotiation is a process of interaction• Negotiation is a context for communicationsubtleties that influence processes andoutcomes6-73
  74. 74. Basic Models of CommunicationCommunication is an activity that occursbetween two people:a sender and a receiver• A sender has a meaning in mind andencodes this meaning into a message that istransmitted to a receiver• A receiver provides information about howthe message was received and by becominga sender and responding to, building on, orrebutting the original message (feedback)6-75
  75. 75. Distortion in Communication1. Senders and receivers (individual communicators)– The more diverse their goals, the greater the likelihoodthat distortions and errors in communication will occur2. Messages– The symbolic forms by which information iscommunicated– The more we use symbolic communication, the morelikely the symbols may not accurately communicate themeaning we intend6-76
  76. 76. Distortion in Communication3. Encoding– The process by which messages are put into symbolic form– Senders are likely to encode messages in a form whichreceivers may not prefer4. Channels and media– The conduits by which messages are carried from one party toanother– Messages are subject to distortion from channel noise orvarious forms of interference6-78
  77. 77. Distortion in Communication5. Reception– The process of comprehension by receiving messages and decodingthem into an understandable form– It might not be possible to capture fully the other’s meaning, tone orwords6. Interpretation– Process of ascertaining the meaning and significance of decodedmessages for the situation to go forward– An important way to avoid problems is by giving the other partyfeedback6-79
  78. 78. Distortion in Communication7. Feedback– The process by which the receiver reacts to thesender’s message– Can be used strategically to induceconcessions, changes in strategy, or alterassessments of process and outcomes– Absence of feedback can contribute tosignificant distortions by influencing the offersnegotiators make6-80
  79. 79. 81
  80. 80. What is Communicated during Negotiation?• Offers, counteroffers, and motives• Information about alternatives• Information about outcomes• Communication about process6-82
  81. 81. How People Communicate inNegotiation• Use of language– Logical level (proposals, offers)– Pragmatic level (semantics, syntax, style)• Use of nonverbal communication– Making eye contact– Adjusting body position– Nonverbally encouraging or discouraging what theother says6-83
  82. 82. How People Communicate inNegotiation• Selection of a communication channel– Communication is experienced differently when itoccurs through different channels– People negotiate through a variety of communicationmedia – by phone, in writing and increasinglythrough electronic channels or virtual negotiations6-84
  83. 83. Four Biases that Threaten E-mailNegotiations1. Temporal synchrony bias– Tendency for negotiators to behave as if they are in a synchronoussituation when they are not2. Burned bridge bias– Tendency to do risky things during e-mail that would not be used in aface-to-face encounter3. Squeaky wheel bias– Tendency to use a negative emotional style4. Sinister attribution bias– Overlooking the role of situational factors6-85
  84. 84. How to ImproveCommunication in Negotiation• Manageable questions• cause attention or prepare the other person’s thinking forfurther questions:– “May I ask you a question?”• getting information– “How much will this cost?”• generating thoughts– “Do you have any suggestions for improving this?”6-86
  85. 85. How to ImproveCommunication in Negotiation• Unmanageable questions• cause difficulty– “Where did you get that dumb idea?”• give information– “Didn’t you know we couldn’t afford this?”• bring the discussion to a false conclusion– “Don’t you think we have talked about thisenough?”6-87
  86. 86. How to ImproveCommunication in Negotiation• Listening: three major forms1. Passive listening: Receiving the message while providing nofeedback to the sender2. Acknowledgment: Receivers nod their heads, maintain eyecontact, or interject responses3. Active listening: Receivers restate or paraphrase the sender’smessage in their own language• Role reversal– Negotiators understand the other party’s positions by activelyarguing these positions until the other party is convinced that heor she is understood6-88
  87. 87. Perceptual Distortion• Four major perceptual errors:– Stereotyping– Halo effects– Selective perception– Projection5-90
  88. 88. Stereotyping and Halo Effects• Stereotyping:– Occurs when an individual assigns attributes toanother solely on the basis of the other’smembership in a particular social or demographiccategory• Halo effects:– Occur when an individual generalizes about a varietyof attributes based on the knowledge of one attributeof an individual5-91
  89. 89. Selective Perceptionand Projection• Selective perception:– The perceiver singles out information that supports aprior belief but filters out contrary information• Projection:– People assign to others the characteristics orfeelings that they possess themselves5-92
  90. 90. Good Will Hunting is a 1997 drama filmdirected by Gus Van Sant and starringMatt Damon, Robin Williams, Ben Affleck,Minnie Driver and Stellan Skarsgård.Written by Affleck and Damon, and withDamon in the title role, the film follows20-year-old South Boston laborer WillHunting, a genius who is forced to see atherapist (Williams) and study advancedmathematics with a renowned professor(Skarsgård) in order to avoid jail time.Through his therapy sessions, Will re-evaluates his relationships with his bestfriend (Affleck) and his girlfriend (Driver)while confronting his emotional issues andmaking decisions about his future.