Negotiation sessions final


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Negotiation strategies.

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Negotiation sessions final

  2. 2. AIBS INTRODUCTION Negotiation is the process of bargaining, Where two parties ,trying to reach an agreement on mutually accepted terms to acquire each others wants. Example: - Buyer trying to negotiate with supplier over a price of a product. - Negotiation for salary between employee & employer.
  3. 3. AIBS DEFINITIONS OF NEGOTIATION  In the words of Bill Scott ,” a negotiation is a form of meeting between two parties: OUR PARTIES & OTHER PARTIES”.  According to J.A. Wall, ”negotiation is a process in which two or more parties exchange goods or services and attempt to agree on the exchange rate for them.”  Winston’s Advanced Dictionary,” the discussions & bargaining that goes on between parties before a contract is settled or deal is agreed upon”.
  4. 4. AIBS NATURE OF NEGOTIATION  It requires involvement of two parties.  Requires flexibility.  A process not an event.  Needs effective communication.  Continuous process( i.e. between buyer & seller, employer & employee for wages, working hours etc)  Win- win situation for parties involved.
  5. 5. AIBS P’s OF NEGOTIATION Personalities : negotiator initiating negotiation must have convincing power, effective communication skills, can influence people & process of negotiation. Pace : main points should be covered in discussions, also proper breaks must be introduced to maintain interest of peoples involved. Plan : main agenda on which negotiation is to be carried on. Purpose : aim is required otherwise it will result in wastage of money, manpower & time. Like P’s of Marketing, essentials of negotiation are called as P’s of negotiation. They are as follows:
  6. 6. AIBS FACTORS AFFECTING NEGOTIATION • PLACE: Familiarity with surrounding helps in boosting confidence. • TIME: Time should be adequate for smooth exchange of ideas & securing agreement before it is to late . • ATTITUDE: Attitude of both parties should be positive, i . e, willingness to make an agreement or deal.  SUBJECTIVE FACTORS: Like relation of two parties involved, status difference, information & expertise.
  9. 9. AIBS  OFFER: First proposal made by one party to another in the negotiation stage.  COUNTER OFFER: Offer made by second party to first party, or proposing their offer against first party offer.  CONCESSION: Increase or decrease made in the offer or change in the idea.  COMPROMISE: Sacrifice made by both or one party.  AGREEMENT: Point where both parties agrees, which is beneficial to both.
  10. 10. AIBS • Loss/Loss : Take the cake away so that neither party gets it. • Win/Lose : Give it to one party or cut it unevenly. • Draw : Cut the cake down the middle. • Win/Win : Make two cakes which are of a much larger size than the present size.
  11. 11. AIBS Positive Attitudes Narrow down to few points of dispute /conflict controversy Step By step approach Find out the other parties state of mind culture background's Likes & dislikes Hide your prove desire Don’t disclose your deadlines Think before you speak Know your market information Bring your own expert
  14. 14. AIBS 14 NEGOTIATION STRATEGIES Strategy is the overall approach for conducting the negotiation. Tactics are particular actions used to implement a strategy.
  15. 15. AIBS 15 NEGOTIATION STRATEGIES Whereas a strategy provides the overall approach used throughout the negotiation, a tactic is particular action used at a specific time during the negotiation to serve a more limited role or purpose.
  16. 16. AIBS 16 NEGOTIATION GOALS Categories of goals which in turn affect the negotiator’s choice of strategy and tactics.
  17. 17. AIBS 17 Categories of Negotiation Goals Aggressive goals Competitive goals Cooperative goals Self-centered goals Defensive goals Combinations of goals
  18. 18. AIBS 18 AGGRESSIVE GOALS Seeks to undermine, deprive, damage or otherwise injure a rival or opponent. Example: Taking a customer or supplier away from a competitor in order to hurt the competitor.
  19. 19. AIBS 19 AGGRESSIVE GOALS Aggressive goals seek to damage an opponent.
  20. 20. AIBS 20 COMPETITIVE GOALS  One side seeks to gain more from the negotiation than the other side.  In fact the negotiator hopes to obtain as large a comparative advantage as possible. Example:  Receiving the highest possible price.  Paying the lowest possible price.
  21. 21. AIBS 21 COMPETITIVE GOALS A competitive goal means getting more than the other party.
  22. 22. AIBS 22 COOPERATIVE GOALS  Cooperative goals are achieved through an agreement that leads to mutual gain for all negotiators and their respective sides.  This achievement is also referred to as win-win negotiating. Example: Forming a joint venture, partnership, or corporation to engage in business opportunities to achieve a mutual profit.
  23. 23. AIBS 23 COOPERATIVE GOALS With cooperative goals, agreement leads to mutual gain.
  24. 24. AIBS 24 SELF-CENTERED GOALS Self-centered goals are those that depend solely on what one’s own side achieves. • Scenario: two large accounting firms merge. The tremendous size of the new firm raises a self centered goal to find sufficient prestigious space in a single location. The goal is reached when the new firm negotiates a lease for 15 floors in a major midtown New York office building.
  25. 25. AIBS 25 SELF-CENTERED GOALS Self-centered goals seek a particular result regardless of what the other side receives.
  26. 26. AIBS 26 DEFENSIVE GOALS  One seeks to avoid a particular outcome.  Examples: • Avoiding a loss of respect. • Preventing a strike. • Avoiding the loss of a customer or supplier.
  27. 27. AIBS 27 DEFENSIVE GOALS Defensive goals seek to avoid a particular result.
  28. 28. AIBS 28 COMBINATION OF NEGOTIATION GOALS  Each negotiation usually has multiple goals. – Case: In a collective bargaining negotiation, a transportation firm seeks to have its employees make prompt deliveries in order to maintain its business volume. This is a self-centered goal. A defensive goal is suggested if the maintenance of volume is intended to avoid a loss of customers. The goal is also aggressive to the extent that the same activity lures new customers away from competitors, a result which is likely to weaken the latter.
  29. 29. AIBS 29 PROCESS OF STRATEGY DETERMINATION  Strategies are chosen for use in a particular negotiation in order to achieve your side’s goals. The nature of those goals will affect the choice of strategy or strategies.  A variety of factors determine the best strategy for a negotiating situation.
  30. 30. AIBS 30 PROCESS OF STRATEGY DETERMINATION The choice of strategy also may be affected by the answers to a number of questions, such as: • Does the negotiation involve a transaction or a dispute? • Is there more than one issue involved? • Can new issues be introduced into the negotiation? • Are the parties’ interests short-term or long-term? • Are the parties’ relationships long-term, limited to one negotiation or some where in between?
  31. 31. AIBS Negotiation Strategy: Determination Process 31
  33. 33. AIBS 33
  34. 34. AIBS 34 MAIN NEGOTIATION STRATEGIES THE DUAL CONCERNS MODEL  How much concern does the actor have for achieving the substantive outcomes at stake in this negotiation? (substantive goals)  How much concern does the negotiator have for the current and future quality of the relationship with the other party? (relationship goals)
  35. 35. AIBS 35
  36. 36. AIBS 36 1. AVOIDANCE STRATEGY (The Nonengagement Strategy) Reasons of why negotiators might choose not to negotiate: 1. If one is able to meet one’s needs without negotiating at all, it may make sense to use an avoidance strategy. 2. It simply may not be worth the time and effort to negotiate.
  37. 37. AIBS 37 Avoidance Strategy 3. The decision to negotiate is closely related to the desirability of available alternatives. Alternatives are the outcomes that can be achieved if negotiations don’t work out 4. Avoidance may be appropriate when the negotiator is responsible for developing others into becoming better negotiators.
  38. 38. AIBS 38 Active-Engagement Strategies • Competition • Collaboration • Accommodation
  39. 39. AIBS 39 2.COMPETITIVE STRATEGY  Distributive Bargaining  Win-Lose Bargaining (I win, you lose) Zero-sum game: whatever extent one party wins something, the other party losses
  40. 40. AIBS 40 Competitive Strategy Distributive Bargaining refers to the process of dividing or distributing scarce resources Two parties have different but interdependent goals There is a clear conflict of interests
  41. 41. AIBS 41 Distributive Bargaining The essence of Distributive Bargaining is who gets what share of fixed pie.
  42. 42. AIBS 42 Examples of Distributive Bargaining • A wage negotiation • A price negotiation • A boundary or territorial negotiation
  43. 43. AIBS 43 Staking Out the Bargaining Zone
  44. 44. AIBS 44 3.COLLABORATIVE STRATEGY  Integrative Bargaining  Win-Win Bargaining (I win, you win) Positive-sum situations are those where each party gains without a corresponding loss for the other party.
  45. 45. AIBS 45 Integrative Bargaining The law of win/win says “Let’s not do it your way or my way; let’s do it the best way” Greg Anderson The 22 Non-negotiable Ways of Wellness Integrative Bargaining is about searching for common solutions to problems that are not exclusively of interest to only one of the negotiators.
  46. 46. AIBS 46 Concepts for Integrative Bargaining • Separate people from the problem • Focus on interests, not positions • Invent options for mutual gains • Insist on using objective criteria
  47. 47. AIBS 47 Distributive versus Integrative Bargaining
  48. 48. AIBS 48 4. ACCOMMODATIVE STRATEGY Win-lose strategy (I lose, you win) The negotiator wants to let the other win, keep the other happy, or not to endanger the relationship by pushing hard to achieve some goal on the substantive issues
  49. 49. AIBS 49 Accommodative Strategy Accommodative Strategy is often used; When the primary goal of the exchange is to build or strengthen the relationship and the negotiator is willing to sacrifice the outcome. If the negotiator expects the relationship to extend past a single negotiation episode.
  50. 50. AIBS 50 • “In a successful negotiation, everyone wins. The objective should be agreement, not victory." • “The key to successful negotiation is to shift the situation to a "win-win" even if it looks like a "win- lose" situation. Almost all negotiations have at least some elements of win-win. Successful negotiations often depend on finding the win-win aspects in any situation. Only shift to a win-lose mode if all else fails.” Professor E. Wertheim, College of Business Administration, Northeastern University
  51. 51. AIBS 51 NEGOTIATION STRATEGIES 1. No-Concessions 2. No Further Concessions 3. Making Only Deadlock-Breaking Concessions 4. High Realistic Expectations With Systematic Concessions 5. Concede First 6. Problem Solving 7. Goals Other Than To Reach Agreement 8. Moving For Closure 9. Combining Strategies
  52. 52. AIBS Perception, Cognition, and Emotion
  53. 53. AIBS Perception, Cognition, and Emotion in Negotiation The basic building blocks of all social encounters are: • Perception • Cognition – Framing – Cognitive biases • Emotion
  54. 54. AIBS Perception Perception is: • The process by which individuals connect to their environment. A “sense-making” process
  55. 55. AIBS The Role of Perception The process of ascribing meaning to messages and events is strongly influenced by the perceiver’s current state of mind, role, and comprehension of earlier communications People interpret their environment in order to respond appropriately The complexity of environments makes it impossible to process all of the information People develop shortcuts to process information and these shortcuts create perceptual errors
  56. 56. AIBS Perceptual Distortion • Four major perceptual errors: –Stereotyping –Halo effects –Selective perception –Projection
  57. 57. AIBS Stereotyping and Halo Effects • Stereotyping: – Is a very common distortion – Occurs when an individual assigns attributes to another solely on the basis of the other’s membership in a particular social or demographic category • Halo effects: – Are similar to stereotypes – Occur when an individual generalizes about a variety of attributes based on the knowledge of one attribute of an individual
  58. 58. AIBS Selective Perception and Projection • Selective perception: – Perpetuates stereotypes or halo effects – The perceiver singles out information that supports a prior belief but filters out contrary information • Projection: – Arises out of a need to protect one’s own self-concept – People assign to others the characteristics or feelings that they possess themselves
  59. 59. AIBS Framing • Frames: – Represent the subjective mechanism through which people evaluate and make sense out of situations – Lead people to pursue or avoid subsequent actions – Focus, shape and organize the world around us – Make sense of complex realities – Define a person, event or process – Impart meaning and significance
  60. 60. AIBS Types of Frames • Substantive • Outcome • Aspiration • Process • Identity • Characterization • Loss-Gain
  61. 61. AIBS How Frames Work in Negotiation • Negotiators can use more than one frame • Mismatches in frames between parties are sources of conflict • Particular types of frames may lead to particular types of arguments • Specific frames may be likely to be used with certain types of issues • Parties are likely to assume a particular frame because of various factors
  62. 62. AIBS Interests, Rights, and Power Parties in conflict use one of three frames: • Interests: people talk about their “positions” but often what is at stake is their underlying interests • Rights: people may be concerned about who is “right” – that is, who has legitimacy, who is correct, and what is fair • Power: people may wish to resolve a conflict on the basis of who is stronger
  63. 63. AIBS Approaches to Negotiation Goal Interests Rights Power Approach • Self-interest • Dispute resolution • Understanding others’ concerns • Fairness • Justice • Winning • Respect Temporal focus Distributive strategies (pie slicing) Integrative strategies (pie expansion) Implications for future negotiations and relationship • Present (what needs and interests do we have right now?) • Past (what has been dictated by the past?) • Future (what steps can I take in the future to overpower others?) • Compromise • Often produces a “winner” and a “loser”; thus, unequal distribution • Often produces a “winner” and a “loser”; thus, unequal distribution • Most likely to expand the pie via addressing parties’ underlying needs • Difficult to expand the pie unless focus is on interests • Difficult to expand the pie unless focus is on interests • Resentment • Possible retaliation • Revenge • Possible court action• Greater understanding • Satisfaction • Stability of agreement
  64. 64. AIBS The Frame of an Issue Changes as the Negotiation Evolves • Negotiators tend to argue for stock issues or concerns that are raised every time the parties negotiate • Each party attempts to make the best possible case for his or her preferred position or perspective • Frames may define major shifts and transitions in a complex overall negotiation • Multiple agenda items operate to shape issue development
  65. 65. AIBS Some Advice about Problem Framing for Negotiators • Frames shape what the parties define as the key issues and how they talk about them • Both parties have frames • Frames are controllable, at least to some degree • Conversations change and transform frames in ways negotiators may not be able to predict but may be able to control • Certain frames are more likely than others to lead to certain types of processes and outcomes
  66. 66. AIBS Cognitive Biases in Negotiation • Negotiators have a tendency to make systematic errors when they process information. These errors, collectively labeled cognitive biases, tend to impede negotiator performance.
  67. 67. AIBS Cognitive Biases • Irrational escalation of commitment • Mythical fixed-pie beliefs • Anchoring and adjustment • Issue framing and risk • Availability of information • The winner’s curse • Overconfidence • The law of small numbers • Self-serving biases • Endowment effect • Ignoring others’ cognitions • Reactive devaluation
  68. 68. AIBS Irrational Escalation of Commitment and Mythical Fixed-Pie Beliefs • Irrational escalation of commitment – Negotiators maintain commitment to a course of action even when that commitment constitutes irrational behavior • Mythical fixed-pie beliefs – Negotiators assume that all negotiations (not just some) involve a fixed pie
  69. 69. AIBS Anchoring and Adjustment and Issue Framing and Risk • Anchoring and adjustment – The effect of the standard (anchor) against which subsequent adjustments (gains or losses) are measured – The anchor might be based on faulty or incomplete information, thus be misleading • Issue framing and risk – Frames can lead people to seek, avoid, or be neutral about risk in decision making and negotiation
  70. 70. AIBS Availability of Information and the Winner’s Curse • Availability of information – Operates when information that is presented in vivid or attention-getting ways becomes easy to recall. – Becomes central and critical in evaluating events and options • The winner’s curse – The tendency to settle quickly on an item and then subsequently feel discomfort about a win that comes too easily
  71. 71. AIBS Overconfidence and The Law of Small Numbers • Overconfidence – The tendency of negotiators to believe that their ability to be correct or accurate is greater than is actually true • The law of small numbers – The tendency of people to draw conclusions from small sample sizes – The smaller sample, the greater the possibility that past lessons will be erroneously used to infer what will happen in the future
  72. 72. AIBS Confidence or Overconfidence? We came to Iceland to advance the cause of peace. . .and though we put on the table the most far- reaching arms control proposal in history, the General Secretary rejected it. President Ronald Reagan to reporters, following completion of presummit arms control discussions in Reykjavik, Iceland, on October 12, 1986. I proposed an urgent meeting here because we had something to propose. . .The Americans came to this meeting empty handed. Secretary General Mikhail Gorbachev, Describing the same meeting to reporters.
  73. 73. AIBS Self-Serving Biases and Endowment Effect • Self-serving biases – People often explain another person’s behavior by making attributions, either to the person or to the situation • Endowment effect – The tendency to overvalue something you own or believe you possess
  74. 74. AIBS Ignoring Others’ Cognitions and Reactive Devaluation • Ignoring others’ cognitions – Negotiators don’t bother to ask about the other party’s perceptions and thoughts – This leaves them to work with incomplete information, and thus produces faulty results • Reactive devaluation – The process of devaluing the other party’s concessions simply because the other party made them
  75. 75. AIBS Managing Misperceptions and Cognitive Biases in Negotiation The best advice that negotiators can follow is: • Be aware of the negative aspects of these biases • Discuss them in a structured manner within the team and with counterparts
  76. 76. AIBS Mood, Emotion, and Negotiation • The distinction between mood and emotion is based on three characteristics: – Specificity – Intensity – Duration
  77. 77. AIBS Mood, Emotion, and Negotiation • Negotiations create both positive and negative emotions • Positive emotions generally have positive consequences for negotiations – They are more likely to lead the parties toward more integrative processes – They also create a positive attitude toward the other side – They promote persistence
  78. 78. AIBS Mood, Emotion, and Negotiation • Aspects of the negotiation process can lead to positive emotions – Positive feelings result from fair procedures during negotiation – Positive feelings result from favorable social comparison
  79. 79. AIBS Mood, Emotion, and Negotiation • Negative emotions generally have negative consequences for negotiations – They may lead parties to define the situation as competitive or distributive – They may undermine a negotiator’s ability to analyze the situation accurately, which adversely affects individual outcomes – They may lead parties to escalate the conflict – They may lead parties to retaliate and may thwart integrative outcomes
  80. 80. AIBS Mood, Emotion, and Negotiation • Aspects of the negotiation process can lead to negative emotions – Negative emotions may result from a competitive mindset – Negative emotions may result from an impasse • Effects of positive and negative emotion – Positive emotions may generate negative outcomes – Negative feelings may elicit beneficial outcomes • Emotions can be used strategically as negotiation gambits