This document discusses key concepts in negotiation including preparation, patience, persistence, perspective, BATNA, reserve price, ZOPA, anchoring, framing, and leverage. It defines negotiation as a formal discussion between parties trying to reach agreement. The document outlines two main types of negotiation: distributive and integrative. Effective negotiators understand both sides' interests, maintain an open mind, and focus on finding mutually beneficial solutions rather than arguing positions.

1. Copy Right Procurement Solutions Group 1

2. Art OF NEGOTIATION
Omar Khan
Procurement Solutions Group
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3. What is Negotiation
Formal discussion between people who are trying to reach an
agreement. (Webster Dictionary)
• A discussion between two or more people, intended to reach a
mutually beneficial outcome or resolve a conflict.
• A dialog between two parties to solve a problem, to satisfy their
interests, or close a business deal.
• It is a process by which compromise or agreement is reached while
avoiding argument and dispute.
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4. Types of Negotiation
• Distributive Negotiation*:
Also called “positional” or “zero sum” negotiation.
Parties employ various tactics and brinkmanship in
order to give up very little & gain as much as possible
before reaching a final deal.
• Integrative Negotiation*:
Also called “interest-based” or “principled” negotiation. It
aims to improve the quality and possibility of negotiated
agreement by finding mutually beneficial solution and to
reach a win-win settlement. (*Harvard University)
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5. Four Pillars of Negotiation
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6. Four Pillars of Negotiation
1. Preparation
• The most important yet often most neglected element / pillar.
• Negotiation is 80% planning & preparation and 20% negotiating.
• Set clear goals, know what you need , don’t shoot from the hip.
• Anticipate their response, their offers and your counter offers.
• Learn everything about them, their interests, fears, competition
• Price is important but there are other critical components of a deal
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7. Four Pillars of Negotiation
2. Patience
• Be patient, don’t show need, greed or desperation for a quick agreement.
• Make sure time is on your side. Don’t let deadlines dictate your decisions.
• Talk less, listen more, ask open ended questions to learn more information.
• Let them talk first and understand their view point well.
• Take notes or let a team member do that. Don’t rely on memory.
• Rephrase or repeat the important points back to them to acknowledge your
understanding.
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8. Four Pillars of Negotiation
3. Persistence
• Ask for more than you expect to get, leave room for negotiating.
• Remain steadfast, concede small chunks ,don’t split the difference .
• Never give up something without getting an equal or more in return.
• Holding out may pay off, if time is on your side. Wait till tomorrow.
• Stay composed & energetic to be persistent. Take breaks for caucus.
• Aim to win but let them win some too. You don’t have to win it all.
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9. Four Pillars of Negotiation
4. Perspective
• Find out other party’s deadlines, pressing needs and bargaining
history to gain clear perspective.
• Based on that perspective , time your negotiations carefully.
• People bend or buckle under time pressure and to meet sale goals.
• If you never ask, you may never know what else you can get.
• People often make their fastest moves and concede more in the last hours
of the negotiations. Be mindful of that trap.
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10. Anatomy of Negotiation Process
Negotiation
People
Positions
Bargaining
Closing
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11. Anatomy of Negotiation Process
Negotiation
Process
People
Positions
Bargaining
Closing
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Yours & Theirs
Interests, Fears,
Aspirations
You, Other Party, Styles
Relationships, Norms
Agreement, Deal,
Impasse,
Breakdown
Postures, Concessions,
Leverage, MBOs
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12. The Negotiation Process
4 Phases
Preparation
Exchanging
Information
Bargaining Closing
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Heart of the Negotiations
Meat & Potatoes
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13. Important Terms & Concepts in
Negotiations
BATNA:
• Best Alternative to Negotiated Agreement. Originated by Harvard
Professors Roger Fisher and William Ury.
• This is the best available option to the negotiator. Money in the back pocket
• A party should generally not accept a worse deal than its BATNA.
• Find out how other party’s BATNA compares to what they are offering.
• A strong BATNA is your leverage to negotiate a better deal.
• A strong BATNA gives you the power to reach a satisfactory contract or the
option to walk away from the deal.
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14. Important Terms & Concepts in
Negotiations
Reserve Price:
• This is the least favorable point at which any party will accept a negotiated
agreement when dealing only on price basis.
• For a seller this means the minimum amount they are willing to accept.
• For a buyer it means the maximum amount she is prepared to pay.
• It is also referred to as the ‘walk away’ point or “take it or leave it” point.
• If compelled to name your reserve price, give a range rather than absolute
number.
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15. Important Terms & Concepts in
Negotiations
ZOPA:
• The “zone of possible agreement” is the bargaining range in sales
negotiations between two parties. (Harvard PON coined the term)
• Within this zone, parties are in the ball park, with overlapping in their
reserve prices. It indicates possibility of an agreement.
• Outside of this zone, an agreement is not possible and parties need to adjust
their positions to move into ZOPA
• Both parties must explore each other’s positions on price early in the process to
determine if they are within ZOPA.
• A clear understanding of parties’ ZOPA is critical for a successful negotiation.
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16. Important Terms & Concepts in
Negotiations
Anchoring:
• This is an arbitrary price point, introduced by one party early in the
negotiation process. Example; first offer or asking price.
• People tend to fixate on the anchor and it often becomes the basis for
subsequent counter offers and demands.
• Anchoring first in price-oriented negotiations can be a good offense /
defense move. Over aggressive anchor can derail the deal.
• It’s a good feeler for the fairness of your ZOPA and also to influence the
other side’s perception of the overall ZOPA.
• Select your anchor points carefully and challenge the other party’s anchor if
it seems unrealistic or outrageous.
• Always anchor with an aggressive but flexible offer to lower the risk of
other party’s perceptions of negative ZOPA.
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17. Important Terms & Concepts in
Negotiations
Framing:
• Framing an issue in negotiations means to focusing attention on one aspect
of a deal and leaving other aspects out.
• Negotiator may elect to exclude negative aspects of an issue selectively
from his frame because they don't advance his interests.
• A customer goes to appliance store considering the purchase of a big-ticket
refrigerator but seems hesitant to pay the high price.
• The salesman points out that the appliance will save substantial energy
cost and frames the expensive purchase as economically favorable deal.
• The customer now feels that the purchase is the right thing to do for home
budget and buys the appliance due to salesman’s framing strategy.
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18. Important Terms & Concepts in
Negotiations
Leverage: Mechanical advantage gained by using a lever.
• Positional advantage to obtain a desired effect or result
• Leverage is often temporary; use it or you may lose it.
• Competition in commodity market gives leverage to the buyer not seller.
• Create the illusion of competition, if necessary, to gain leverage.
• Using leverage unfairly can backfire or ruin relationships. Be careful.
• Do use leverage to bring the supplier to their senses, but not to their knees.
• Learn to use “Silence” as leverage. It often makes people spill their beans.
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19. The Effective Negotiators
Characteristics of effective & successful negotiators.
• They see possibilities rather than problems.
• Excellent communicators and have self control.
• Keep an open mind, Empathize with other party.
• They separate personal issues from negotiating issues and
identify the interests, fears & concerns of both sides.
• They ask open ended questions, talk less and listen more.
• They are optimistic, patient, creative and strive for solutions.
• They don’t shoot from the hip nor aim to wing it.
• They plan, prepare, strategize and achieve goals.
They understand these characteristics are all learnable skills.
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20. Dealing with Emotions in Negotiations
People have emotions which can impact the negotiations
positively or negatively.
• Don’t let the emotions derail your negotiations.
• Watch for verbal & non verbal cues to detect their emotions & yours.
• Point out where you agree more than you point out differences.
• Build their self-esteem. Give them sincere praise on what they do well.
• Prepare three questions for which they will have to say “yes.”
• Make sure your words and your body language are consistent.
• Use more “I” than “you” statements. Check your ego at the door.
• People don’t care what you know until they know that you care.
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21. Dos of Conducting Effective Negotiations
• Prepare as best as you can in advance. Overcome the fear of negotiation
• Clearly understand your objectives, positions, needs and wants
• Do follow your BATNA, Reservation Point and Walk Away position.
• Get to know as much as possible about your supplier, their market position.
• Acknowledge / appreciate their authority, affiliation, status, roles.
• Try to understand opponents’ needs , wants, interests, motivations
• Maintain positive attitude towards people & the process
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22. Don’ts of Effective Negotiations
• Don’t debate, confront or fight. Create options, search for solutions.
• Don’t storm out of the negotiation, rather walk out tactfully & judiciously, if &
when you must have to walk out.
• Do not fall for “splitting the difference” tactic.
• Don’t take every deadline and “take it or leave it” seriously.
• Don’t be too eager to please nor afraid to say NO.
• Don’t assume they know your weakness. Create perception of power.
• Don’t bluff, cheat or lie. It will catch up with you to hurt your credibility
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23. Final Thoughts
• Negotiating is a learnable skill that requires knowledge and practice.
• Try to benefit from books, articles, videos, seminars & workshops on the
subject of negotiation but most of all practice it.
• Purchasing professionals with good negotiation skills find many
opportunities of upward mobility in their field.
• Be always honest, fair and ethical in your negotiations.
• We offer interactive negotiation workshops for buyers and procurement
professionals. Contact us at: http://www.procurementsolutionsgroup.com
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24. Wait, but there is more…
You can get a copy of this presentation with more details, prepared especially
for Buyers and Procurement Professionals. Go to our website and check the
Resources tab.
http://www.procurementsolutionsgroup.com/#!resources/c1bjc
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25. Thank You !
http://www.procurementsolutionsgroup.com/#!resources/c1bjc
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