Multilateral Business on negotiation course steps

1. International Business
Negotiation
Principles and Practice
Multilateral Business
Negotiation
5

2. Overview
• NEGOTIATION RESEARCH
• MANAGING COMPLEXITY
• PARTIES IN MULTILATERAL BUSINESS NEGOTIATI
ONS
• FEATURES OF MULTILATERAL BUSINESS NEGOTI
ATION
• IMPACT OF COALITIONS
• BLOCKAGES IN MULTIPARTY NEGOTIATIONS

3. • Multilateral business negotiation, which invol
ves negotiation between three or more partie
s, is a common feature of international busin
ess
• The negotiators may be firms,government,M
NEs negotiating with government agencies,tr
ade unions and professional bodies,environ
mental protection agencies,local commuiniti
es or the general public.
5.1 INTRODUCTION

4. • All multilateral negotiations are multiparty.In
multilateral BN, the most influential parties ar
e generally large and successful firms with m
uch experience of negotiation.
Even companies which do not participate in int
ernational business negotiations can be affect
ed by their decisions
example of Airbus subcontractor and supplie
rs worldwide.
5.1 INTRODUCTION

5. • In a multilateral negotiation, whole participat
es’interest have to be considered simultaneo
usly before a solution can emerge that work
for all parties.
• The complexity of multiparty business neg
otiations stems from such factors as cultu
ral differences, communication difficulties
among negotiators from diverse cultures
and legal and regulatory pluralism
5.1 INTRODUCTION

6. • The greater the number of parties partipating in
a negotiation,the greater the chance of dispute
s and blockage . So a simple structure and pro
cedures are needed as well as appropriate neg
otiating techniques.
• The techniques include:
• Tradesoff,planned and structured inform
ation exchange,clear voting rules.
• Voting method range from top-down decision
making to consensus decision making methods
at the other end of the spectrum.Majority vote
methods come somewhere in between.
5.1 INTRODUCTION

7. Influential individuals in multiparty negotiation
s tend to be extroverted personalities, persons
who share a common culture and language with
many of the other participants, and persons who
adopt a collaborative, problem-solving approach
in negotiations
These individuals make them into central positio
ns,whom may join a temporary coalition to sway
a decision on a particular issue.
5.1 INTRODUCTION

8. join a coalition enables negotiators to combine f
orces and negotiate with strong party in a collecti
ve ,organised manner.
Weak parties which join a coalition avoid destru
ctive competition with each other,and gain negoti
ating strength by pooling their resources.
Advantages of coalition for non-coalition mem
bers :they just negotiate with one party rather tha
n many,thus saving time and money.
5.1 INTRODUCTION

9. To save valuable time,a draft contract is prepare
d by one of the parties that resolve all issues.If th
e draft contract is accepted by the other parties,it
provides a framework for the negotiation.
Heated disputes sometimes disrupt multilateral
negotiations,and mediation may have to used to r
esolve the conflict.
5.1 INTRODUCTION

10. 5.2.1 Two-party emphasis
• Two-party negotiations are relatively easy to pla
n and study
• The two sides either reach an agreement or not
• E.g. concession-tradesoff-agreement
• Multiparty negotiations are much more complica
ted than two-party negotiations, and are therefo
re much more difficult to describe and analyse
• E.g.
5.2 NEGOTIATION RESEARCH

11. 5.2.1 Two-party emphasis
• E.g.cocessions offered to one party may have a
detrimental effect on the other parties,with the r
esult that concessions may not bring the negoti
ators any closer to a satisfactory agreement,that
is ,an agreement acceptable to all parties.
5.2 NEGOTIATION RESEARCH

12. • Wide range of issues and interests
• Managing multiple issues
5.3 MANAGING COMPLEXITY

13. 5.3.1 Wide range of issues and interests
• Multilateral business negotiation, a common featur
e of international business, is a highly complex pro
cess, involving many firms, covering numerous iss
ues and taking place over long periods of time
• multiparty negotiations include at least three partie
s and sometimes far more than that.
• E.g.WTO being built in 1994,each round is dominat
ed by bargain and exchanges of concession throu
gh a complex pattern of multilateral and bilateral n
egotations
5.3 MANAGING COMPLEXITY

14. 5.3.1 Wide range of issues and interests
• Negotiations involving multiple parties have to deal
with multiple interests and issues far more frequent
ly than do two-party negotiations
• In multilateral business negotiations, there is also a
greater chance of clashing cultural values and ideo
logies, and differing expectations about the outco
mes, which can slow progress towards an agreem
ent
5.3 MANAGING COMPLEXITY

15.  Simple structure and procedures
• Other aspects of multilateral business negotiation
s that slow progress towards an agreement are
– the many parties often have unequal negotia
ting power
– many complex and sometimes divisive issue
s have to be addressed
– conflict over contentious issues may erupt a
nd polarise the parties
5.3.1 Wide range of issues and interests
5.3 MANAGING COMPLEXITY

16.  sim
5.3.1 Wide range of issues and interests
5.3 MANAGING COMPLEXITY

17.  Simple structure and procedures ,such as a sch
eduled meeting with a chair and simple proc
edures to facilitate orderly discussion,clear
voting rules ,and notiating techniques like p
ackaging,tradesoff,help the negotiators kee
p moving towards a agreement.
•
5.3.1 Wide range of issues and interests
5.3 MANAGING COMPLEXITY

18. 5.3.2 Managing multiple issues
• In international business negotiations, more
parties mean more complications. The comple
xity of information processing and interpersonal
dynamics in multilateral negotiations increases e
xponentially with the number of people at the ta
ble
• Lewicki(1992) framework /detail approach to ma
naging muliple issues requires first to agree on
some broad objectives and principles_the frame
work_and only then to discuss the details.
5.3 MANAGING COMPLEXITY

19. 5.3.2 Managing multiple issues
• framework phase enables a start to be made to t
he negotiations. The detail phase permits the de
bate and packing of specific issues so that a se
ttlement acceptable to all sides can be achieved.
5.3 MANAGING COMPLEXITY

20. 5.3.2 Managing multiple issues
 1st tool:Use of subgroups
 Using approprite procedure(set upsubgroups),w
hich consisting of technical experts nominated o
r elected by the various parties.
 Each subgroup will investigate a particular issue
-or a single aspect of the issue_and consider va
rious options for dealing with it.
 In many case,the recommendation of the subgro
up are presented to a plenary session of all parti
es for their endorsement or revision.
5.3 MANAGING COMPLEXITY

21. Use of subgroups
5.3 MANAGING COMPLEXITY

22. 5.3.2 Managing multiple issues
2nd tool:Willingness to adjust
 Negotiators who are dealing with multiple issues
have to be willing to adjust their opening negotia
ting positions and align their own interests with t
hose of the other parties in order to enable over
all agreement to be reached.
 When each side proposes changes to the other
parties’ negotiating positions while simultaneous
ly making changes to its own .
5.3 MANAGING COMPLEXITY

23. 5.3.2 Managing multiple issues
2nd tool:Willingness to adjust
 This process involves give and take,flexibility an
d willingness by each party to adjustits negotiati
ng stance.
5.3 MANAGING COMPLEXITY

24. 5.3.2 Managing multiple issues
 The Third tool:Isue bundles
 Issue bundles is another way to manage multiple
issues ,as opposed to the traditional approach o
f negotiating each issue seperately.
 The advantage :saving time
 E.g. cost,delivery,after-sales service may be ne
gotiated in single bundle,but sometimes be at th
e cost of sub-optimal outcomes.
5.3 MANAGING COMPLEXITY

25. 5.3.2 Managing multiple issues
 The fourth tool:Clear voting rules
Opposed to majority vote,Agreement in inte
rnational multilateral business negotiations
frequently has to be reached by unanimous
vote or consensus.
In this context, a unanimous vote means th
at most parties are infavor,and the rest do
not oppose.Parties who don’t agree can ab
stain without blocking agreement.
5.3 MANAGING COMPLEXITY

26. • Principals and agents
• Influential parties
• Parties’ strategic orientations
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

27. 5.4.1 Principals and agents
• “Parties” in multilateral and bilateral business negoti
ations can be principals representatives, agents, advi
sers, coalitions of parties, arbitrators and mediators
• In some multilateral business negotiations the princip
al is not an individual but an organisational committe
e
• principals and agents have different motives, interest
s and standards, and sometimes they have different
goals and ethical norms
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

28. 5.4.1 Principals and agents
• E.G.:Agent or representative not acting in the best int
erests of the company is when the agent accepts a l
ow price or unfavour terms of payment in order to fin
alisenegotiations and be free to move on to another
assugnment.
• The situation is one of potential conflict because prin
cipal and agent have different interests and asymmetr
ic information
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

29. 5.4.1 Principals and agents
Principals and agents have different motives ,interests,
and different goals and ethical norms.during mulitiparty
BN,the agent’s main concern may be to accomplish a d
eal quickly for the reasons above,even a del which is n
ot in the principal’s best interests.
• Avoiding impasse by making an over-generous conc
ession,can be in the best interests of the agent(since
outside agents are uusually paid a fee for their effort
s),but not in the best intersts of the principal.
• “Agency costs “ refers to the deviation from principal’
s interest by the agent.
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

30. 5.4.1 Principals and agents
In complex multilateral negotiations,instructions from pri
ncipals may be imprecise and uncertain,making it diffic
ulty for the agent to structure the concessions and trad
esoff needed to reach agreement.
As a result,the agent is forced to rely on behavior learn
ed from previous experience.Anecdotal evidence sugge
sts that agent are less willing to yield than principals.Th
ey have a tougher outlook,and also a more distant relati
onship with the other parties.
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

31. 5.4.2 Influential parties
• The most influential individuals in multilateral n
egotiations tend to be extroverted personalities
• Persons who share a common culture and lang
uage with many of the other participants
• Persons who adopt a collaborative,problem
-solving approach in the negotiations
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

32. 5.4.3 Parties’ strategic orientations
• Negotiation researchers have long recognised
that the negotiators in two-party negotiations
have a dominant strategic orientation, usua
lly a competitive or cooperative orientation
• distributive (competitive) behaviour which pr
ecedes integrative (cooperative) behaviour i
s normative in both multiparty and two-party n
egotiations
5.4 PARTIES IN MULTILATERAL
BUSINESS NEGOTIATIONS

33. • Purposes
• Lengthy negotiations
• Choice of negotiation methods
5.5 FEATURES OF MULTILATERAL
BUSINESS NEGOTIATION

34. 5.5.1 Purposes
• Multilateral business negotiations are a common
feature of international business, and are an im
portant means of resolving conflict about busin
ess issues among companies which are based i
n different countries
• All multilateral negotiations are also multiparty n
egotiations
5.5 FEATURES OF MULTILATERAL
BUSINESS NEGOTIATION

35. 5.5.2 Lengthy negotiations
• Companies embarking on multilateral negoti
ations often underestimate the complexity an
d difficulty of reaching an agreement
• When very large groups or even entire communi
ties are involved in negotiations, public particip
ation mechanisms may need to be created to p
rovide the means for the multiple parties to mak
e their voices heard in the negotiations
5.5 FEATURES OF MULTILATERAL
BUSINESS NEGOTIATION

36. 5.5.3 Choice of negotiation methods
• Firms carry out multilateral buying/selling negoti
ations:
– Negotiate concurrently with all the parties
– Negotiate sequentially with all the parties reg
arding
 Iterative method
 Single negotiating text
 Binding agreements
5.5 FEATURES OF MULTILATERAL
BUSINESS NEGOTIATION

37. • Why coalitions?
• Benefits
• Issue-based coalitions
• How coalitions form
5.6 IMPACT OF COALITIONS

38. 5.6.1 Why coalitions?
• The most successful parties in multilateral nego
tiations are often those who align themselves wi
th other players, who form coalitions of parties
with broadly similar interests and goals
• In complex multilateral business negotiations, c
oalitions make the negotiation process more ma
nageable by reducing the number of positions a
nd interests that have to be considered and deb
ated
5.6 IMPACT OF COALITIONS

39. 5.6.2 Benefits
• Negotiators who are in coalitions have a negotia
ting advantage, since joining a coalition enable
s them to join forces with other, possibly strong
er, parties and negotiate in a collective, organis
ed manner
• Multilateral business negotiations become bilate
ral encounters or bloc-to-bloc negotiations wh
en negotiators form cross-cutting coalitions tha
t piece together agreements regarding various n
egotiating issues
5.6 IMPACT OF COALITIONS

40. 5.6.3 Issue-based coalitions
• The unstable nature of issue-focused coalition
s, pointing out that such coalitions form aroun
d a particular issue, and then disband once th
e issue is resolved
• In multilateral and multinational negotiations, t
he forming of coalitions is a key facilitating fac
tor
5.6 IMPACT OF COALITIONS

41. 5.6.4 How coalitions form
• Coalition formation begins with the parties bar
gaining over conditions of pairing, then cluster
ing, and then coalescing into a large coalition
• In international multilateral business negotiatio
ns, negotiating power can be equated with the
ability of parties to protect and advance their o
wn interests
5.6 IMPACT OF COALITIONS

42. 5.7.1 Factors causing blockages
• The factors include
– cultural differences between negotiators, i
ncluding differences in business norms
– linguistic difficulties
– ideological diversity
– legal and regulatory pluralism
– monetary factors
5.7 BLOCKAGES IN MULTIPARTY
NEGOTIATIONS

43. 5.7.1 Factors causing blockages
• Approaches used by practitioners to overcome
these problems include
– Structured information exchanges
– Tradeoffs
– Clear voting rules
5.7 BLOCKAGES IN MULTIPARTY
NEGOTIATIONS