Strategic Negotiations


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Negotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy various interests of two people/parties involved in negotiation process. Negotiation is a process where each party involved in negotiating tries to gain an advantage for themselves by the end of the process. Negotiation is intended to aim at compromise.
Negotiation occurs in business, non-profit organizations, government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life. The study of the subject is called negotiation theory. Professional negotiators are often specialized, such as union negotiators, leverage buyout negotiators, peace negotiators, hostage negotiators, or may work under other titles, such as diplomats, legislators or brokers.
Negotiation can take a wide variety of forms, from a trained negotiator acting on behalf of a particular organization or position in a formal setting, to an informal negotiation between friends. Negotiation can be contrasted with mediation, where a neutral third party listens to each side's arguments and attempts to help craft an agreement between the parties. It also is compared with arbitration, which resembles a legal proceeding. In arbitration, both sides make an argument as to the merits of their case and the arbitrator decides the outcome.
Negotiation theorists generally distinguish between two types of negotiation. Different theorists use different labels for the two general types and distinguish them in different ways.
Distributive negotiation is also sometimes called positional or hard-bargaining negotiation. It tends to approach negotiation on the model of haggling in a market. In a distributive negotiation, each side often adopts an extreme position, knowing that it will not be accepted, and then employs a combination of guile, bluffing, and brinksmanship in order to cede as little as possible before reaching a deal. Distributive bargainers conceive of negotiation as a process of distributing a fixed amount of value.
The term distributive implies that there is a finite amount of the thing being distributed or divided among the people involved. Sometimes this type of negotiation is referred to as the distribution of a “fixed pie.” There is only so much to go around, but the proportion to be distributed is variable. Distributive negotiation is also sometimes called win-lose because of the assumption that one person's gain results in another person's loss. A distributive negotiation often does not involve people who have never had a previous interactive relationship, nor are they likely to do so again in the near future. Simple everyday examples would be buying a car or a house.

Integrative negotiation is also sometimes c

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Strategic Negotiations

  1. 1. StrategicNegotiations Wali Memon Wali Memon 1
  3. 3. NEGOTIATION STRATEGIES Strategy is the overall approach for conducting the negotiation. Tactics are particular actions used to implement a strategy.3 Wali Memon
  4. 4. 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.4 Wali Memon
  5. 5. NEGOTIATION GOALSNegotiation goals encompass a wide range of both tangible and intangibledesires.Categories of goals which in turn affect the negotiator’s choice of strategy andtactics. Wali Memon 5
  6. 6. Categories of Negotiation Goals Aggressive goals Competitive goals Cooperative goals Self-centered goals Defensive goals Combinations of goals6 Wali Memon
  7. 7. 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.7 Wali Memon
  8. 8. AGGRESSIVE GOALS Aggressive goals seek to damage an opponent.8 Wali Memon
  9. 9. 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. Wali Memon 9
  10. 10. COMPETITIVE GOALS A competitive goal means getting more than the other party.10 Wali Memon
  11. 11. 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.11 Wali Memon
  12. 12. COOPERATIVE GOALS With cooperative goals, agreement leads to mutual gain.12 Wali Memon
  13. 13. 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.13 Wali Memon
  14. 14. SELF-CENTERED GOALS Self-centered goals seek a particular result regardless of what the other side receives.14 Wali Memon
  15. 15. 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. Wali Memon 15
  16. 16. DEFENSIVE GOALS Defensive goals seek to avoid a particular result.16 Wali Memon
  17. 17. 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 the17 latter. Wali Memon
  18. 18. 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. Wali Memon 18
  19. 19. 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 to19one negotiation or some where in between? Wali Memon
  20. 20. 20 Wali Memon
  22. 22. 22 Wali Memon
  23. 23. 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)23 Wali Memon
  24. 24. Wali Memon 24
  25. 25. 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.25 Wali Memon
  26. 26. Avoidance Strategy3. 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 out4. Avoidance may be appropriate when the negotiator is responsible for developing others into becoming better negotiators. 26 Wali Memon
  27. 27. Active-Engagement Strategies Competition Collaboration Accommodation Wali Memon 27
  28. 28. 2. COMPETITIVE STRATEGYDistributive BargainingWin-Lose Bargaining (I win, you lose)Zero-sum game: whatever extent one partywins something, the other party losses Wali Memon 28
  29. 29. 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 interests29 Wali Memon
  30. 30. Distributive Bargaining The essence of Distributive Bargaining is who gets what share of fixed pie. Wali Memon 30
  31. 31. Examples ofDistributive Bargaining A wage negotiation A price negotiation A boundary or territorial negotiation Wali Memon 31
  32. 32. 32 Wali Memon
  33. 33. Staking Out the Bargaining Zone33 Wali Memon
  34. 34. 3. COLLABORATIVE STRATEGY Integrative Bargaining Win-Win Bargaining (I win, you win)Positive-sum situations are those whereeach party gains without a corresponding lossfor the other party. Wali Memon 34
  35. 35. Integrative BargainingThe law of win/win says “Let’s not do it your wayor 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.35 Wali Memon
  36. 36. Concepts for Integrative BargainingSeparate people from the problemFocus on interests, not positionsInvent options for mutual gainsInsist on using objective criteria Wali Memon 36
  37. 37. Distributive versus Integrative Bargaining37 Wali Memon
  38. 38. 4. ACCOMMODATIVE STRATEGYWin-lose strategy (I lose, you win)The negotiator wants to let the other win, keep the other happy, or not toendanger the relationship by pushing hard toachieve some goal on thesubstantive issues Wali Memon 38
  39. 39. 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.39 Wali Memon
  40. 40. “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,40 Wali Memon Northeastern University
  41. 41. NEGOTIATION STRATEGIES1. No-Concessions2. No Further Concessions3. Making Only Deadlock-Breaking Concessions4. High Realistic Expectations With Systematic Concessions5. Concede First6. Problem Solving7. Goals Other Than To Reach Agreement8. Moving For Closure9. Combining Strategies Wali Memon 41
  43. 43. 1. NO-CONCESSIONSA No-Concessions Strategy is tough anddangerous, since concessions usually areexpected.With a no-concessions strategy, the negotiationbecomes a unilateral process. Wali Memon 43
  44. 44. NO-CONCESSIONS A no-concessions strategy is suitable for aggressive, competitive and self-centered goals. A no-concessions strategy is not suitable for cooperative and defensive goals.44 Wali Memon
  45. 45. WHEN TO USE NO-CONCESSIONS When the balance of power is strongly in your favor. When you are in a disproportionately weak position. When the dollar amount is too low or time is too short. 1) Cost Efficiency 2) Available Time45 Wali Memon
  46. 46. WHEN TO USE NO-CONCESSIONS When the same terms must be available to everyone. When bids or written proposals are sought When another party is waiting in the wings. 46 Wali Memon
  47. 47. DRAWBACKS OF THENO-CONCESSIONS STRATEGY Might preclude an agreement the terms of which, although less favorable, are still acceptable. A strategy shift away from no concessions might be read as a failed attempt at bluffing, a position to be avoided. Wali Memon 47
  48. 48. DRAWBACKS OF THE NO-CONCESSIONS STRATEGY Avoid inadvertent bluffs by rashly miscalculating the use of this strategy. It may also be helpful to accompany the demand with reasons why your side is not in a position to offer anything else, and to explain how the demand is fair.48 Wali Memon
  49. 49. COUNTERING TIPS FOR THENO-CONCESSIONS STRATEGY1. Appeal to a higher level of authority in an attempt to change the party’s position.2. Ignore it and proceed as if concessions are possible.3. Present cost saving or win-win measures that justfy a concession.4. As a seller, offer less (such as fewer services), thereby effectively increasing the price.5. As a buyer, demand more, thereby, in effect, reducing the price.6. Terminate the negotiating session. Wali Memon 49
  50. 50. 2. NO FURTHER CONCESSIONS A No-Further-Concessions Strategy is possible when the other party can be forced to make the final concession, or when the situation has changed.50 Wali Memon
  51. 51. NO FURTHER CONCESSIONS The no-further-concessions strategy is implemented after some concessions have been made. The countermeasures to this strategy are the same as those for its parent, the no-concessions strategy.51 Wali Memon
  52. 52. 3. MAKING ONLY DEADLOCK- BREAKING CONCESSIONS A strategy of Making Only Deadlock-Breaking Concessions is okay when the risk of no agreement is acceptable. A deadlock is an impasse or standstill, a state of inaction resulting from the opposition of equally powerful uncompromising parties. Wali Memon 52
  53. 53. MAKING ONLY DEADLOCK- BREAKING CONCESSIONS The strategy of making a concession only to break deadlock is the next toughest strategy after the no-concession strategy. This strategy generates an atmosphere of tension and difficulty. Because of this one should be very careful to use this strategy.53 Wali Memon
  54. 54. MAKING ONLY DEADLOCK- BREAKING CONCESSIONS A making only deadlock-breaking concessions strategy is viable for aggressive, competitive and self-centered goals. A making only deadlock-breaking concessions strategy is inappropriate for cooperative and defensive goals.54 Wali Memon
  56. 56. 4. HIGH REALISTIC EXPECTATIONS WITH SMALL SYSTEMATIC CONCESSIONS (HRESSC) It is the strategy of combining high, realistic expectations with small, systematic concessions It entails a planned approach both to the objectives of the negotiation and to the compromises that may be employed to reach those objectives “Strategy which achieves the best results”56 Wali Memon
  57. 57. HRESSC (cont.) It has three components: The size of the concessions The use of apparent concessions which actually involve no cost to the negotiator’s side The advance planning of concessions Wali Memon 57
  58. 58. Small concessions depends on: - the value of that which is being negotiated while the negotiation begins - the value which is put during the negotiation Small concessions after big concessions Advance planning helps to maximize one’s results and minimize the pressure to merely respond to the other negotiator’s actions58 Wali Memon
  59. 59. 5. CONCEDE FIRST It is used to reduce tension, create an atmosphere conducive to reaching an agreement and allow one to demand a reciprocal concession “We made an important concession at the outset of this meeting and you still have not given us anything significant in return” Difficult and sometimes impossible to withdraw a concession59 Wali Memon
  60. 60. CONCEDE FIRST (CONT.) It is suitable to apply this strategy when the position of negotiator is too weak It can be used in rare circumstances when any real negotiation may lead the other party to discover information that will harm the negotiator’s client It is used to achieve competitive, self-centered, or defensive goals, depending on the specific context of negotiation Wali Memon 60
  61. 61. 6. PROBLEM SOLVING It is a strategy for creating a procedural agreement to solve a common problem that has been identified It is the most useful strategy after HRESSC It is different from other concession-based strategies which center on giving up or refusing something of value61 Wali Memon
  62. 62. PROBLEM SOLVING (CONT.) It focuses on creating a procedural agreement that the negotiators will work together to discover and identify problems that are preventing agreement and to determine whether any common interests can be used to resolve those problems It is described in game theory as a “win-win” strategy Wali Memon 62
  63. 63. The Four-StepProblem-Solving Process1) A procedural agreement to use problem solving2) Identification of the problem preventing agreement3) Determination of any common interests and limiting seperate needs4) Discussion to discover fair, mutually beneficial solutions Wali Memon 63
  64. 64. Laying the Essential Foundationsfor the Problem- Solving Strategy There must be an agreement by the parties and negotiators to work together to identify the problems preventing agreement, and to formulate a mutually advantageous solution To ensure good faith, the parties must have a mutual interest in solving the particular problems in the same way The negotiators must identify the same problems and agree on how to define them Parties and negotiators must realize that a win-win solution is possible and that problems will not be solved by one side yielding to other. Instead the participants will strive to create a previously unconsidered, mutually beneficial solution64 Wali Memon
  65. 65. Important Points in Problem-Solving Strategy Achieving a clear distinction between objectives and needs Maintaining attitudes of empathy and cooperativeness The related roles of creativity and patience in problem solving65 Wali Memon
  66. 66. Keeping the focus on mutual interestsOutside forces to avoid: o Government action o A jury or a judge deciding the facts at trial so that one side wins totally while the other side loses totally o A competitor gaining an advantage o The expiration of a financing commitment66 Wali Memon
  67. 67. Broadening the pie and trading concessions across issuesIt may be useful to consider the distribution ofresources in terms of: What will be distributed When it will be distributed By whom it will be distributed How it will be distributed How much will be distributed Wali Memon 67
  68. 68. BrainstormingBrainstorming for problem solving is a process which requires that the participants: Speak spontaneously or think out loud (as long it is relevant and constructive) Retrain from evaluating or criticizing the statements of others until after all initial ideas are elicited Be willing to repeat one’s ideas if others want to hear them again Persist in the effort even if there is a prolonged silence68 Wali Memon
  70. 70. 7. GOALS OTHER THAN TO REACH AGREEMENT Real purpose of a negotiation is to reach an agreement But in this strategy it is NOT Be careful-An exercise in gamesmanship With cooperative goals70 Wali Memon
  71. 71. USAGE OF “GOALS OTHER THAN TO REACH AGREEMENT” STRATEGY1. A strategy to delay For eg: a negotiation team is sure that union’ll strike in all conditions. But the team believe that they’ll soften and a delay will harm seasonal tasks. Wali Memon 71
  72. 72. Usage of “Goals Other Than to ReachAgreement” Strategy2. To gather information3. Negotiating as a forum for expressing views Wali Memon 72
  73. 73. Usage of “Goals Other Than to Reach Agreement” Strategy4 . Negotiating to influence a third party Public Management of the entity ! Influence of 3rd parties on negotiation is very important Powerful people or groups, family members, etc73 Wali Memon
  74. 74. 8. MOVING FOR CLOSURE To finalize a particular issue or the overall negotiation rather than risk losing the available terms.74 Wali Memon
  75. 75. MOVING FOR CLOSURE A difficult dilemma between Risk of losing an agreement The opportunity of doing better and balancing by evaluating those: * Value * Potential * Risk * Odds75 Wali Memon
  76. 76. MOVING FOR CLOSURE! In negotiations the most important risk is losing an available deal that your clients may accept! To avoid this, the ultimate decision should be made by decision maker76 Wali Memon
  77. 77. TECHNIQUES FOR MOVING THE OTHER SIDE TOWARD CLOSURE A proposal should be close to other party’s bottom-line Other party should believe No further concession is possible Failing to accept may result in no agreement Closure is more advantageous77 Wali Memon
  78. 78. TIPS FOR “MOVING FOR CLOSURE” STRATEGY Expressing understanding that agreement exists Concession-based inducement to close Minimizing the danger of cancellation between closure and execution Closing issues within a larger negotiation78 Wali Memon
  79. 79. 9. COMBINING STRATEGIES Generally usage of a single strategy isn’t efficientFor e.g.: first concession and moving for closure are efficient in specific parts of the negotiation Wali Memon 79
  80. 80. WHY CHANGE STRATEGIES? Tried and failed strategies may be changed Changing strategies may be the main strategy80 Wali Memon
  81. 81. CATEGORIES OF STRATEGY CHANGES Sequential changes Issue-oriented changes81 Wali Memon
  82. 82. E.G. FOR ISSUE-ORIENTED CHANGES A purchaser has a competitive goal of getting lowest price for machinery,and a self-centered goal of good service production For 1st one, HRESSC and for 2nd one problem solving strategies are chosen.82 Wali Memon
  83. 83. A TIP FOR STRATEGY CHANGES What is important is: If the negotiator doesn’t do the change secretly, this change should be clearly defined not to harm trustworthiness.83 Wali Memon
  84. 84. You cannot shake hands with a clenched fist. Indira Gandhi[ Clenched Fist - Woodblock by Frank Cieciorka, 1965 ] Wali Memon 84
  85. 85. Questions Wali Memon 85