Introduction to International Negotiations Verner Worm, Ph.D. Professor of Chinese Business and Development Asia Research Centre Copenhagen Business School.

Introduction to International Negotiations

Verner Worm, Ph.D.Professor of Chinese Business and Development

Asia Research CentreCopenhagen Business School

[email protected]

Negotiation is one of the most important global business skills

What is negotiations?

Two or more parties combining their conflicting points of view into a single decision of mutual interest.

Negotiation is about value claiming, value creation and trust building

Learning Objectives

• Improved ability to negotiate• General strategy (mental model)

for successful negotiation• Enlightened model of

negotiation (fraternal twin)

Negotiation Skills as Core Leadership Competency

• Key communication & influence tool for interdependent relationships (in & outside the company)

• Most people are not very good at negotiation (e.g., over 80% of corporate executives and CEOs leave money on the table)

• People don’t realize this

Conditions of negotiations• Perception of conflict

• People hold different perceptions. Objective conflicts or perception of conflict

• Communication opportunities• If people cannot communicate, they cannot negotiate.

In explicit bargaining people communicate with one another. In tacit bargaining they coordinate through their actions.

• Interdependence• People are interdependent if their actions affect

others’ outcome. In the dyadic case parties must agree to the outcome to occur. Veto power to walk away.

The role of conflict• Predominantly negative– Competitive processes– Misperception and bias– Emotionality– Decreased communication

• Positive aspects of conflicts– Discussing conflicts make people aware and able to

cope with problems.– Create organizational changes– Promote awareness of self and other

InterdependenceIn negotiation, parties need each other to achieve their

preferred outcomes or objectives

• Interdependence and the structure of the situation shape processes and outcomes– Zero-sum or distributive – one winner (win-lose)

• Non-zero-sum or integrative – mutual gains situation (win – win)

• A mix of convergent and conflicting goals characterizes many interdependent relationships

Stages of negotiations

• Preparation• Relationship building• Information gathering• Information using• Persuasion• Making concessions and agreements• Closing the deal (final offer)• Implementing the agreement

B.A.T.N.A.:Best Alternative To a Negotiated Agreement

• What are you going to do if you do not make a deal with this person?

• Determined by your available alternatives• Defines most you will pay (buyer) & least you

will accept (seller)• Key source of power: Ability to walk away• Strategic advice:– Should you reveal your BATNA?– Falling in love rule

Goals, Strategy and Planning

The 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 and

measurable.• Indirect effects– Forging an ongoing relationship

Strategy, tactics, Planning

• A negotiation strategy is an integrated set of behaviors chosen because they are thought to be the means of accomplishing the goal of negotiators.

• Tactics are short-term moves.• Planning/Implementation: The “action”

component of the strategy process; i.e. how will I implement the strategy?

Getting Ready to Implement the Strategy: The Planning Process

• Define the issues• 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 want– Your “ideal” settlement– Your bottom line

Getting Ready to Implement the Strategy: The Planning Process

• Know your limits and alternatives• Set your objectives (targets) and opening bids

(where to start)– Target is the outcome realistically expected– Opening is the best that can be achieved

• Assess constituents and the social context of the negotiation

Getting Ready to Implement the Strategy: 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’s arguments?• Present the issues to the other party

Influencing negotiations• Reciprocity (law of the universe)

– Pertain more to pattern of concessions than to degree.• We feel upset if receiving a favor we cannot return.

• Consistency• Need to appear to be consistent in our behaviors to others as well at to

ourselves (psychological commitment)

• Social proof• The behavior of others determine what is desirable, correct.

• Liking. (Flattery can get you everywhere) • Make concession to people they like

• Authority• We are inclined to accept opinions of people we consider authorities

• Scarcity.• Rare things appear more appealing.

Making the first move • Making concessions– Reciprocity (i.e.. conditional concessions)– Size (Normally higher level concession in initial phase?)

• Bargaining in good faith– Don’t falsify intention nor information (reputation again)• Offers remain valid until rejected or even after

• Common concerns– Sharing information about reservation price (NO)• Negotiation is a matter of strategy, not trust.

– Lying about reservation price (NO), the liar gets caught.– Tough or soft negotiation stance? Strategic creativity!– Making the final offer (no rush).

Advice for direct information • Ask questions about interests and priorities, things

that you are willing to share information about in return.

• Give a little information about your own interests and priorities.

• Be sure to reciprocate information with information

• Be honest when rejecting to give information.• Build trust by meeting expectation.

Advice for indirect information• Multi-issue proposals are more efficient in

getting information• Do not make proposals that are unacceptable

to you• Anchor proposal so that you receive an

adequate distributive outcome.• Post proposals visually on a flipchart.• Make 2 or 3 at most proposal at a time• Analyse the proposal quickly (spreadsheet)• Allow time for running the numbers

Mutual Adjustment and Concession Making

• When one party agrees to make a change in his/her position, a concession has been made

• Concessions restrict the range of options

• When a concession is made, the bargaining range is further constrained

Strategic Options

• Per Dual Concerns Model, choice of strategy is reflected in the answers to two questions:– How much concern do I have in achieving my

desired outcomes at stake in the negotiation?– How much concern do I have for the current and

future quality of the relationship with the other party?

Mutual Adjustment

• Continues throughout the negotiation as both parties act to influence the other

• One of the key causes of the changes that occur during a negotiation

• The effective negotiator needs to understand how people will adjust and readjust and how the negotiations might twist and turn, based on one’s own moves and the other’s responses

The Dual Concerns Model

Avoidance: Don’t negotiateCompetition: I gain, ignore relationshipCollaboration: I gain, you gain, enhance relationshipAccommodation: I let you win, enhance relationship

Two Dilemmas in Mutual Adjustment

• Dilemma of honesty– Concern about how much of the truth to tell the

other party

• Dilemma of trust– Concern about how much negotiators should

believe what the other party tells them

Closing the deal

Provide alternatives

• Assume the close– Take out the contract form

• Split the difference• Exploding offers– Offers containing tight deadlines

• Sweeteners– I will give you X if you agree

Summary on the Planning Process

“...planning is one of the most important activities in negotiation.”

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