CHAPTER 4 Negotiation: Strategy and Planning Questions to ponder A journey of a thousand miles...

CHAPTER 4CHAPTER 4

Negotiation: Negotiation:

Strategy and PlanningStrategy and Planning

Questions to ponder

A journey of a thousand miles begins with a A journey of a thousand miles begins with a single step. [Confucius]single step. [Confucius]

Beforehand preparation leads to success; unpreparedness results in failure.

Comment on the above observations.

Learning objectives

1. Appreciate effective Strategy and Planning as the pr

ime indicator of achieving negotiation objectives or

Goals, and the relationship btwn the key steps in the

planning process.

2. Understand the Stages/Phases-based Negotiation Pr

ocess, typical of a Western marketing negotiation.

3. Grasp and apply Planning Guide for better IB Negot

iation performance.

Outline

1. Intro: Value of Planning

2. Key steps in the planning process and their

relationship

3. The flow of negotiation: stages and phases

4. Planning Guide

5. Assignment

1 Intro: importance and necessity of planning

• Planning is critically important (in negotiation)

Your argument?

• Negotiators frequently fail to plan for a variety of reasons.

Pls name some reasons?

• Effective planning allows negotiators to design a road map that will guide them to agreement.

Departure place? Where to go?... blueprint the journey!!!

2 Key steps in the planning process and their relationship(20/80 rule)

• Figure 4.1 Relationship between key steps in the planning process

StrategyGoals Planning

2.1 Goals: The Focus That Drives a Negotiation Strategy

Effective preparation requires a thorough, thoughtful approach to multi-goals.

2.1.1 Direct Effects of Goals on Choice of Strategy

Four aspects of how goals affect choice of strategy

2.1.2 Indirect Effects of Goals on Choice of Strategy

e.g. Long-term vs short-term orientation

(cf. Geely&Volvo, relational goals tend to support the choice of a collaborative or integrative strategy)

Classroom Activity: See the dramatic effect?

Suppose that you were the voice mail receiver, what would you respond to the sender, one of your customers.

It’s Tuesday afternoon, you just got back from lunch, and you find you have a voice mail message from one of your customers. You closed a deal with them about six months ago---agreeing on price, terms, service, volume, and length of contract---and the deal’s due to be renegotiated six months from now. But in his message the customer says that he’s being pushed hard by management to reduce costs and he wants an additional 5% off the price. He also says that he needs an answer from you for a three o’clock meeting with his boss, which means you’ve got two hours to blueprint this negotiation.

2.2 Strategy: The Overall Plan to Achieve One’s Goals

2.2.1 Strategy vs Tactics

2.2.2 Uni-lateral vs Bi-lateral to Strategy

2.2.3 The Dual Concern Model (Mode of Strategies)

2.2.1 Strategy: as compared to tactics

2.2.2 Uni-lateral vs Bi-lateral to Strategy

• Which is more appropriate for IB negotiation?

Box 4.1 Donald Trump’s Advice to negotiators: Be Strategically Dramatic (p. 106)

And highly recommended TV series: The Apprentice (13 Episodes)

TV series: The Apprentice (13 Episodes)

“Negotiation is a very delicate art. Sometimes you have to be tough; sometimes you have to be sweet as pie—it depends upon who you are dealing with” (Episode 3).

“In negotiations, try and figure out your opponent” (Episode 6). Negotiating skill is a communication competency involving elements of interpersonal communication, audience analysis, and persuasive message design.

“Never beg when trying to sell” (Episode 8). Effective persuasive communication appeals to the interests of the target and does not project an air of desperation.

2.2.3 The Model as a vehicle for describing negotiation strategies

Figure 4.2 The Dual Concerns Model (p.106)

RelationalOutcomeImportant?

Yes

No

Yes No

Substantive outcome important?

CollaborationAccommodation

Competition Avoidance

2.2.3 The Dual Concerns Model

• Alternative Situational Strategies

• The Non-engagement Strategy: Avoidance

• Active-engagement Strategies: Competition,

Collaboration, and Accommodation

2.2.3 ---Alternative Situational Strategies

Key Words: Alternative Situational

Q: Why is the model here again?

(cf. Figure 1.3)

A: to illustrate the relationship btwn the choice of strate

gies and implications for planning and preparation. Th

e Planning Process aims at implementing the strategy

for the established goal.

2.2.3 ---Non-engagement Strategy

1. The Non-engagement Strategy: Avoidance

Why and When? Ref. Box 1.1 (p.8)

The decision to negotiate is closely related to the desi

rability of available alternatives, (e.g. CNA, BATNA),

with exceptions (e.g. in an ongoing negotiation, for a

weak BATNA party to do nothing but accept a poor o

utcome, and as Bill Gates’ story in Box 4.2 illustrated,

avoiding negotiation may get you what you want, but

at a high cost)

2.2.3 ---Active-engagement Strategy

2. Active-engagement Strategies: Competition, Collab

oration, and Accommodation (p.107)

Different Formula and Different Image

Competition: win-lose (chpt 2) “I win, you lose”

Collaboration: win-win (chpt 3) “you win, I win”

Accommodation: lose-win “you win, I lose”

(ref. Figure 4.2, Geely&Volvo A&M, for a reference

project, etc.). Reciprocity rule works!

2.2.3 A summary

• Table 4.1 Characteristics of Different Engagement Strategies

A comparative view of THREE strategies along 13 dimen

sions for their positive characteristics (p.109)

But watch out for their potential drawbacks (e.g. the ne

gative effect of a dominantly competitive DB enterprise o

n your mind and attitude, etc)

Remember: The dynamics (interaction) matters most (se

e the author’s disclaimer, p.110) For more information,

ses 2.2.3 Mechanism: Determinants of the choice of strate

gy, TBCed)

2.2.3 Mechanism: Determinants of the choice of strategy

2.2.3 Mechanism: Outcome stakes (1)

• Impact on corporate strategy• Financial condition• Sunk costs• Precedents• Accountability• Urgency• options

2.2.3 Mechanism: Power position(2)

• Size • Financial base• Additional manpower• Expertise• Leadership• Prestige• Communication/per

s-uasion• Access to media• Cohesiveness of org

anization

• Experience handling conflict

• Commitment• Legitimacy• Risk-taking ability• Potential coalition• Alternative options• Capability to reward• Capability to coerce

2.2.3 Mechanism: Common interests (3)

• Goal Compatibility

• Approach Compatibility

• Resource interdependency

2.2.3 Mechanism: Quality of relationship (4)

• Quality of past relationship

• Mutual understanding

• Mutual willingness to help

• Quality of communication

• Value orientation

2.2.3 A summary of Mechanism: Choice of Strategy

Q: Which position/strategy should we adopt in a given situ

ation?

A: The choice depends on the type of task at hand, the si

tuation, and the personality of the negotiator (Personal

disposition) (ref. Dupont 1982)

Supporting evidence: e.g. The strategic position of IBM i

n India (TBCed) and the case of Geely & Volvo Merger

3. Understanding the Flow of Negotiation

• Figure 4.3 Phases of Negotiation and Table 4.2 Phase models of negotiation: Labels and Descriptions (p.111)

• However, people frequently deviate from this model and that one can track differences in their practice according to his or her national culture (Greenhalgh 2001, p.112) (e.g. two IB Negotiation frameworks for your reference, TBCed, also see chpt 10).

Phase 2Phase 1 Phase 3 Phase 4 Phase 5 Phase 6 Phase 7

RelationshipbuildingPreparation

Informationgathering Bidding

Informationusing

Closing the deal

ImplementingThe agreement

3.1 Process of IB Neg--- Framework

3.2 Ping-Pong Model--Framework

3. A Summary: key determinant

4. Getting Ready to Implement the Strategy: The Planning Process-1

• Defining the Issues (issues to be negotiated; How)• Assembling the Issues and Defining the Bargaining

Mix• Defining Interests• Knowing Limits and Alternatives• Setting Targets and Openings• Assessing Constituents and the Social Context of the

Negotiation • Analyzing the Other Party• Presenting Issues to the Other Party• What protocol needs to Be Followed in The

Negotiation

4. The Planning Process-2

Four things to note (p.113) :1. A single planning process can be followed for both an

distributive and an integrative process.

2. Several “structural” factors surrounding a negotiation

may also affect the strategizing and planning process.

3. Negotiations will be conducted primarily one to one

(Dyadic negotiation).

4. Complete and up-to-date planning will require a

certain degree of shuttling back and forth between

steps.

4.1 Defining the Issues-1

• Figure 4.4 How Issues Affect the Choice between Distributive and Integrative Strategy (p.116)

IncreasingValue to Buyer

IncreasingValue to Seller

Claiming Value

Creating Value

·A

·C

·B

4.1 Defining the Issues-2

• While the number of issues impact strategy, it does not preclude the possibility that single-issue negotiations can be made integrative, or that multiple-issue negotiations will remain distributive.

• Single-issue negotiations can often be made integrative by increasing the number of issues.

• Similarly, in multiple-issue negotiations, the opportunity to create value may be lost in competitive dynamics.

(Ref. A small ad hoc negotiation, Dietmeyer 2004)

4.2 Assembling the Issues and Defining the Bargaining Mix

• Large bargaining mixes allow many possible components and arrangements for settlement (options), thus increasing the likelihood that a particular package will meet both sides’ needs.

• After assembling issues, the negotiator next must prioritize them. Prioritization includes two steps:

Determine which issues are most important and which are less/least important.

Determine whether the issues are linked together or separate.

4.3 Define Interests

• Although defining interests is more important to integrative negotiation than to distributive bargaining, even distributive discussions can benefit from one or both parties identifying the key interests.

• Asking “why” questions usually bring critical values, needs, or principles that we want to achieve in the negotiation to the surface.

• Interests may be Substantive, Process-based, or Relationship-based.

4.4 Knowing Limits and Alternatives

• Good preparation requires that you establish two clear points: your resistance point and your alternatives.

A resistance point is the place where you decide that you should absolutely stop the negotiation rather than continue because any solution beyond this point is minimally acceptable.

Alternatives define whether the current outcome is better than another possibility.

4.5 Setting Targets and Openings

• Target Setting Requires Positive Thinking about On

e’s Own Objectives.

• Target Setting often Requires Considering How to

Package Several Issues and Objectives.

• Target Setting Requires an Understanding of Trad

e-offs and Throw-aways.

4.6 Assessing Constituents and the Social Context of the Negotiation

• When people negotiate in a professional context, there may be more than two parties.

• When one has a constituent or observers, other issues arise, such as who conduct the negotiation, who can participate in the negotiation, and who has the ultimate power to ratify negotiated agreements.

• One way to assess all the key parties in a negotiation is to complete a “field analysis”.

4.7 Analyzing the Other Party

• The Other party’s Resource, Issues, and Bargaining Mix

• The Other party’s Interests and Needs• The Other party’s Targets and Openings• The Other party’s Constituents, Authority, and

Social Structure • The Other party’s Reputation and Style• The Other party’s Strategy and Tactics

4.8 Presenting Issues to the Other Party

• to present a case clearly and to provide ample supporting facts and arguments; to refute the other party’s arguments with counter-arguments.

• Because of the breadth and diversity of issues that can be included in negotiations, it is not possible to specify all the procedures that can be used to assemble information. There are, however, some good general guides that can be used (Table 4.3 Negotiation Planning Guide, p. 114).

4.9 What protocol needs to Be Followed in The Negotiation?

• A negotiator should consider a number of elements of protocol or process:

What agenda should we follow?

Where should we negotiate?

What is the time period of negotiation?

What might be done if negotiation fails?

How will we keep track of what is agreed to ?

How do we know whether we have a good agreement?

(Box 4.3 Do you have a “good” agreement?, p. 129)

Box 4.3 Do You Have A “Good” Agreement? • Is there a preamble in which the intent of the agreement is spelled

out clearly?

• Are all the issues of interests to all parties addressed?

• Are all the proposals workable?

• Have all parties affected by the agreement been consulted?

• For each point of agreement, is it crystal clear what you have agreed to, including what is to be done, by whom, by what time, and how?

• Does the agreement in total make sense?

• Is the agreement reasonable and equitable?

• Have you considered the major barriers to fulfilling the agreement?

• Do you have a vehicle for managing disagreements arising out of this agreement? Is it clear to all parties what this vehicle is and how to use it? (p. 129) Blair Sheppard (1993)

4. A concluding remark

While this road map may frequently need to be modified and updated as discussions with the other side proceed, working from the map is far more effective than attempting to work without it.

5. Assignment

1. Further readings: Rethinking about “preparation”

2. Case study: “A small ad hoc negotiation” (Dietmeyer,

2004: 166-172), available at the course site.

3. Journal Entry Writing Task: “What I have learnt …”

(about 300w) (submitted at the course site: Assignmen

t)

Topics: e.g. The apprentice (Episode 03/06)

OR Box 4.1

ALSO to be reported at next class (10m)

Reference

• Ghauri, Pervez and Fang, Tony, Negotiating with the Chinese: A Social-cultural Analysis, Journal of World Business, Fall 2001, v. 36, iss. 3, pp. 303-25