OKBIT22 Managing International Relations

4. International business negotiations: Planning the

negotiations

Lesson 3 in a Nutshell

Defining negotiations Different negotiations situations Business negotiations characteristics Stages of a negotiation process Principled negotiations Framework for international business

negotiations Successful negotiator Preparing for negotiations

Developing a Structure for Effective Negotiation

1. Preparing2. Setting the Scene3. Opening up a Negotiation4. Exploring Positions5. Finding a Common Ground6. Building a Movement7. Reaching Agreement8. Following Up

1. Preparing for Negotiations

To fail to prepare, is to prepare to failPreparing includes:

Doing background research “homework” Planning objectives – a Vision Planning a Strategy Planning your Tactics

1. In This Stage You Should…

1. Prepare yourself and your team

2. Know the other party

3. Know the big picture

4. Identify objectives

5. Prioritize objectives

6. Create options

7. Select fair standards

8. Examine alternatives

9. Select your strategy, tactics, andcountertactics

10. Develop a solid and approvedteam negotiation plan

1. A Little Bit of Research is Needed

The other person - Knowing your opponent and the power the other party has

The history - Avoiding troubleThe context - Understanding a bigger

pictureThe environment/culture - How do they

do things over there?

Things to Know About the Other Party

Buyer and Seller What is the organization’s overall business strategy? What is its reputation? What is its current company business environment? Who is the lead negotiator? Who are the primary decision makers? What are their key objectives? What are their overall contract objectives? What are their personal objectives? Who or what influences the decision makers? What internal organization barrier do they face?

Seller Only When does the buyer need our products or services? How much money does the buyer have to spend? Where does the buyer want our products and services delivered? What benefits will our products and services provide? What is our company’s past experiences with this buyer?

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 63.

1. Preparing to Negotiate

Recognize your preferred negotiating styleDiagnose distributive, integrative, and

mixed-motive negotiationsFrame, plan, and strategize for the

negotiation

1. Preferred Negotiating Styles

Style

Diagnose

Plan

Concern for other

Concern for self

Cooperative

Uncooperative

Assertive Unassertive

Collaboration (Problem solving)

Competition (Contending)

Accommodation (Yielding)

Avoid(Inaction)

Compromise

1. Preferred Negotiating Styles

There is no “right” negotiating styleEach style is appropriate and

inappropriate at different times and situations

1. The Dual-Concerns Model

Is the substantive outcome important to you?

Yes No

Yes

No

Is the relational outcome

important to you?

Collaboration (Problem solving)

Competition (Contending)

Accommodation (Yielding)

Avoid(Inaction)

Compromise

1. Competitive Style

Appropriate when: Unpopular course of action

is needed Speedy decision is needed Unfavorable decision by the

other party very costly to you

You are in a power position and your relationship with the other party is not important

Inappropriate when: Both parties are equally

powerful Relationship is

important to you Speedy decision isn’t

necessary Issue is complex

1. Accommodative Style

Appropriate when: Preserving relationship

is important You anticipate

reciprocation later Issue is more important

to other party You have less power You believe you might

be wrong

Inappropriate when: Issue is important to

you You believe that you are

right The other party is

wrong or unethical

1. Collaborative Style

Appropriate when: Issues are complex One party alone cannot

solve the problem Time is available for

problem solving Other parties’

commitment is necessary for implementation

Issues are complex

Inappropriate when: Task or problem is

simple Speedy decision is

required Other parties are

unconcerned about outcome

Other parties do not have problem-solving skills

1. Compromising Style

Appropriate when: Goals of parties are

mutually exclusive; consensus cannot be reached

Parties are equally powerful

Temporary solution to a complex problem needed

Integrating or dominating styles failed

Inappropriate when: One party is more

powerful Problem is complex, but

an integrative solution can be found through problem solving

1. Avoiding Style

Appropriate when: Issue is trivial Potential dysfunctional

effect of confronting the other party outweighs benefits of resolution

Cooling off period is needed

Inappropriate when: Issue is important to

you It is your responsibility

to make the decision Prompt attention to the

problem is needed and the parties are unwilling to defer

1. Distributive and Integrative Negotiations

Style

Diagnose

Plan

Distributive Negotiations Win-lose Fixed pie to be divided

Integrative Negotiations (Principled negotiations)

Win-win Pie can be expanded

1. Frame, Plan & Strategize for the Negotiation

Style

Diagnose

Plan

Frame the problem

Define your goals

Develop a strategy to achieve those goals

Develop a plan to execute that strategy

1. Planning a Strategy

Planning the strategy will help you to develop your objectives and produce an overall plan for negotiation

Set objectives Ideal position Realistic position Fallback position (bottom line)

1. Planning a Strategy - Preparing your Case

Key areas to cover: Identify the main argumentsWork out their strengths and weaknessIdentify potential sticking pointsAnticipate the other party's positionWork out what concessions you can offer

(to achieve movement)

1. Planning Tactics

Key areas to plan:TimingMethodLocation Sequence of issuesControlling the release of informationGetting movementReaching Agreement

1. Strategies and Tactics in International Business Negotiations

Developing a Structure for Effective Negotiation

1. Preparing2. Setting the Scene3. Opening up a Negotiation4. Exploring Positions5. Finding a Common Ground6. Building a Movement7. Reaching Agreement8. Following Up

2. Setting the Scene

Personal IntroductionsPurpose of the meetingTime allowed for the meetingRelevant background informationMeeting agenda Decision making process and authority

levelsConstraints and boundaries - areas that

are not up for discussion

3. Opening up the Negotiation

Decide who will state the position first How much information are you going

to disclose when you present your position?

DO

Listen wellUse open questionsCheck that you understand the other

person's positionSummarizeWithhold judgment

× DON´T

InterruptImmediately put down the other

person's positionReveal all your negotiating currencyAnswer questions too specifically

OKBIT22 Managing International Relations

5. International business negotiations: Conducting the

negotiations

Developing a Structure for Effective Negotiation

1. Preparing2. Setting the Scene3. Opening up a Negotiation4. Exploring Positions5. Finding a Common ground6. Building a Movement7. Reaching Agreement8. Following Up

Conduct

11. Determine who has authority

12. Prepare the facility

13. Use an agenda

14. Introduce the team

15. Set the right tone

16. Exchange information

17. Focus on objectives

18. Use strategy, tactics, andcountertactics

19. Make counteroffers

20. Document the agreement or know when to walk away

4. Exploring Positions

Spend some time exploring the position to identify common ground and sticking points i.e.

Have you got enough information? What information have you discovered?

DO

Focus on the topic or problem not the personConcentrate on issues, not positionsListen for common ground and possible

sticking pointsAsk probing and clarifying questionsObserve the other person's body languageSummarize and check understandingMake notes

×DON´T

InterruptTalk too much or allow the other person to

talk too muchBe tempted to present counter agreementsStart to become entrenched in your position Think in terms of “right” and “wrong” (it is

more helpful to think in terms of difference)

5. Finding Common Ground

Keep positive attitude and make positive statements

Don’t allow yourself to become negative if there seems to be little common ground

Do not put pressure on the other person to agree if there is no common ground

DO

Make a note of the common groundKeep a positive attitude and make

positive statements

×DON´T

Allow yourself to become negative if there seems to be little common ground

Put pressure on the other person to agree

5. Identify Sticking Points

Summarize where sticking points seem to be

Explore them in more detail and attempt to resolve or minimize them

DO

Make a note of the sticking pointsKeep a positive attitude and make

positive statementsDeal with any conflict in a constructive

way

×DON´T

Allow yourself to become negative if there seems to be a lot of sticking points

Don’t sweep the sticking points under the carpet

Blame the other person if they won't budge

5. Deploying Effective Negotiating Behavior

Behave effectively

USE

Effective listeningSummarizingEffective questioning skillsStress control

×AVOID

IrritatorsCounterproposalsDefend and attack spiralsArgument dilution

6. Moving towards Agreement

Movement Phase

6. Movement Phase

What concessions do you want to offer?Are you happy with the concessions the

other person is offering?Other opportunities for movement?

DO

Aim for a win/win outcomeSummarize as you proceedBe open about your motives and

intentionsGive reasons before making a proposal

or a decisionAnticipate counter argumentsAsk questions

DO (cont.)

Keep focused on the main themeGain questions: “If you…then we…” Build on common ground

×DON´T

Make threats or use sarcasmUse irritating phrases, such as: “I am

sure you will want to accept my extremely generous offer”

Become defensive or attack the other person

Insult the other personForce decisions prematurely

Developing a Structure for Effective Negotiation

1. Preparing2. Setting the Scene3. Opening up a Negotiation4. Exploring Positions5. Finding a Common Ground6. Building a Movement7. Reaching Agreement8. Following Up

7. Reaching Agreement

Reaching Agreement is often the most overlooked stage in the negotiating process

7. Reaching Agreement

Do all parties share the same understanding of the proposed agreement?

Do people need time to consider?

DO

Record all decisions in writing Give people time to consider

acceptanceCheck that all parties are committed to

the decision / agreement reachedMake sure that all parties agree with

the next steps to be taken

×DON´T

Rush decisions before everyone has stated that they agree

Leave any actions to be followed up open-ended

7. Recording Agreements

Make a record of the decisions that are reached

Make a note of who will take an action and by when next to each decision

Send a copy of the decisions reached to all parties within 24 hours of the conclusion of the negotiation

7. Recording Agreements (cont.)

Allow a fixed period of time for amendments

If there is a disagreement you may need to re-open the negotiation

Inform other people who need to know about the outcome of the negotiation as soon as the decisions have been ratified

7. Document the Negotiation and Form the Contract

21. Prepare the negotiation memorandum

22. Send the memorandum to the other party

23. Offer to write the contract

24. Prepare the contract

25. Prepare negotiation results summary

26. Obtain required reviews and approvals

27. Send the contracts to the other party for signature

28. Provide copies of the contract to affected organizations

29. Document lessons learned

30. Prepare the contract administration plan

Developing a Structure for Effective Negotiation

1. Preparing2. Setting the scene3. Opening up a negotiation4. Exploring Positions5. Finding a common ground6. Building a movement7. Reaching Agreement8. Following Up

8. Following Up the Negotiation

Follow up to check that all the agreed actions have been taken

DOSend a note to all parties, summarizing the

agreements reached and reminding of the next steps

Carry out all your agreed action by the agreed deadline

Inform all relevant parties about the conclusions reached

Send a letter of thanks to those involved in the negotiation

×DON´T

Forget