lec 5 negotiations
TRANSCRIPT
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NEGOTIATION SKILLS
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Negotiating
Negotiating is the art of
reaching an agreement by
resolving differencesthrough creativity
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STEPSSTEPS ININ THETHE NEGOTIATIONNEGOTIATIONPROCESSPROCESS
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STEP 1: PREPARATION
STEP 2: BUILDING THERELATIONSHIP
STEP 3: EXCHANGING
INFORMATION/FIRST OFFER
STEP 5: CONCESSIONS
STEP 6: AGREEMENT
STEP 4: PERSUASION
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STEP 1: PREPARATIONSTEP 1: PREPARATION
Is the negotiation possible?
Know what your company wants
Know the other side
Send the proper team
Agenda
Prepare for a long negotiation
Strategy
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The Situational Matrix
I: Balanced Concerns(Business partnership, joint venture,or merger)
II: Relationships(Marriage, friendship, or work team)
III: Transactions
(Divorce, house sale, or markettransaction)
IV: Tacit Coordination
(Highway intersection or airplaneseating)
High Low
Perceived Conflict Over Stakes
High
Low
Importance
of Relation-
ship
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Negotiating
Tacit Coordination - Calls for tactful avoidance ofconflict, not negotiation.
T
ransactions-
Stakes are substantially more importantthan relationships. Leverage counts.
Relationships -Treat the other party well, generously,the stakes are secondary. Accommodate.
Balanced Concerns - Problem solving and compromiseare vital. Stakes and relationships equally important.
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Preparation
Assess negotiating styles.
Competitors
Cooperators
Match the other sides style.
If youre a cooperator, a competitor will eat yourlunch.
If youre a competitor, you will tend to gouge acooperator.
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Preparation
Identify other sides interests and objectives.
Fill out Negotiating andClosing Planner
Determine your targets. Specific opportunity/product
Price
Size of order
Terms
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Preparation
Determine your BATNA (Best Alternative to
a Negotiated Agreement).
Determine your HLE (Highest LegitimateExpectation).
Determine your walk-aways.
Price
Terms and conditions
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Negotiating Initial Discussion
Deliver bad news (deal breakers, threats)
early in a negotiation.
Sell all the deal terms early. Indicate where you can and cannot be flexible
(credibility).
Signal your expectations (HLE) and leverage.
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STEP 2: BUILDING THE RELATIONSHIPSTEP 2: BUILDING THE RELATIONSHIP
No focus on business
Partners get to know each other
Social and interpersonal exchange
Duration and importance vary by culture
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STEP 3: EXCHANGING INFORMATIONSTEP 3: EXCHANGING INFORMATION
AND THE FIRST OFFERAND THE FIRST OFFER Bargaining formally begins when negotiators
on one side open with a concrete, plausible
(in their mind) offer. Dont respond emotionally to any offer or any
tactic.
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Opening Tactics: Open First?
If you are not informed about the other sidesbusiness, interests, or demands, dont open first.
If you are well informed, always open first: It lets you fix the range -- the zone of realistic
expectations.
Sometimes forces the other side to rethink its goals.
Most important, allows you to set the anchor. We tend to be heavily influenced by first impressions.
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Opening: Optimistic or Reasonable
Depends on the situation:
Relationship Open optimistically, be generous
Transaction -Open optimistically (high, but nottoo high) - the highest for which there is asupporting standard or argument enabling you tomake a presentable case.
Make the highest opening you can with a straightface.
Dont open high if you have no leverage and theother side knows it.
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Optimistic Openings
Take advantage of two psychologicaltendencies:TheContrast Principle and theNorm of Reciprocity. The contrast principle: If I want you to pay me
$500,000, and I open with $750,000 (supported bypresentable, straight-face argument), mysettlement of $500,000 seems reasonable and
gives the perception of getting a good deal. If Ihad opened for $550,000 and only come down to$500,000, the contrast would have been small andthe deal not satisfying.
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Optimistic Openings
The Norm of Reciprocity: I make an optimistic opening ($750,000), and you
reject it.
I moderate my offer by making a significantconcession ($650,000), and you feel obligated toaccept it (reciprocity).
Big then small offer -- door in the face -- second
offer seems reasonable.
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STEP 4: PERSUASIONSTEP 4: PERSUASION
Heart of the negotiation process
Attempting to get other side to agree to a
position
Numerous tactics used
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Anchoring
When the other side hears a high or lownumber, they adjust their expectations(unconsciously) accordingly. The first offer anchors the other sides perception
of your walk-away price. First offer must be somewhat reasonable (no more than 50% higher
than you will settle for).
As high as possible--as close to the other sides walk-away as possible
(thats the home run).
Outlandish numbers at the beginning can kill thedeal or destroy your credibility if you drasticallyreduce the offer later.
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Framing
Frame all of your offers. Framing emphasizes the value of your offer.
Framing provides justification for the other side to make
concessions. Just pennies a day frames an offer.
To those who like to win, frame as a gain, awin -- emphasize benefits.
For those who are afraid to lose (losses loomlarger than gains to many), frame as apossible loss -- emphasize the pain andshame of losing.
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Framing Example
Group I
1 If Program A is adopted, 200 people will be saved.
2 If Program B is adopted, 1/3 probability that all will be saved, 2/3
probability that none will be saved. Group II
1 If Program A is adopted, 400 people will die.
2 If Program B is adopted, 1/3 probability that all will be saved, 2/3probability that none will be saved.
76% inGroup I chose Program A, only 12% inGroup II chose ProgramA.
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VERBAL AND NONVERBAL NEGOTIATIONVERBAL AND NONVERBAL NEGOTIATION
TACTICSTACTICS Promise
Threat
Recommendation Warning
Reward
Punishment
Normative appeal
Commitment
Self disclosure
Question Command
No
Interrupting
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DIRTY TRICKSDIRTY TRICKS ININ NEGOTIATIONSNEGOTIATIONS
Dirty tricks are negotiation tactics thatpressure opponents to accept unfair or
undesirable agreements or concessions
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STEPS 5 AND 6: CONCESSIONS ANDSTEPS 5 AND 6: CONCESSIONS AND
AGREEMENTAGREEMENT
Final agreement: The signed contract,agreeable to all sides
Concession making: requires that each side
relax some of its demands
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Concession Tactics
Open optimistically and have room to make
concessions.
Concessions are the language of cooperation.They tell the other side in concrete,believable terms that you accept the
legitimacy of their demands and recognize
the necessity to cooperate and sacrifice toget a fair deal.
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Concession Tactics
To get movement, offer a small trade -- show thatagreement is possible.
Give a trade or concession in your least important
area. Price to get a desired deal term or payment, e.g.
The other sides first concession is in its least importantarea of concerns.
Try not to give the first major concession (it raisesexpectations and confuses people).
Put the major issues aside, agree on small, easyissues first.
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Concession Tactics
Give small concessions and give them slowly.
The slower you give them, the more value they
have. A fast concession makes the buyer feel awful and
devalues the product.
Make them work hard for every concession, they willappreciate it more.
Make concessions progressively smaller.
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Styles of concessionStyles of concession
Sequential approach
Each side reciprocates concessions
Holistic approach
Concession making begins after all issues arediscussed
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BASIC NEGOTIATION STRATEGIESBASIC NEGOTIATION STRATEGIES
Competitive
The negotiation as a win-lose game Problem solving
Search for possible win-win situations
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CONCLUSIONCONCLUSION
Successful negotiators:
Understand the negotiation steps
Build cross-cultural communication skills
Understand nonverbal communication
Avoid attribution errors
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A Good Negotiator Is..
Creative
Versatile
Motivated
Has the ability to
walk away