AUTONOMOUS GROUP LEARNING

1. AUTONOMOUS GROUP LEARNING Boland1 Dr. Bob Boland

2. AGL 20 NEGOTIATIONSUMMARY LECTURE - PART I

3. 11.1 COURSE OBJECTIVES • The program provides members with the opportunity to use negotiation concepts, terms, techniques and skills and become more complete managers. • The specific learning objectives are to: • a. To analyze negotiation process to achieve goals exceeding BATNA • b. To evaluate the impact of culture on negotiation. • c. To practice international negotiation communication skills. • d. To develop skills in achieving negotiation strategy. • e. To motivate further study in the future.

4. 11.2 NEGOTIATION • The negotiation process includes: planning re-negotiation, initiating first moves, making the first moves, negotiating prices, closing business negotiation and undertaking renegotiation. • The key objective is to achieve win-win goals for both parties which establish trust for short and long term relationships. • BATNA - Best AlternaTive with No Agreement. BATNA! Available alternative when negotiation fails. Close the deal or walk away to BATNA. • BATNA affects: cash, culture, deadlines, interests, knowledge, and the experience of both parties. Assess your BATNA at the outset and estimate the opposing BATNA.

5. 11.2 NEGOTIATION • Negotiation environment includes such complex factors as: instability and change, government control and policy, foreign exchange fluctuation, political and legal change, external stockholders and parties, ideological and cultural differences. • The negotiation setting may includes: levels of conflict underlying potential negotiations, relationships before and during negotiation, desired outcomes, stockholder impacts, relative bargaining power and dependence and finally the negotiation style.

6. 11.3 PLANNING • Negotiation begins with research and pre-negotiation planning with each party g with a different goal and hopes to achieve it. Thus there is need for clarification, comprehension and credibility, in order to create mutual values. • As negotiation continues the parties reach convergence of view with discussion, leading to concessions, counter proposals and commitment. The final stage is conclusion.

7. 11.4 INITIATING • Making the first moved is critical, because the first impressions are difficult to change. An initial first competitive offer should meet the context of the surrounding discussion and must be defended with valid arguments. • In competitive markets a higher initial offer may be lowered. In traditional less competitive markets, offers on the high side with concessions may be more acceptable. • The initial offer should be confident and yet flexible to enable the negotiator to learn other party objectives and reformulate to meet specific needs. The initial negotiation phase, is the opportunity to create trust and exchange strategic in formation, not the time to make concessions. • In the initial phase, the buyer keeps his goals in mind and is ready to say no and refer to competition. He may later seek concessions or a better offer or may ask if the proposal can be adapted achieve his needs. • Thus is stage reflective cooperation.

8. 11. 5 PRI11.4 INITIATING CE NEGOTIATION • Price determines the total revenue and profitability of the business by considering: objective, cost, competition, customer and government regulations. • Price negotiations may follow a cost or market approach. • The cost approach computes relevant costs and adds markup to determine price. The market approach examines price setting from the customer’s and competitor’s viewpoint. • Need to highlight the business and product attributes, maintain flexibility and differentiate from the competition. At closing reliability, reputation and financial stability may be critical.

9. 11.5 PRICE NEGOTIATION • Price determines the total revenue and profitability of the business by considering: objective, cost, competition, customer and government regulations. • Price negotiations may follow a cost or market approach. • The cost approach computes relevant costs and adds markup to determine price. The market approach examines price setting from the customer’s and competitor’s viewpoint. • Need to highlight the business and product attributes, maintain flexibility and differentiate from the competition. At closing reliability, reputation and financial stability may be critical.

10. 11.6 CROSS BORDER CULTURES • Cross cultural negotiations may involve culture emotionally based upon traditions, etiquette. It may relate to group behavior or just to the chosen negotiator parties as freely choose to behave. • Protocols involve dress and behavior deal with greetings, formalities, touching, eye contact, emotions, silence, eating, body language, and punctuality etc. Need to know the key players well and the informal cultural influences on the process.

11. 11.6 CROSS BORDER CULTURES • Cross cultural negotiations may involve culture emotionally based upon traditions, etiquette. It may relate to group behavior or just to the chosen negotiator parties as freely choose to behave. • Protocols involve dress and behavior deal with greetings, formalities, touching, eye contact, emotions, silence, eating, body language, and punctuality etc. Need to know the key players well and the informal cultural influences on the process.

12. 11.7 SELECTING NEGOTIATING STYLE • Know your personal style and the style of the other party. Adjust to match, and ensure smooth negotiations. • Define the style as influenced by task or relationship orientation, which directly relates to cultural values.

13. 11.8 PRE-NEGOTIATION PLANNING11.7 SELECTING NEGOTIATING STYLE • In any negotiation the actual interface between the two parties is only one phase. • The critical element is the research and planning for the preparatory stage, which must never be neglected. • Experienced negotiators may sometimes be over prepared but should never be under prepared. With particular strengths and weaknesses, the party that is more committed works harder for its goals, and can always can achieve the best results. • Preparation is the best negotiation investment! • Pre-negotiation planning requires defining the issues, knowing the other side position, knowing the competition and the especially

14. 11.911.7 SELECTING NEGOTIATING STYLE MANAGEMENT OF CONCESSIONS • Study Exhibit C which provides practical-guidance on achieving success on concessions, in complex negotiation environments

15. 11.8 PRE-NEGOTIATION PLANNING • In any negotiation the actual interface between the two parties is only one phase. • The critical element is the research and planning for the preparatory stage, which must never be neglected. • Experienced negotiators may sometimes be over prepared but should never be • under prepared. With particular strengths and weaknesses, the party that is more committed works harder for its goals, and can always can achieve the best results. Preparation is the best negotiation investment! • Pre-negotiation planning requires defining the issues, knowing the other side • position, knowing the competition and the especially

16. 11.9 MANAGEMENT OF CONCESSIONS • Study Exhibit C which provides practical-guidance on achieving success on concessions, in complex negotiation environments

17. 11.10 LEARN FROM CASE EXPERIENCE • DARCANGUES INTERNATIONAL • Need for quickly establishing trust with a cooperative strategy. • Acceptance of the other party’s interests, objectives and limitations • Recognition of value differences. • Define conflict areas. • Creative search for seven alternatives for every key issue.

18. 11.10 LEARN FROM CASE EXPERIENCE • DARCANGIES INTERNATIONAL: • Priority for fairness in long term relationships. • Identifying the constraints on each party for future working in the company with the tough CEO • Need for KSA in negotiation to achieve more than BATNA • Personal reputation and status are critical factors in implementing negotiated agreements.

19. 11.10 LEARN FROM CASE EXPERIENCE • RICHMOND HOUSE: • To provide early critical feedback on negotiation style and process. • To use both objective and emotional criteria in negotiation. • To practice the skills for negotiating as a team. • To explore the ability to identify and integrate other side interests in the negotiation and agreement.. • To (if videotaped) step outside and observe oneself, as you explore how the other side is feeling, and the effect of your behavior on the other side.

20. 11.10 LEARN FROM CASE EXPERIENCE • To be aware of non-verbal communication and mis-communication • To assess the impact of both nonverbal communication and miscommunication. • To instinctively make a creative search for seven alternatives for every key issue. • To give priority to fairness and long term relationships.

21. 11.10 LEARN FROM CASE EXPERIENCE • To give priority to fairness and long term relationships. • To identify the constraints of each party. • To develop KSA in negotiation to achieve more than BATNA • To value personal reputation and status as critical factors in all negotiations. • To avoid difficult negotiations when the stakes seem large. • To value many objective criteria that are neither fully consistent nor determinative.

22. 11.10 LEARN FROM CASE EXPERIENCE • Not to haggle, but to use a variety of bargaining tactics can be used. • Explore tactics which are effective under what circumstances, and why. • Many important concerns and legitimate criteria in the case are • intangible and/or difficult to measure, unless turned into • numbers. • Focus closely on what specific events cause parties to change their • offers, and what brings them to the point of closing the deal. • Discuss deadlines, their effects and how to create them.

23. 11.10 LEARN FROM CASE EXPERIENCE • Compare techniques, attitudes and tactics that may produce more • competition and/or animosity? • How does amicability correlate with optimal results? • BATNA? How does a party’s perception of its BATNA affect conduct in the negotiation? How should it? How can BATNAs be improved? When is it ethical to try to change the other side’s BATNA for the worse? When not? What are the ways of doing that? • How might the parties have prepared better? • Even a simple negotiation process involves: anchoring; BATNA; bluffing; closure; commitment; fairness; information exchange; interests,

24. 11.11 Negotiation Analysis11.11 Negotiation Analysis • The questions to analyze in a negotiation are: What is the BATNA of each party, with no agreement? • Who are the real Parties in the negotiation? • What are the critical Interests of each party? • How to create value for both parties? • What Barriers must be overcome to achieve agreement? • How can Power influence the process?

25. 11.11 Negotiation Analysis • What are ethical things to do? • But rigorous negotiation analysis is necessary but not enough. • Negotiation also needs: implementation strategy, ability to listen, • persuasion, positive attitudes, patience and humour. • Negotiation is an interactive process, directly related to attitude and • creativity that needs to encourages cooperative behavior • from the people with whom we deal.

26. 11.12 OVERALL • The six P’s of effective negotiation are : Parties, Process, Power, Product, Problem and Prognosis (outcome). • The key objective is achieving a long term relationship of trust for mutual benefit and a “win-win” outcome. The BATNA is an alternative for a failed negotiation. • So much depends upon the negotiation: environment, process and the setting, which can be managed!!

27. 11.12 OVERALL • Business success in negotiation may well depend upon: knowing your product, customer and competition; effective business decision making; finding your market niche. • Quality products; creative diversity; finding expanding markets; network contacts; trust and honesty; control of cash, outcomes and risk; diffusing tension; customer loyalty; creativity and overall … on your skills of negotiation

28. 11.12 OVERALL • So many things to learn … now … including Exhibit A on Protocols and deportment and Exhibit B Practical Advice and Exhibit C Managing Concessions

29. EXHIBIT A - ProtocolS • Try hard to avoid making obvious mistakes with different nationalities: • English - definite and polite with proper protocol and etiquette. • French - expecting others to behave as if in France, conducting business, with the French language • German - protocol important. Conservative dress and posture with manner expected. Seriousness of purpose and appropriate dress. • Swedish - formal relationships without price disputes. Expect complete professional proposals without errors and of high quality.

30. EXHIBIT A - ProtocolS • Italians - extremely hospitable and volatile. Make points with dramatic gestures and emotional expression. • Japanese - may spend days or weeks creating a friendly, trusting atmosphere before discussing any business at all. • Chinese - follow fixed protocol in negotiation, always preceded by small. Opposed to touching. Greeting with short bow and very brief handshake. • Indians - formal business with polite relaxed manner. Connections are the key to trust. Always request permission before entering, sitting or smoking.

31. EXHIBIT A - ProtocolS • Mexicans - practice negotiation with heavy emotion . Drama more important than logic. Negotiators often selected for skills in dramatic and distinguished performances. • Brazilians - negotiating process valued more than the actual result. Discussions lively, heated, eloquent, and witty. Great hospitality to establish comfortable social climate. • Russians – Tend to distrust business managers. Extremely cautious when dealing with new parties.

32. EXHIBIT B – PRACTICAL ADVICE • a. Risk averse negotiators are sometimes desperate to avoid risk and may take a quick first offer. • b. The target point is the point at which a negotiator would like to conclude negotiations; it is not the negotiator's bottom line;, not the first offer a negotiator quotes to his opponent; not the initial price set by the seller. • c. Both tangible and intangibles factors can be the most powerful in any negotiation. f. Highly individualized (idiosyncratic) deals are much more common today, and they are not reserved only for a special few.

33. EXHIBIT B – PRACTICAL ADVICE • d. “Coordinate (cooperative) adjustment””, involves, making conscious changes to your approach to be more appealing to the other party. • e. Both parties making mutual adjustments to find a common process for negotiation; crafting an approach that is specifically designed to achieve success in the negotiation situation

34. EXHIBIT B – PRACTICAL ADVICE • f. Multiparty negotiations differ from two-party deliberations in so many ways; more negotiators at the table; more issues and more information introduced; environmental changes from one-on-one dialogue to small group discussion. • g. The parties approach multiple issues simultaneously; tend to achieve lower quality agreements; increase the likelihood of achieving some agreement; and yet exchange less information and have less insight into the preferences and priorities of all the other parties at the table.

35. EXHIBIT B – PRACTICAL ADVICE • f. Reputation in negotiation is a perceptual identity; a reflective of the combination of personal characteristics; demonstrated behaviour. All of these define reputation. • g. The perceptual process involves a special order: stimulus, attention, recognition, translation, behaviour. Visibility is important as it involves centrality or criticality in negotiation network structures.

36. EXHIBIT B – PRACTICAL ADVICE • h. Hardball tactics are designed to be used primarily against powerful negotiators; to clarify ;to a distributive (zero-sum) bargaining approach and to pressure d parties to do things they would not otherwise do.. • i. Frames are important in negotiation because disputes are often nebulous and open to different interpretations. Frames do not allow parties to develop separate definitions of the issues; frames can not be avoided; frames do not allow negotiators to articulate just one aspect of a complex social situation

37. EXHIBIT B – PRACTICAL ADVICE j. The most dominant cause of breakdowns and failures in negotiation are distortions in perception, feedback, and behaviors; it is not just meaning or cognition.

38. EXHIBIT C MANAGING CONCESSIONS • Plan concessions in advance, concentrating on the other party’s • underlying interests. • Provide sufficient margins particularly in cultures that are • extremely demanding. • Set aside a few concessions in reserve to be used when concluding • the deal. • Trade small concessions early on to encourage the other party to • share information and to promote trust. • Insist on obtaining immediate reciprocity after making a • con­cession (future promises lose value over time).

39. EXHIBIT C MANAGING CONCESSIONS • Determine, the real value of the concessions and what other party • is willing to pay for • Remember that 80% of the concessions are traded in the 20% • remaining time. • Have the party work hard in obtaining concessions to be • appreciated as well as encouraging the other party to recipro­cate • generously • Provide justification/benefits for each concession to enhance its • value. • Keep a few nontangible concessions, including symbolic ones to • break a deadlock or to conclude. • Observe the other party's body language to detect hidden motives.

40. EXHIBIT C MANAGING CONCESSIONS • Take into consideration that negotiators from • different cultures concede differently • Be aware that how you concede is just as • important as what you concede. • Trade concessions in fewer and fewer amounts • requiring the -other party to spend more and • more time and effort. • Manage time efficiently by concentrating on key • issues.

41. EXHIBIT C MANAGING CONCESSIONS • Know the competition to resist giving away • unnecessary concessions. • Be aware of false concessions. • Build trust; otherwise reciprocity is not • adhered to.

42. 11.13 LEARNING PATTERNS - REVIEW Six P’s of effective negotiation

43. 11.13 LEARNING PATTERNS - REVIEW • Parties • Process • Power

44. 11.13 LEARNING PATTERNS - REVIEW • Product • Problem • Prognosis • (outcome)

45. 11.14 INSTRUCTIONS (20 minutes) Reassemble in SG Review the Summary Lecture for Part I Discuss questions arising

46. 11.14 INSTRUCTIONS (20 minutes) • Get the best out of Part II of the program, complete ALL of homework tonight: • Study the course text book: Practical Solutions to Global • Business Negotiations (Cellich & Jain) - Chapter 1 and • explore the contents of the book for future study. • Study again the AGL Summary Lecture Part 1 and Glossary in the Diary.

47. 11.14 INSTRUCTIONS (20 minutes) • Review the HBS Article (Investment Analysis). • Very briefly review the two new cases: Quick Drying Paint • and GE (handouts). • Review your notes for Part I of the course and list outstanding • questions to be resolved in Part II • Be sure to return the Workpack to the organizer now. • You have all you need in the Diary.

48. END OF SUMMARY LECTURE 1 (Are you still awake?)

49. 3. SUMMARY LECTURE Part 2

50. 12.1 COURSE OBJECTIVES • The program provides members with the opportunity to use negotiation concepts, techniques and skills so that they become more complete managers. • The specific learning objectives are to: • To analyze negotiation process to achieve goals exceeding BATNA • To evaluate the impact of culture on negotiation. • To practice international negotiation communication skills. • To develop skills in achieving negotiation strategy . • To motivate further study in the future.