NEGOTIATION

•DEFINITION
Trade is giving ‘this’ for ‘that. Terms of trade are ‘how much of this for how
much of that’. Negotiation is the process of arriving at a common understanding
through bargaining at these terms.
It involves scientific analysis, power of judgement, a sense of timing and an
array of interpersonal skills.
STEPS FOR PREPARATION
• What is this negotiation about? Example: It may include description,
scope, parties involved and time limit.
• What are your interests?
Interests are the reasons why you want something.(concerns,
fears, hopes, sense of duty, needs, core desires/hates). Understanding
interests help to develop more options and priorities. Example of
Gorkha Land raised by Subhash Ghising
• What are the negotiable issues?
Issues are items or topics to be resolved during negotiations.

Figure- 2.1 Wants and interest

Interests are
Issues are why you
what you want want them
Issues are tradable. These have different values for each negotiator.
Explore as many issues as you can to form a negotiated package.
Tradable unlocks deadlock.
•What are your priorities?
. The issues may have varying degrees of priorities and hence
prioritization.
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Negotiable issues Priority ranking
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* High (Must get)
* Medium (Important to get.)
* Low (Like to get)
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Fig 2.2 Ranking of Issues
- High priorities are your week spots.
- Influence of priorities on negotiated outcome.
ISSUES US THEY
* H H Difficult to get negotiated
settlement.
* M M
* L L
Fig. 2.3 Identical priorities
ISSUES US THEY
* H H Outcome more probable.
* M L They can trade-off L & M
priorities to compensate
* L M some trade-off on high
priorities.
Fig. 2.4 Common & Differing priorities
ISSUES US THEY

* H L Outcome
more
* L M probable.
* M H

Fig. 2.5 Differing priorities

• Objecting setting and range
The objective should reflect the most likely position and be hedged by
entry and exit position. Range is the gap between entry and exit position.
It iss essential to work out entry and exit position for each issue. Entry
position must look credible (Fig 2.7)
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Issues Priority ranking Objectives Negotiation range
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(H, M, L) Entry Exit
___________________________________________________________

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.
Fig. 2.7, Negotiable range
. The negotiators’ Surplus.
Eb b
Buyer
Seller
Es
s
Entry price - Eb/ Es
Exit price - b/ s
Negotiation Range = entry position - exit position.
Settlement range = b - s

(1) when s < b, exit prices overlap and create a positive settlement
range (or negotiators’ surplus).
Negotiation is about how to divide negotiators’ surplus between
the parties.
(2) When s> b, exit price do not overlap and create negative
settlement range and agreement will be impossible without
altering one or other parameters.
- Bargaining achievement (Seller).
Let entry position = 100
Exit position = 60
Settlement position = 80
Negotiation range = 100-60 = 40
Achievement = 100-80= 20

Bargaining achievement = 20
------ X 100 = 50%
40
Lower the achievement, better it is. Or, move little from entry
position to get deal.

-
 ANALYSISING BARGAINING POWER
One must establish its own bargaining power and anticipate the
supplier’s position.

Fig .13.5 BARGAINING STRENGTH

BUYER SELLER
 Extent of competition  Desire for contract
 Adequacy of cost price analysis  Certainty of getting contract
 Thoroughness of preparation  Time available for negotiation
 Time available for negotiations
 Volume of business
 Strategies
Strategies are ways or means to settle a conflict. Basic
strategies include:
• Trading issues: Each party trades low priority issues to
get issue of high priority.
• Problem Solving: Options with differing priorities are
added so that, there is more to share.
• Contending: One party pressurises the other to gain
favour.
• Yielding: One side reduces its goal significantly.
• Cost cutting: Parties jointly work to cut cost and share
the results.
 Tactics
Tactics are short tem plans and actions employed by negotiator to
ethically try and persuade his counter part to endorse a certain
position. Commonly used tactics include:
 Scarcity: Scarcity of certain things is used as a means of persuasion.
 Extreme Position: This refers to the buyer or seller taking an initial
low or high position on an issue.
 Taking Break: This involves taking time out to discuss new
information making further concessions or seeking expert opinion.
 Concession: It is a movement away from current position within
negotiation range.
 Stalling: This is to slow down the pace of negotiation to counter any
pressure tactics of the other party or to gain any other advantage.
….. Continued..
 Use Diversion: At times negotiation becomes unpleasant. Narrating a
joke, anecdote or incidence can be effective means of easing tension.
This should be avoided discussion may end there.
 Negotiating Behaviours: There are three types of behaviour exhibited
in negotiation including taking or result oriented (also called hard or
red), giving or relationship oriented (also called soft or blue) and
trading. Taking and giving are injurious to trade if taken separately.
The taking runs out of people to do business with and the giving runs
out of resources to give away. Both are extreme type of behaviours
and to be avoided during negotiations.

Result H
Red M
(Hard) L
L M H
Relationship Blue -
Soft
 •MANIPULATIVE PLOYS

Manipulative tricks and ploys are about making you do more than
otherwise would. In short, it coerces you to concede more.

Ten common agreement ploys :

 Prominence (ex : Recent failures counts more than year’s good)
The ‘Squeaky wheel, gets the grease’ syndrome.
 Popularity
Popular ideas are not necessarily good ideas. E.g. : Free electricity
 Expertise : Expert in something is taken as expert in everything
 Changing the subject
 Defective personalities: The debate shift from the issues to the
personalities of the proposer.
 Provenance ( place of origin): Attack the origin of ideas and
not its content or merit.
 Straw man: To make a case against something which are
distorted from the truth or the merit of the case.
 Slippery slope: Deflect attention from the merit of the initial
proposal by looking at its alleged negative consequence
(example : sick pay scheme, no. of sickness will increase)
 Selective evidence (which suits you).
 Phony dilemma: The speaker presents only two choices.
 SELECTING NEGOTIATING TEAM:
Selecting right personnel for the negotiation will increase the chances of success.
Team could include management, engineers, accountants .

CHARACTERISTICS OF GOOD NEGOTIATOR

1. Clear, rapid thinkers
2. Ability to communicate effectively
3. Ability to analyze
4. Impersonal (approach a problem from company objective)
5. Be patient
6. Consider person’s ideas objectively
7. Tactful, have poise and self – restraint , like people and good knowledge
of human nature .
8. Possess a sense of humor
(Ability to make concession and yet display good manners pay
dividends ).
THE FOUR PHASES OF NEGOTIATION
 FACT FINDING PHASE
- Limited to fact finding . Inconsistencies in information of either
sides are investigated .
- Both sides also describe their interest not their position .
 THE RECESS
-During this , the negotiating teams reassess its figures ,
wherever required based on facts revealed in previous stage .
 NARROWING THE DIFERENCES
Negotiator defines each issue, state the facts and tries to
convince each other. If agreement is not reached on an issue, the
negotiator moves to next issue .
 HARD BARGAINING
This is last resort , involves the use of take – it or leave – it
tactics .