Negotiation strategies.

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NEGOTIATION

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INTRODUCTION
Negotiation is the process of bargaining, Where two
parties ,trying to reach an agreement on mutually
accepted terms to acquire each others wants.
Example:
- Buyer trying to negotiate with supplier over a price
of a product.
- Negotiation for salary between
employee & employer.

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DEFINITIONS OF NEGOTIATION
 In the words of Bill Scott ,” a negotiation is a form of meeting
between two parties: OUR PARTIES & OTHER PARTIES”.
 According to J.A. Wall, ”negotiation is a process in which
two or more parties exchange goods or services and attempt to
agree on the exchange rate for them.”
 Winston’s Advanced Dictionary,” the discussions &
bargaining that goes on between parties before a contract is
settled or deal is agreed upon”.

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NATURE OF NEGOTIATION
 It requires involvement of two parties.
 Requires flexibility.
 A process not an event.
 Needs effective communication.
 Continuous process( i.e. between buyer &
seller, employer & employee for wages, working
hours etc)
 Win- win situation for parties involved.

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P’s OF NEGOTIATION
Personalities : negotiator initiating negotiation must have convincing power, effective
communication skills, can influence people & process of negotiation.
Pace : main points should be covered in discussions, also proper breaks must
be introduced to maintain interest of peoples involved.
Plan : main agenda on which negotiation is to be carried on.
Purpose : aim is required otherwise it will result in wastage of
money, manpower & time.
Like P’s of Marketing, essentials of negotiation are called as P’s of
negotiation. They are as follows:

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FACTORS AFFECTING NEGOTIATION
• PLACE: Familiarity with surrounding helps in boosting
confidence.
• TIME: Time should be adequate for smooth exchange of
ideas & securing agreement before it is to late .
• ATTITUDE: Attitude of both parties should be positive, i .
e, willingness to make an agreement or deal.
 SUBJECTIVE FACTORS: Like relation of two parties
involved, status difference, information & expertise.

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THE NEGOTIATION PROCESS
PREPARATION AND PLANNING
DEFINITION OF GROUND RULES
CLARIFICATION AND JUSTIFICATION
BARGAINING AND PROBLEM SOLVING
CLOSURE AND IMPLIMENTATION

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NEGOTIATION PROCESS
OFFER
COUNTER
OFFER
CONCESSION
COMPROMIS
E
AGREEMENT

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 OFFER: First proposal made by one party to another
in the negotiation stage.
 COUNTER OFFER: Offer made by second party to
first party, or proposing their offer against first party
offer.
 CONCESSION: Increase or decrease made in the
offer or change in the idea.
 COMPROMISE: Sacrifice made by both or one
party.
 AGREEMENT: Point where both parties
agrees, which is beneficial to both.

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• Loss/Loss : Take the cake away so that neither party
gets it.
• Win/Lose : Give it to one party or cut it unevenly.
• Draw : Cut the cake down the middle.
• Win/Win : Make two cakes which are of a much
larger size than the present size.

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Positive Attitudes
Narrow down to few points of dispute /conflict
controversy
Step By step approach
Find out the other parties state of mind culture background's
Likes & dislikes
Hide your prove desire
Don’t disclose your deadlines
Think before you speak
Know your market information
Bring your own expert

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NEGOTIATION STRATEGIES

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• NEGOTIATION GOALS
• PROCESS OF STRATEGY DETERMINATION

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NEGOTIATION STRATEGIES
Strategy is the overall approach for
conducting the negotiation.
Tactics are particular actions used to
implement a strategy.

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NEGOTIATION STRATEGIES
Whereas a strategy provides the overall
approach used throughout the negotiation,
a tactic is particular action used at a
specific time during the negotiation to
serve a more limited role or purpose.

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NEGOTIATION GOALS
Categories of goals which in turn affect
the negotiator’s choice of strategy and
tactics.

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Categories of Negotiation Goals
Aggressive goals
Competitive goals
Cooperative goals
Self-centered goals
Defensive goals
Combinations of goals

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AGGRESSIVE GOALS
Seeks to undermine, deprive, damage
or otherwise injure a rival or opponent.
Example: Taking a customer or
supplier away from a competitor in order
to hurt the competitor.

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AGGRESSIVE GOALS
Aggressive goals seek to damage an
opponent.

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COMPETITIVE GOALS
 One side seeks to gain more from the negotiation
than the other side.
 In fact the negotiator hopes to obtain as large a
comparative advantage as possible.
Example:
 Receiving the highest possible price.
 Paying the lowest possible price.

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COMPETITIVE GOALS
A competitive goal means getting more
than the other party.

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COOPERATIVE GOALS
 Cooperative goals are achieved through an
agreement that leads to mutual gain for all
negotiators and their respective sides.
 This achievement is also referred to as
win-win negotiating.
Example: Forming a joint
venture, partnership, or corporation to engage in
business opportunities to achieve a mutual
profit.

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COOPERATIVE GOALS
With cooperative goals, agreement leads
to mutual gain.

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SELF-CENTERED GOALS
Self-centered goals are those that depend
solely on what one’s own side achieves.
• Scenario: two large accounting firms merge. The
tremendous size of the new firm raises a self
centered goal to find sufficient prestigious space in
a single location. The goal is reached when the
new firm negotiates a lease for 15 floors in a major
midtown New York office building.

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SELF-CENTERED GOALS
Self-centered goals seek a particular result
regardless of what the other side receives.

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DEFENSIVE GOALS
 One seeks to avoid a particular outcome.
 Examples:
• Avoiding a loss of respect.
• Preventing a strike.
• Avoiding the loss of a customer or
supplier.

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DEFENSIVE GOALS
Defensive goals seek to avoid a particular
result.

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COMBINATION OF NEGOTIATION
GOALS
 Each negotiation usually has multiple goals.
– Case: In a collective bargaining negotiation, a
transportation firm seeks to have its employees
make prompt deliveries in order to maintain its
business volume. This is a self-centered goal. A
defensive goal is suggested if the maintenance
of volume is intended to avoid a loss of
customers. The goal is also aggressive to the
extent that the same activity lures new customers
away from competitors, a result which is likely to
weaken the latter.

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PROCESS OF STRATEGY
DETERMINATION
 Strategies are chosen for
use in a particular
negotiation in order to
achieve your side’s goals.
The nature of those goals
will affect the choice of
strategy or strategies.
 A variety of factors
determine the best strategy
for a negotiating situation.

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PROCESS OF STRATEGY
DETERMINATION
The choice of strategy also may be affected by
the answers to a number of questions, such as:
• Does the negotiation involve a transaction or a
dispute?
• Is there more than one issue involved?
• Can new issues be introduced into the
negotiation?
• Are the parties’ interests short-term or
long-term?
• Are the parties’ relationships long-term, limited to
one negotiation or some where in between?

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Negotiation Strategy:
Determination Process
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MAIN NEGOTIATION STRATEGIES
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• AVOIDANCE STRATEGY
• COMPETITIVE STRATEGY
• COLLABORATIVE STRATEGY
• ACCOMMODATIVE STRATEGY

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MAIN NEGOTIATION STRATEGIES
THE DUAL CONCERNS MODEL
 How much concern does the actor have
for achieving the substantive outcomes
at stake in this negotiation?
(substantive goals)
 How much concern does the negotiator
have for the current and future quality of
the relationship with the other party?
(relationship goals)

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1. AVOIDANCE STRATEGY
(The Nonengagement Strategy)
Reasons of why negotiators might
choose not to negotiate:
1. If one is able to meet one’s needs
without negotiating at all, it may make
sense to use an avoidance strategy.
2. It simply may not be worth the time and
effort to negotiate.

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Avoidance Strategy
3. The decision to negotiate is closely
related to the desirability of available
alternatives.
Alternatives are the outcomes that can be
achieved if negotiations don’t work out
4. Avoidance may be appropriate when the
negotiator is responsible for developing
others into becoming better negotiators.

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Active-Engagement Strategies
• Competition
• Collaboration
• Accommodation

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2.COMPETITIVE STRATEGY
 Distributive Bargaining
 Win-Lose Bargaining (I win, you lose)
Zero-sum game: whatever extent one party
wins something, the other party losses

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Competitive Strategy
Distributive Bargaining refers to the
process of dividing or distributing scarce
resources
Two parties have different but
interdependent goals
There is a clear conflict of interests

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Distributive Bargaining
The essence of
Distributive
Bargaining is who
gets what share of
fixed pie.

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Examples of
Distributive Bargaining
• A wage negotiation
• A price negotiation
• A boundary or
territorial negotiation

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Staking Out the Bargaining
Zone

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3.COLLABORATIVE STRATEGY
 Integrative Bargaining
 Win-Win Bargaining (I win, you win)
Positive-sum situations are those where
each party gains without a corresponding loss
for the other party.

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Integrative Bargaining
The law of win/win says “Let’s not do it your way
or my way; let’s do it the best way”
Greg Anderson
The 22 Non-negotiable
Ways of Wellness
Integrative Bargaining is about searching for common
solutions to problems that are not exclusively of interest
to only one of the negotiators.

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Concepts for
Integrative Bargaining
• Separate people from the problem
• Focus on interests, not positions
• Invent options for mutual gains
• Insist on using objective criteria

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Distributive versus
Integrative Bargaining

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4. ACCOMMODATIVE STRATEGY
Win-lose strategy (I lose, you win)
The negotiator wants to let the other win,
keep the other happy, or not to endanger
the relationship by pushing hard to
achieve some goal on the
substantive issues

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Accommodative Strategy
Accommodative Strategy is often used;
When the primary goal of the exchange is
to build or strengthen the relationship and
the negotiator is willing to sacrifice the
outcome.
If the negotiator expects the relationship to
extend past a single negotiation episode.

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• “In a successful negotiation, everyone wins. The
objective should be agreement, not victory."
• “The key to successful negotiation is to shift the
situation to a "win-win" even if it looks like a "win-
lose" situation. Almost all negotiations have at
least some elements of win-win. Successful
negotiations often depend on finding the
win-win aspects in any situation. Only shift to a
win-lose mode if all else fails.”
Professor E. Wertheim,
College of Business Administration,
Northeastern University

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NEGOTIATION STRATEGIES
1. No-Concessions
2. No Further Concessions
3. Making Only Deadlock-Breaking
Concessions
4. High Realistic Expectations With Systematic
Concessions
5. Concede First
6. Problem Solving
7. Goals Other Than To Reach Agreement
8. Moving For Closure
9. Combining Strategies

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Perception, Cognition, and
Emotion

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Perception, Cognition, and Emotion in
Negotiation
The basic building blocks of all social
encounters are:
• Perception
• Cognition
– Framing
– Cognitive biases
• Emotion

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Perception
Perception is:
• The process by which individuals connect
to their environment.
A “sense-making” process

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The Role of Perception
The process of ascribing meaning to messages and events is strongly
influenced by the perceiver’s current state of mind, role, and
comprehension of earlier communications
People interpret their environment in order to respond appropriately
The complexity of environments makes it impossible to process all of
the information
People develop shortcuts to process information and these shortcuts
create perceptual errors

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Perceptual Distortion
• Four major perceptual errors:
–Stereotyping
–Halo effects
–Selective perception
–Projection

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Stereotyping and Halo Effects
• Stereotyping:
– Is a very common distortion
– Occurs when an individual assigns attributes to
another solely on the basis of the other’s membership
in a particular social or demographic category
• Halo effects:
– Are similar to stereotypes
– Occur when an individual generalizes about a variety
of attributes based on the knowledge of one attribute
of an individual

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Selective Perception
and Projection
• Selective perception:
– Perpetuates stereotypes or halo effects
– The perceiver singles out information that supports a
prior belief but filters out contrary information
• Projection:
– Arises out of a need to protect one’s own self-concept
– People assign to others the characteristics or feelings
that they possess themselves

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Framing
• Frames:
– Represent the subjective mechanism through which
people evaluate and make sense out of situations
– Lead people to pursue or avoid subsequent actions
– Focus, shape and organize the world around us
– Make sense of complex realities
– Define a person, event or process
– Impart meaning and significance

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Types of Frames
• Substantive
• Outcome
• Aspiration
• Process
• Identity
• Characterization
• Loss-Gain

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How Frames Work in Negotiation
• Negotiators can use more than one frame
• Mismatches in frames between parties are
sources of conflict
• Particular types of frames may lead to particular
types of arguments
• Specific frames may be likely to be used with
certain types of issues
• Parties are likely to assume a particular frame
because of various factors

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Interests, Rights, and Power
Parties in conflict use one of three frames:
• Interests: people talk about their “positions” but
often what is at stake is their underlying interests
• Rights: people may be concerned about who is
“right” – that is, who has legitimacy, who is
correct, and what is fair
• Power: people may wish to resolve a conflict on
the basis of who is stronger

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Approaches to Negotiation
Goal
Interests Rights Power
Approach
• Self-interest
• Dispute resolution
• Understanding others’
concerns
• Fairness
• Justice
• Winning
• Respect
Temporal focus
Distributive
strategies (pie
slicing)
Integrative
strategies (pie
expansion)
Implications for
future negotiations
and relationship
• Present (what needs and
interests do we have right
now?)
• Past (what has been dictated
by the past?)
• Future (what steps can I
take in the future to
overpower others?)
• Compromise • Often produces a “winner”
and a “loser”; thus, unequal
distribution
• Often produces a
“winner” and a “loser”;
thus, unequal distribution
• Most likely to expand the pie
via addressing parties’
underlying needs
• Difficult to expand the pie
unless focus is on interests
• Difficult to expand the
pie unless focus is on
interests
• Resentment
• Possible retaliation
• Revenge
• Possible court action• Greater understanding
• Satisfaction
• Stability of agreement

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The Frame of an Issue Changes as the
Negotiation Evolves
• Negotiators tend to argue for stock issues or
concerns that are raised every time the parties
negotiate
• Each party attempts to make the best possible
case for his or her preferred position or
perspective
• Frames may define major shifts and transitions
in a complex overall negotiation
• Multiple agenda items operate to shape issue
development

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Some Advice about Problem Framing for
Negotiators
• Frames shape what the parties define as the key
issues and how they talk about them
• Both parties have frames
• Frames are controllable, at least to some degree
• Conversations change and transform frames in
ways negotiators may not be able to predict but
may be able to control
• Certain frames are more likely than others to
lead to certain types of processes and outcomes

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Cognitive Biases in Negotiation
• Negotiators have a tendency to make
systematic errors when they process
information. These errors, collectively
labeled cognitive biases, tend to impede
negotiator performance.

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Cognitive Biases
• Irrational escalation
of commitment
• Mythical fixed-pie
beliefs
• Anchoring and
adjustment
• Issue framing and
risk
• Availability of
information
• The winner’s curse
• Overconfidence
• The law of small
numbers
• Self-serving biases
• Endowment effect
• Ignoring others’
cognitions
• Reactive devaluation

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Irrational Escalation of Commitment
and Mythical Fixed-Pie Beliefs
• Irrational escalation of commitment
– Negotiators maintain commitment to a course of
action even when that commitment constitutes
irrational behavior
• Mythical fixed-pie beliefs
– Negotiators assume that all negotiations (not just
some) involve a fixed pie

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Anchoring and Adjustment
and Issue Framing and Risk
• Anchoring and adjustment
– The effect of the standard (anchor) against which
subsequent adjustments (gains or losses) are
measured
– The anchor might be based on faulty or incomplete
information, thus be misleading
• Issue framing and risk
– Frames can lead people to seek, avoid, or be neutral
about risk in decision making and negotiation

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Availability of Information
and the Winner’s Curse
• Availability of information
– Operates when information that is presented in vivid
or attention-getting ways becomes easy to recall.
– Becomes central and critical in evaluating events and
options
• The winner’s curse
– The tendency to settle quickly on an item and then
subsequently feel discomfort about a win that comes
too easily

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Overconfidence and
The Law of Small Numbers
• Overconfidence
– The tendency of negotiators to believe that their
ability to be correct or accurate is greater than is
actually true
• The law of small numbers
– The tendency of people to draw conclusions from
small sample sizes
– The smaller sample, the greater the possibility that
past lessons will be erroneously used to infer what
will happen in the future

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Confidence or Overconfidence?
We came to Iceland to advance the cause of peace.
. .and though we put on the table the most far-
reaching arms control proposal in history, the
General Secretary rejected it.
President Ronald Reagan to reporters,
following completion of presummit arms control discussions
in Reykjavik, Iceland, on October 12,
1986.
I proposed an urgent meeting here because we had
something to propose. . .The Americans came to this
meeting empty handed.
Secretary General Mikhail Gorbachev,
Describing the same meeting to reporters.

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Self-Serving Biases
and Endowment Effect
• Self-serving biases
– People often explain another person’s behavior by
making attributions, either to the person or to the
situation
• Endowment effect
– The tendency to overvalue something you own or
believe you possess

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Ignoring Others’ Cognitions
and Reactive Devaluation
• Ignoring others’ cognitions
– Negotiators don’t bother to ask about the other party’s
perceptions and thoughts
– This leaves them to work with incomplete information,
and thus produces faulty results
• Reactive devaluation
– The process of devaluing the other party’s
concessions simply because the other party made
them

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Managing Misperceptions and
Cognitive Biases in Negotiation
The best advice that negotiators can follow
is:
• Be aware of the negative aspects of these
biases
• Discuss them in a structured manner within the
team and with counterparts

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Mood, Emotion, and Negotiation
• The distinction between mood and
emotion is based on three characteristics:
– Specificity
– Intensity
– Duration

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Mood, Emotion, and Negotiation
• Negotiations create both positive and negative
emotions
• Positive emotions generally have positive
consequences for negotiations
– They are more likely to lead the parties toward more
integrative processes
– They also create a positive attitude toward the other
side
– They promote persistence

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Mood, Emotion, and Negotiation
• Aspects of the negotiation process can lead to
positive emotions
– Positive feelings result from fair procedures during
negotiation
– Positive feelings result from favorable social
comparison

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Mood, Emotion, and Negotiation
• Negative emotions generally have negative
consequences for negotiations
– They may lead parties to define the situation as
competitive or distributive
– They may undermine a negotiator’s ability to analyze the
situation accurately, which adversely affects individual
outcomes
– They may lead parties to escalate the conflict
– They may lead parties to retaliate and may thwart
integrative outcomes

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Mood, Emotion, and Negotiation
• Aspects of the negotiation process can lead to
negative emotions
– Negative emotions may result from a competitive
mindset
– Negative emotions may result from an impasse
• Effects of positive and negative emotion
– Positive emotions may generate negative outcomes
– Negative feelings may elicit beneficial outcomes
• Emotions can be used strategically as
negotiation gambits