Importance of Negotiation

Ekta Manghwani (33)

Source: Harvard Business Essentials 1

Agenda
Negotiation
Basics of negotiation
Basic elements of negotiation
Negotiation process
Table tactics
Negotiating for others
Agency issues
5 ways to negotiate effectively

Source: Harvard Business Essentials 2

“Let us never negotiate out of
fear. But let us never fear to
negotiate.”

-President John F. Kennedy

Source: Harvard Business Essentials 3

Negotiation

Negotiation is a basic means of getting what you want

from others by interactive communication designed to
reach an agreement.

Source: Harvard Business Essentials 4

Basics of negotiation
1. There must be at least 2 or more parties involved.
2. There is a common interest between parties.
3. Have definite goals & objectives.

Source: Harvard Business Essentials 5

Basic elements of successful negotiation
 Positive attitude
 Knowledge of the negotiation subject
 An understanding of people
 A grasp of your subject
 Communication skills

Source: Harvard Business Essentials 6

Negotiation process
1. Relate: Building a relationship
2. Explore: Interests of both the sides
3. Propose: 1 concrete proposal addresses all
underlying interests
4. Agree: Compromising & creating alternatives

Source: Harvard Business Essentials 7

Table tactics
Getting the other side to the table
1. Offer incentives:-Find out the reluctant person’s
needs(money, time, your support) & then pose them
as potential benefits of negotiations.
Example:-If your boss, Sales Manager, is reluctant to
give you time to work on a redesign of the company’s
inventory system, explain how an improved system
will help solve 1 of his problems-lost sales from out-
of-stock conditions.

Source: Harvard Business Essentials 8

Contd..
2. Put a price on the status quo:-Spell out the cost of
negotiating.
Example of a woman whose boss promoted her &
had her take on additional work, but was forever
delaying any discussion of a pay rise. Frustrated by
his inaction-she secured a job offer from another
company. Now the boss was suddenly very keen in
dealing with her long overdue pay rise. He had to
negotiate or face the costly & time-consuming
process of replacing an effective subordinate. In
other words, he realized the price of the status quo.
Source: Harvard Business Essentials 9
Contd..
3. Enlist support:-Allies can sometimes accomplish what
other measures cannot.

Example:-if the Sales Manager still does not gives you

time off to improve the inventory system, look for allies
who have organizational power & a reason to favor your
goal. The CFO will likely favor any plan to improve
inventory management. The CFO knows that better
inventory management means lower working capital
requirements, which makes him look good. Once the
Sales Manager realizes that the issue has risen to the
senior managementSource:level, he’sEssentials
Harvard Business likely to bargain. 10
Negotiating for others
1. Independent agents:- They are charged with
representing the interests of another (principal) in
negotiations with a third party. Examples: lawyers,
accountants, brokers
2. Reasons for hiring independent agents:
(a)Greater expertise
(b)To put some distance between oneself & the other
party(to avoid relationship conflicts with a friend or
valued business associate)

Source: Harvard Business Essentials 11

Contd..
2. Non-independent agents:-
Some individuals act as non-independent agent
representatives in negotiations.
A Purchasing Manager negotiates regularly with
suppliers on behalf of his employer.
He acts as the employer’s agent & is a part of the
organization on whose behalf he is negotiating
Examples:-Union representative, Corporate
Advertising Manager

Source: Harvard Business Essentials 12

Agency issues
1. Information Asymmetries:- It means that 1 party
has more information than the other which can be a
problem.
If the principal has more knowledge than the agent,
then the agent may not know how to represent the
principal. Generally, the agent possess the greater of
information. The agent’s greater information can
create a problem of trust between the principal & the
agent.

Source: Harvard Business Essentials 13

Contd..
2.Divided interests:-
 Many agents face the challenge of serving divided
internal interests.
 Not all the organizations are of 1 mind as to its core
interests.
 This fact puts those who represent the principal into
a difficult position.
 Best solution-communication with constituents-
communication that aims for consensus regarding
priorities. In such cases, the agent has to act as an
educator.
Source: Harvard Business Essentials 14
Contd..
3.Conflicts of interests:-Agent’s personal agenda may
conflict with the principal’s agenda.
Example: Generally companies use incentives
(bonuses, profit-sharing & stock options) to align the
interests of agents with their own interests.

The idea is simple: Agents only do well if the

organizations they represent do well.

Source: Harvard Business Essentials 15

5 ways to negotiate effectively
1. Learn to flinch
2. Recognize that people often ask more than they
expect to get
3. The person with the more information often does
better

Source: Harvard Business Essentials 16

The negotiator must be:
A. Self-confident
B. Patient
C. Aware of non-verbal communication

Source: Harvard Business Essentials 17

THANK YOU!!!

Source: Harvard Business Essentials 18