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The word ³negotiation´ comes from the Roman word Õ  meaning ³to carry on
business´ and is derived from Latin word roots Õ (not) and  (ease or leisure).The
origin of this word itself explains a lot about its meaning. It is a decision making process
in which two parties having conflicting views and interest try to reach a common position
which is in lager interest of all stakeholders. Negotiation has become one of the most
important instruments for amicable solution of problems in today¶s world. Whether it is a
problem of national scale like international agreements, boundary disputes or business
issues like wage determination, mergers and acquisitions or some labor dispute, n
negotiation is used by both the parties for coming to a solution. Thus we can understand
negotiation in following terms:

1.Ú  Ú
 : Negotiation is basically a group process where two groups or
larger social units with differing point of view but a common objective strive to
reach a common position which will define the future conduct of both groups.

 : Negotiation is a process. It is so because negotiation has a defined order
of events. It starts with presentation of charter which defines the agenda and
topics to be discussed, moves on to clarifications and justification, bargaining and
problem solving, contracting to a common position and reaching an agreement or
contract at the end of successful completion of process.

3.Ú    : Negotiation is generally a bipartite process where only two parties are
involved, people who may not be directly related to issue may be present but they
can be supporting or opposing one party or the other.

4.Ú G  Ú   : During negotiation considerable scope exists for discussions,

deliberations, compromise, mutual clarifications and justification. This is so
because the main aim of negotiation is to come to a decision, to find a solution for

the problem. So both parties are ready to hear each other¶s point of view and to
consider each other¶s position.

Negotiation generally has two aspects, creating value and claiming value (Donald W.
Hendon, 1996). Creating value is a cooperative process whereby both parties seek to
create a situation which is beneficial for both and can realize the maximum potential gain
for both sides. Claiming value is more of a competing process where both parties are
tying continuously to increase the maximum potential gain for themselves while trying
for to come to a solution at the same time i.e. negotiators from both sides are trying to
gain advantage for their own parties, but are also trying to develop a long-term
constructive relationship between the parties involved in negotiation.

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Preparation for negotiation is very important in order to have a fruitful and successful
negotiation. The amount of preparation becomes evident at the negotiating table. A
negotiator with better preparation is in a much better position while bargaining with
opposite party. A badly prepared negotiator is a liability for his party and has no respect
from the opposing party such a person can seriously jeopardize the process. So in order to
avoid any such hassle a detailed and exhaustive preparation should be made well in
advance of the start of negotiation process. Some of the main things which should be
dealt with in detail while preparing are:

1.Ú     The objectives should be clearly defined before the start of process of
negotiation. Both the parties should be very clear about the objective for which
they are doing negotiation. The formulation of objectives should be done with
utmost care by taking to all stakeholders. The objectives set by a side should be
representative of the interests of all stakeholders of that party and should not be

decided unilaterally by one person. Once the objectives are defined the parties
need to decide the level of priority of each topic depending upon its importance.
The objectives can be prioritized into 3 categories:
i.Ú   These are the objectives which are of utmost importance and
are fundamental to one¶s negotiation position.
ii.Ú ^   These are important but less than essential one¶s some of these
may be forgone in order to achieve the essential ones.
iii.Ú      These are of least importance and are bonus if they are

2.Ú m   Ú   The composition of negotiating team should also be done
after careful deliberations. No negotiator can negotiate alone successfully. In
order to have a meaningful negotiation a team of negotiators should be selected
which should be composed of experts from different fields so as to have a
comprehensive review and discussion of the problem at hand. A person with more
experience of negotiation can be appointed as the chief negotiator, who can lead
the team and be the face of team.

3.Ú ^    Deadline plays an important role in successful completion of the

process. Generally the agreement signed by sides at the end of negotiation have an
expiry period(because external environment is dynamic and in case things like
wage negotiations wages have to be revised over a period of time) after which
both sides need to frame new rules to abide by, or to decide to abide by the same
rules. Whatever be the case the sides need come to negotiation table and to come
to a new agreement before expiry of previous one. The pressure on both sides to
comply with deadline yields a positive effect and prevents both sides from
resorting to any foot-dragging, and promotes them to come to a decision.

4.Ú   The primary purpose of the agenda is to bring order and structure to the
whole process. It sets the tone and prevents the sides from deviating from the

issue at hand. It also helps the negotiators in gauging the position of other parties
in advance and to decide upon their strategies and responses accordingly.

5.Ú   Ú

  The negotiating party should also assess the bargaining
power of the other party. Bargaining power can be defined as ³the ability to
induce the other side to make concessions which it would not otherwise make.´
Thus if one side¶s bargaining power is considerably more and it decides to use it
to its maximum then it can erode other side¶s position and that side should be
prepared to tackle the pressure of other side¶s bargaining power and should make
its strategies accordingly.


Whole process of negotiation can be broadly divided into few steps which are:

MÚ Preparation and Planning

MÚ Defining Objectives and agenda
MÚ Clarification and Justification
MÚ Bargaining and Problem Solving
MÚ Closure and Implementation

Preparation and planning, setting of objectives and agenda are mainly done before parties
are face to face. Rest of the stages are comprise actual negotiation process when
negotiators from both sides sit together for negotiation.

u   ÚÚ     At the start of negotiation process both sides exchange
drafts stating their demands and expectations. It is at this stage that clarifications are
sought from opposite parties with respect to any confusion regarding the stated demands
and expectations. All demands are discussed in detail and clarifications are sought. After

this session both parties take a break for some time, this is important as both parties
utilize the break to understand each other¶s demands and to align their negotiation
strategies accordingly. Also this gives time for any kind of fact finding if required.
Clarifications and justification stage is important as it helps both the parties to understand
each other demands clearly, which is necessary for relevant and comprehensive

 ÚG : Once the demands and expectations of opposite party
has been understood, both side meet again ready to talk about their position, to defend
their position and to erode the opposition¶s position. While doing so both parties tread
carefully so as to ensure that the process goes on and any disruption can be avoided. Both
parties discuss each other¶s demands and try to find a common position where both can
concur. Both parties also look into alternative positions and their viability and
acceptability to both sides. During this stage both sides may employ various tactics to
enforcing their position and to put pressure on other party for accepting their position.
The main objective of this stage is to do a thorough post-mortem of the issue at hand and
to find the best possible situation which can create a win-win situation for both sides.
Also this stage is crucial in reconciliation of the differences between both sides and
evolution of mutually agreeable position.

u  Ú Ú      This is the final stage of negotiation in this stage both
parties discuss the pro¶s and con¶s of the common position. All aspects of the common
position are discussed and detailed agreement is drafted. The main emphasis of this phase
is on language of final draft agreement, there can be non-agreement on the words being
used or the way in which clauses are drafted. Both parties go through the draft and re-
drafting of agreement may take place. This stage results in an elaborate draft acceptable
to both sides, having things like treatment clause, duration, method and way of
implementation of settlement and the period toll which agreement will remain valid etc.


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Negotiation plays an important role in industrial set-up, if used properly it can ensure
healthy atmosphere in industry. Whether it is negotiation for pay raise, bonus, working
conditions or settlement of industrial dispute, negotiation has been used in different forms
depending upon the situation for diffusing the tension and to ensure an amicable solution
for both employer and employees. In industrial setup negotiation is structured and can
take place at various levels:

[Ú  Ú   Ú This is the smallest level at which negotiation can be found in

industrial set-up. At this level the negotiation occurs between worker council
certain functional unit of the plant and the management, it¶s outcome does not
have any bearing on other units of plant and is specific to the unit in question.

Ú   At this level the subject of contention is very specific and is of local
importance in context i.e. it is specific to the plant and may not have any bearing
on other plants of other companies of the same region or industry or country. In
this type of negotiation workers union of a company represent various units or
plant of a company and the outcomes have bearing on whole plant.
[Ú   Ú   This is a higher level negotiation and the problem at hand may
have larger bearing on the functioning of the industry as a whole. Such
negotiations may take place between employers union and employee union of
certain industry, workers¶ union of certain industry and government. These
negotiations are for the larger good of all the worker employed in a specific
industry and have relevance for the whole industry.

[Ú m Ú    This type of negotiation takes place between governments and
the main focus of such negotiations is to have better business environment for
domestic industries.

The negotiation in industrial setup has been prevalent right from the time of industrial
revolution and has evolved over a period of time with the industry. In industrial parlance
it is better known by the term collective bargaining. Collective bargaining can be defined
as a procedure by which the terms and conditions of employment of workers are
regulated by agreement between their bargaining agents (Generally trade unions) and the
employers. Collective bargaining is not only restricted to workers union and employers
but can also be between employers union and workers union. Collective bargaining can
be of following types:

[Ú Conjunctive Bargaining
[Ú Cooperative Bargaining
[Ú Productivity Bargaining
[Ú Composite Bargaining

u   Ú   This one of the oldest forms of bargaining. It is a model where
³Loss of one party is gain of other party.´ In this type of bargaining both sides try to bar
gain of the other and maximize their gain. Due to this nature of bargaining where if one
party gains something then other looses in equal proportion, the net sum is zero, hum it is
also known as zero sum game. It could be seen in early industrial revolution phase when
the employers will prevailed and workers were generally at receiving end. The only deal
available to worker was of ³take it or leave it nature´ thus they were forced to accept
whatever wage the employer offered to them. Such a style of bargaining can also be seen
in today¶s Small Scale industries where workers are mainly daily workers who don¶t have
much bargaining power and are forced to accept whatever is offered by the employer.

u   Ú  : This type of bargaining emerged during the Great Depression
of 1930¶s when due to economic recession industries were struggling to stay afloat. Such
was the condition that the workers¶ of a factory offered to accept voluntary pay-cut so as
to keep the company running. This offer was accepted by the management which in turn
offered higher wages to its workers for their understanding and loyalty. This model was
basically a ³BID FOR SURVIVAL´ by both workers union and employers. This model
can be associated with recession as it can be seen only under exceptionally adverse

business environment, a time when both parties are not left with any option but to ³help
each other.´

   Ú   Ú This model emerged in 60¶s and 70¶s when recession was
clearly over and companies were making huge profits. The workers union¶s have become
quite strong by this time and were having huge following. The workers unions started
demanding better pay packages for workers as was promised by employers during Great
Depression, but employers refused to honor their commitments. This led to huge
discontent in the workforce which was better organized under trade unions, this
discontent manifested in the form of high absenteeism, unauthorized breaks, abandoning
of work stations, shoddy work and rising indiscipline. These things led to a downfall in
productivity and high operating costs which was not good for companies¶ health. Such
circumstances led to an attempt at ESSO¶s oil refinery in UK to gain control over
overtimes and to increase productivity. This gave birth to a new style of bargaining where
³    Ú Ú Ú  Ú   Ú Ú  ´ the workers were told that they will be
given better salaries depending upon their performance and increase in productivity will
be matched with equivalent increase in their salaries. This model benefitted the
employers as they were able to ensure better productivity without giving away much
whereas the workers were at a disadvantage because of increased workload.

u   Ú  : This model emerged as result of more mature trade unions and
the realization by workers unions that till now the management has been playing with
them by using various tactics. The workers became more aware and assertive in their
demands, they had realized that in the name of productivity bargaining the management
was doing eyewash and was the only beneficiary in negotiations, whereas the workers
gained nothing out of it. This realization and increasing assertiveness in due course of
time led to insertion of agendas other than monetary incentives in negotiations. The
workers unions started demanding better working conditions, safe working environment,
medical facilities at workplace for providing first aid in case of any mishap. They also
stated demanding provisions for their social well-being in the form of housing facilities,
education facilities for their children, medical cover for their family members, proper

compensation in case any fatality arising out of occupational diseases. The management
by now had realized that it was no longer possible for it to overlook these demands and
decided to yield to these demands in return of better productivity, commitment and
quality from its unions.

In today¶s industrial negotiation a mixture of one or two or all of these bargaining

methods can be observed. The kind of model being used for negotiation depend upon
various factors like:

[Ú The kind of labor legislations prevailing in a country, region or zone. The kind of
safeguards it provides for workers rights. Provisions for employer and employee
in a particular industry.
[Ú The recognition, professionalism and bargaining power of the union on the other
side table.
[Ú The level at which bargaining is being done, whether it is at unit level, plant level,
industry level or national level.
[Ú The issue in question and its impact on industry practices.
[Ú The attitude of employer towards the trade union.

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There are four main pre-requisites to collective bargaining. They are:

[Ú u Ú ""Ú Ú   Ú Ú    Ú   As discussed earlier, the
negotiation team should be selected carefully, the size and composition of the
team should be ideal.
[Ú  Ú Ú    Both sides should be free and empowered to put their
points freely without coming under any kind of pressure. They should be
authorized to take decisions on behalf of their group.

[Ú   ÚÚ    There should be a relationship of respect between the
employer and the employee. Both should have trust in each other.
[Ú üÚ  Ú Ú    Ú Ú      Negotiators of both side
should have respect for each other, they should also show respect to each other
and should have faith in the ability of representative of other side.

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As has already been discussed that in depth and thorough preparations are necessary for
successful and fruitful negotiation so in industrial bargaining also the negotiators should
be fully prepared. Different preparations are required for negotiators of management and
the workers union representative, which are given below:

mGÚÚ mmÚ Following are the preparations which should be made
by union representatives:

[Ú The implications and feasibility of demands should be considered and proper

research should be conducted on all aspects while formulating the demand.
[Ú Study existing terms of employment and conditions of work and compare them
with the comparable industry in the local area/region/country for preparing a
statement of demands
[Ú Consult shop representatives and discuss with the members of union to assess
their requirements before formulating the demands.
[Ú Analyse past or existing agreements for preparation of new demands or changing
them if necessary.
[Ú Review grievances or arbitration decisions in order to build or modify existing

[Ú Compare the current agreements with other agreements in that area or industry
negotiated by the same or sister unions, thereby strengthening the bargaining
[Ú Obtain economic information on issues to be advanced in negotiation along with
data relating to the proposals and demand submitted.
[Ú The statement of demand should be clear and self explanatory so as to not give
rise to any mis-understanding.
[Ú Inform all members of the demand to be raised with the employer/employer¶s
organization and their implications.
[Ú Advise members not to resort to anything which might jeopardize the smooth
negotiations during collective bargaining.



[Ú Anticipate statement of demand from the union once it has been recognized as a
collective bargaining agent.Ú
[Ú Study the agreements in other comparable units/industry/area and find out
important provisions agreed upon; analyze them and find out to what extent they
could be accepted if the same or similar demands are raised.Ú
[Ú Analyze grievances and arbitration awards, in particular those grievances that
arise repeatedly under the same agreement and look for poor and unworkable
clauses which call for revision.Ú
[Ú Conduct meetings with supervisors and other lower echelons and record their
experiences of working with existing or past agreements, thus providing
information for possible changes.Ú
[Ú üeet representatives of other company for the purpose of exchanging viewpoints
regarding the terms of employment and conditions of work applicable therein and
working of agreements.Ú
[Ú Study provisions of various labor laws to ensure that the terms of agreement when
arrived at are in accordance with and not contrary to law.Ú

[Ú Study and obtain the economic information company, area and industry as well as
the national policies before starting negotiations.Ú
[Ú Examine the labour relations policy of the company and the changes, if any, on
the anvil.Ú
[Ú Examine the attitude and assistance rendered by the union and the shop stewards
in the implementations of the existing or past agreements and various methods
[Ú Get full clarifications of various demands submitted for collective bargaining
before actual negotiation starts and take tentative decisions thereon without being
[Ú Select the right negotiator or team of negotiators in advance.Ú


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In today¶s due to globalization, organizations have become multinational and have started
operating in more than one country. This has lead to many complexities manly related to
assimilation and handling of cultural diversity. These organizations face many problems
while entering in some new market and need to do a lot of negotiations to gain support of
local organizations and government. Also globalization has lead to greater integration
business activities of one country with another, thus creating a large number of problems
in international business arena, this has made it necessary for tomorrow¶s business
managers to understand the technicalities of international negotiation.

The main factors affecting the style of negotiation in international arena is

³  $. It is the distinguishing factor which affects the way people behave and
perceive things. üost of the international negotiations occur within the context of cultural
boundaries. It is an established fact that 70% of communication in any conversation is
non-verbal which is perceived by the other person. The way in which this non-verbal
communication is perceived is decided by our cultural settings which differ from one
culture to other, or in other words from one country to another. Thus to sum up we can
say that success in international negotiations is mainly dependent upon the ability to
understand the cultural differences and in learning about culture of your opposition.


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Thus to sum up we can say that negotiation is a process where 2 parties with conflicting
views try to reach a common position in order to create a win-win situation for both
sides. It can be divided into following stages:

i.Ú Preparation and Planning

ii.Ú Definition of ground rules
iii.Ú Clarification and justification
iv.Ú Bargaining and problem solving
v.Ú Closure and implementation

Negotiation in terms of industrial parlance is also called Collective bargaining and is of 4


i.Ú Conjunctive bargaining: Loss of one party is gain of other party

ii.Ú Cooperative bargaining: Bid to survival
iii.Ú Productivity bargaining: Increase in pay was linked to performance
iv.Ú Composite bargaining: Labor welfare measures

Collective bargaining can take place at any level unit level, plant level, industry level or
national level. At any given point of one or more types of collective bargaining can be in
use at one or more levels of bargaining.

International business negotiation is all about understanding the cultural differences and
to act accordingly.