Business Negotiation Skills

Dr. Irfan A. Rizvi

Negotiation

 The world negotiate derive from the Latin infinitive negotiari meaning “to trade or do business;”
 This verb itself was derived from another, negare, meaning “to deny” and a noun, otium, meaning “leisure”;
 Therefore, the ancient Roman businessman would “deny leisure” until the deal had been settled (Curry, 1999).

Negotiation is a social communication process in which …

 interdependent people with conflicting interests (needs, viewpoints) …
 determines how to allocate resources or work together in the future.
 Negotiation is a communication situation;
 It is an interactive process;
 It is an intentional process;
 It is transactional in nature.

Negotiation context

1. Structure:
Number of parties involved, time available, location, type of decision making, topics allowed on agenda;
2. Norms & Values:
Informal understandings & formal ground rules;
3. Relationships:
Meaning assigned by two or more individuals to their connectedness & coexistence (trust, respect,
commitment, openness, strength);
4. Communication:
Verbal & non-verbal, explicit & tacit, listening;
5. Interdependence:
Individualistic/cooperative, sensitivity to each other;
6. Power (influence, leverage, control):
political, authority, resource, information, legal, decision, personal;

Types of Negotiation

Distributive
 Parties compete over distribution of a fixed sum of value;
 Key question , ‘Who will claim the most value?’
 Gain of one at the expense of the other (known as a zero-sum negotiation;
 Often, there is only one issue in distributive negotiation: money;
 It is impossible to make trade-offs based on differing preferences;
 Relationship and reputation are irrelevant; not willing to trade value for value in their relationship.
… e.g., Sale of a car

Integrative
 Parties cooperate to achieve maximum benefits by integrating their interests into an agreement;
 Also known as win-win negotiation;
 In business, integrative negotiations tend to take place under following conditions :
 During the structuring of complex, long term partnerships or other collaborations;
 When the deal involves many financial and non-financial terms;
 Between professional colleagues, or superiors and direct subordinates whose long term interests benefit
from the other’s satisfaction.

Dr. Irfan A. Rizvi/BNS Course/XPGDM/IMI, New Delhi/March 2018 Page 1

Distributive Vs. Integrative Negotiation

Characteristics Distributive Integrative

Outcome Win-Lose Win-Win
Motivation Individual gain Joint & individual gain
Interests Opposed Different but not always positive
Relationship Short-term Long-term or short-term
Issues involved Single Multiple

Ability to make trade-offs Inflexible or rigid Flexible

Solution Not creative Creative

Most business negotiations are neither purely distributive nor purely integrative; rather, competitive and
cooperative elements are entwined …

 Resulting tension / negotiator’s dilemma, requires difficult

 strategic choices : Negotiators must balance competitive strategies, which make ithard to cooperate &
create value effectively, with cooperative strategies, which make it hard to compete & claim value
effectively;
 At the core of the negotiator’s art is knowing whether to compete where interests conflict --- claiming more
instead of less ---- or to create value by exchanging the information that leads to mutually advantageous
options.

Fundamental framework of negotiation

1. People negotiate when they do not have the power to force a certain outcome;
2. They negotiate only when they believe it is to their advantage;
3. A negotiated solution is advantageous only when a better option is not available;
4. Any successful negotiation must have a fundamental framework based on knowledge of three things:
 The best alternative to negotiation
 The minimum threshold for a negotiated deal
 How flexible a party is willing to be and what trade-off it is willing to make.

Negotiation dynamics
1. Relationship: Interdependence Vs Dependence Vs Independence;
2. Level of preparation;
3. Perceptions of each other;
4. Power differentials;
5. Issues under contention : few or many;
6. Interests Vs Position Vs Goal;
7. Priorities: essential, important, desirable, throwaway;
8. Communication skills;
9. Bargaining skills;
10. Ethics & trust.

Seven elements of negotiation

Dr. Irfan A. Rizvi/BNS Course/XPGDM/IMI, New Delhi/March 2018 Page 2

1. Interests : what do the parties want;
2. Options : what are likely areas of agreement;
3. Alternative : what if we don’t agree;
4. Legitimacy : how persuasive is each party;
5. Communication : are both parties willing to discuss & listen;
6. Relationship : are both parties ready to establish or maintain operational relationship;
7. Commitment : what is the structure of commitment from both parties?

Negotiation Concepts

1. BATNA (Best Alternative To a Negotiated Agreement) :

Your options if you fail to reach agreement during a negotiation.

2. Reservation Price:
The least favorable point at which you’ll accept a negotiated deal; the “walk-away“ price.

3. ZOPA (Zone Of Possible Agreement):

The range in which a potential deal can take place; defined by the overlap between the parties’
reservation prices;

4. WAP:
Walk Away Point at which one would not like to continue with the negotiation;

5. Value creation through trades:

The trading of goods or services that have only modest value to their holders but exceptional value to the
other party.

6. Low ball – High ball :

Low ball : very low or inconsequential offer;
High ball : High price quoted

7. Snow Job: Hiding

The practice of overloading the other party with huge amount of information so as to confuse her of the
real issue / problem;

8. Hard ball:
Being aggressive & tough in negotiation … intimidating;

9. Strategic mimicry:
Projecting oneself as similar to the other party to gain empathy & thus get / extract better results;

10. Nibble:
Negotiating on some small aspect of the deal after agreement on major issues has been reached; Last
minute demand after agreement has been reached.

Dr. Irfan A. Rizvi/BNS Course/XPGDM/IMI, New Delhi/March 2018 Page 3

Negotiation Process

1. Preparation
• Identify issues;
• Set priorities;
• Research other party;
• Identify your BATNA;
• Develop support argument;
• Decide venue, schedule, agenda;

2. Opening
• Ground rules;
• Framework for success;
• Initial offers & anchoring;
• Posturing;

3. Bargaining
• Position Vs Interest;
• Distributive;
• Integrative;

4. Closing
• Thanks & reaffirmation;
• Documentation & signing-off;

Basic principles of negotiation

1. Negotiation is a voluntary activity any party can break away or refuse to enter into discussion;
2. Negotiation starts when one party wants to change status quo;
3. Negotiation is incomplete if no mutually acceptable decision is arrived at;
4. Timing is an important component;
5. There is no winning;
6. Win-win situation – basic requirement.

General mistakes committed in negotiation

1. Not knowing your power;

2. Believing other party knows your powers;
3. Getting intimidated by other ‘Big shot, Little shot syndrome’;
4. Getting intimidated by statistics, precedents, regulations etc. Question them;
5. Not realizing that other party needs agreement as much as you do;
6. Preset mindset;
7. Not knowing who the final authority is;
8. Seeking only general goal;
9. Failing to offer proper arguments;
10. Discussing insignificant issues;
11. Poor communication;
12. Ignoring timing and location;
13. Giving up when deadlock reached;
14. Not knowing right time to close.

International negotiation strategies

Dr. Irfan A. Rizvi/BNS Course/XPGDM/IMI, New Delhi/March 2018 Page 4

 1. Plan the negotiation;
2. Be culturally literate & adapt to the negotiating strategies of the host country environment;
3. Adopt a win-win approach;
4. Maintain high aspirations;
5. Use language that is simple & accessible;
6. Ask lots of questions, then listen with your eyes and ears;
7. Build solid relationships;
8. Maintain personal integrity;
9. Converse concessions;
10. Be patient.

Tips for International negotiation

1. Communicate effectively
• English is the business language of the globe, learn it;
• Use simple or low risk English… avoid jargon, idioms etc.;
• Use interpreter when either party is not comfortable with a common language;
• Paraphrase … say the same thing a few ways;

2. Adapt your approach to your negotiator’s culture

• Begin with shared experience, ice-breakers to get to know each other covering interests, sports, art,
weather etc.;
• Show interest in family only if dealing with counterparts from India, Mid-East, Africa;
• Avoid family matters while speaking with Germans, French;
• Avoid tricky issues like politics, cultural, religious;
• Use humor as it is the ‘shortest distance between 2 people;
• Use humor with British but not with Germans;

3. Listen carefully
• Listening carefully helps you catch subtle cultural nuances;
• Silence is used by Japanese to think over what has been presented & prepare alternatives;
• Westerners consider silence as lack of understanding;
• Do not feel uncomfortable & jump in or make concessions;

4. Respect & regard

• Face or regard for others is important for Chinese, Japanese, Thai, and Vietnamese;
• They are indirect & hence use intermediaries to smoothen contentious issues to save face & for the sake
of long term relationships;
• Westerners separate business life from personal life, but for Easterners this separation is not significant;

5. Adopt the right negotiation practices

 Business cultures differ across cultures in terms of degree of formality or informality;
 Japanese card exchange ritual ‘meishi’ as they consider cards as an extension of a person’s persona:
Read the card offered & put it in front of you & not in your back pocket;
 Get you card printed on both sides … in English & its other culture language version;
 Give due regard to seniority in seating arrangements, order of speeches, and exchange of gifts;
 Don’t give gifts to Australians (consider it bribe) but in other cultures gifts reflect importance attached
to deal or relationship;
 Negotiation environment created should enhance your prospect of deal making : Negotiation is a social
situation for French, Japanese, Latin Americans but opposite for Brits, Americans & Scandinavians.

Dr. Irfan A. Rizvi/BNS Course/XPGDM/IMI, New Delhi/March 2018 Page 5

International negotiation: Do’s & Don’ts

Do’s
1. Do conceal your emotions;
2. Do use experts;
3. Do always maintain the initiative : gain control to save money & business;
4. Do put things in writing;
5. Do learn to use high authority;
6. Do ask for discount when paying cash;
7. Do identify buying signals in your negotiations;
8. Do look out for personality mirrors.

Don'ts
1. Don’t expect to win them all;
2. Don’t be afraid to break off negotiation;
3. Don’t attack your counterpart – attack the problem;
4. Don’t show triumph;
5. Don’t deal with round numbers;
6. Don’t indicate movement before you need to;
7. Don’t dig your heels in;
8. Don’t be afraid of risk;
9. Don’t succumb to dangerous phrases;
10. Don’t be afraid to make your counterpart work hard;
11. Don’t be afraid to go back & try again.

Dr. Irfan A. Rizvi/BNS Course/XPGDM/IMI, New Delhi/March 2018 Page 6