Aug 28 – Day 1.

1 OBHR 493

BioPharm / Seltek Negotiation

 Straight forward approach

o Quite fair, and acknowledged negatives of the other party
o Very agreeable and flexible to changes in the offer
o Took charge and probed for information first
 Framing the problems

Distributive negotiation

 Value claiming
 Zero-sum strategy
 Pie strategy

Negotiation is

 80% Preparation 20% implementation

Key Points

 Minimum will involve

o Target point (Aspiration point)
o Resistance (reservation) point (walk away)
o Asking price, initial offer
o BATNA - This will influence the other three points.
o Best Alternative to a negotiated agreement BATNA

Resistance point

 Point at which you are indifferent to whether you achieve a negotiated agreement or walk away
 Beyond the resistance point you prefer no agreement
 Never reveal your resistance point!

Bargaining Zone

 Zone of possible agreements between two parties reservation points

 Positive bargaining zone and an agreement should be possible
 Negative bargaining zone
o Both parties resistance point does not overlap
o It is better to walk away rather than to negotiate
BATNA – Plan B

 Alternatives if negotiations aren’t agreeable

 Resistance point and BATNA is not the same
 Reservation point is BATNA +/- things that make you want to do the deal (premium)
o Switching costs, ego, misc preferences

Switching Costs

 Convenience sometimes trumps the actual benefits

 Switching phone companies that offer the exact same plans but without the hassle of talking to
someone

Negotiation Strategies

Concession Making

 When a parties agrees to make a change on their position, a concession has been made
 When concession is made, the bargaining range is further constrained
 Can signal when negotiations are reaching a conclusion
 Never make two concessions in a row
o Sign of a bad negotiator (negotiating with yourself)

Guidelines for making concessions

 Be the first to concede on a minor issue, but not the first to concede on a major issue
 Make unimportant concessions, and portray them as important
 Backtracking on concessions is very difficult
 Keep a record, especially in complex negotiations
 Give yourself room to make concessions

Fundamental Strategies

 Push for settlement near opponents resistance point

 Get the other party to change their resistance

Making an opening offer

 People believe it is best to sit back and wait for the first offer
 Research suggests that it is best to make the first offer
 Due to the anchoring effect
Hardball Tactics
 The Flinch (Demur)
o Extreme reaction to an opening offer
o Generates a feeling that your counterpart has gone beyond a reasonable level
o Initiates counterpart to make two consecutive concessions
 Good Cop/ Bad Cop
o Bad guy presents tough position then good guy tries to reach an agreement
 Highball/Lowball
o Open with an extreme (high or low) offer
o Anchors the negotiation towards a very high or very low bargaining range
o Good defense is the finch
 Bogey
o Pretending that an issue of little importance when really it is not
o Allows you to trade this issue off for something more important
o Risks of it backfiring sometimes
 Silence
o Creates an opportunity for the other person to make concessions
o Best defence is to ask questions
 The Nibble
o Ask for a proportionately small concession on an item that hasn’t been discussed
previously to close the deal
o Good defense is to open the floor to negotiation again
 Intimidation/Aggressive behaviour
o Attempt to force the other party to agree by means of emotional ploy
o Constantly pushing or attacking
 Snow Job
o When negotiator overwhelms the other party with information which is used mostly as a
distraction
 Exploding offer
o Giving an offer with a time limit attached
o Create unnecessary pressure
o Restrict choice
o Good defence is asking them to justify it or ignoring it
Closing the Deal

 Provide alternatives which can be of similar value

 Assume the close
o Act as if the deal has been made (Hardball)
 Split the difference
o Ok if a small concession (Textbook strategy)
 Exploding offers (Hardball)
 Deal sweeteners
o “Ill give you???” if we close the deal
Day 1.2

Goals

 Determining goals in the first step in the negotiation process

o Tangibles – money, financing, timing
o Intangibles – relationships, reputation
o Procedural – shaping the agenda, having a voice at the table

Negotiation

Coast Mountain News

 Advertorial – advertisements disguised as news stories

Pareto Frontier

 Agreement is pareto efficient when there is no other agreement that would make any party
better off without decreasing the outcomes to any other party
 Pareto inefficient exists when an alternative would benefit at least one party without injuring
any party