Commercial

Dispute Resolution
Negotiation
 Introduction
• Why negotiate?- strategic choice or used
conjunction with other methods of
resolution
• Is negotiation always possible?
• What is negotiation?
• Á process by which two or more parties
attempt to resolve their opposing interest”
 Characteristics of Negotiation

1. There are two or more parties-

2.There is a conflict of needs and desires
3.The parties negotiate by choice
4. The parties expect a process of ‘give and
take’
5.Successful negotiations involve the
management of tangibles and also the
resolution of tangibles
 When not to negotiate
1. When the risks are too high- e.g if
negotiation could lead to severe loss or
losing everything.
2. When a party has no stake in the
outcome- a party with nothing to lose will
not negotiate in good faith
3. Where a party does not have time-
negotiations need time
 When not to negotiate
4. When the other side acts in bad faith- if a
party cannot be trusted during negotiations,
any agreement reached can also not be
trusted
5. When waiting would improve a party’s
bargaining position-n- better alternatives
might arise
 When not to negotiate

6.When a party is not prepared- an

unprepared party is prone to making bad
decisions during negotiations.
7. When it would be unethical- when a party
acts unethically, its better not to negotiate
 Negotiation skills
1. Creating a conducive negotiation climate-
• Create a supportive negotiation
environment
• Support a negotiation environment
• Emotional environment
• Physical supportive environment-
psychical environment should be
supportive and conducive
 Negotiations skills

• 2. Listening carefully- this involves active

listening
a) Eye content- helps to show attentions
and interest
b) Asking questions- facts can be
established by asking questions
 Negotiation skills
• Identifying feelings and emotions-
identifying the feelings of the other party
can assist a negotiator in identifying the
needs of the other party
• Non-verbal communication- awareness of
non-verbal communication
• Things to loom out for include;
• Prolonged eye contact
 Negotiations Skills
• Asking questions
• Identifying feelings and emotions
• Non-verbal communication- very important
• Involves: reading body language (e.g eye
contact, body posture, facial expression)
 The Negotiation Process
• Negotiation process/steps in negotiation
1. Preparation
2. Opening negotiations
3. Exchanging information
4. Exploring options
5. Agreeing on solutions
6. Closing agreements
 1. preparation
• Preparation is necessary to achieve optimum
results
• Preparation entails:
• Researching the other party
• Identifying the interest of the other party
• Setting objectives for the negotiations
• Establishing your bottom line
• Brainstorming options
• Establishing authority of the parties
 Preparation
• Establish your bottom line- BATNA
• What is BATNA- best alternative to a
negotiated agreement.
• BATNA is a technique used to determine
and secure the best alternatives in a
negotiation, with the aim of being prepared
to face any scenario and reach the most
profitable agreement possible
 BATNA
• To determine your BATNA in a given
negotiation, the following four steps must
be followed:
• List your alternatives. Think about all the
alternatives available to you if the current
negotiation ends in an impasse (What are your
no-deal options?)
• Evaluate your alternatives. Examine each option
and calculate the value of pursuing each one.
 BATNA
• Establish your BATNA. Choose a course of action that
would have the highest expected value for you. This is
your BATNA (the course you should pursue if the current
negotiation fails).
• After establishing your BATNA, calculate your
reservation value—the lowest-valued deal you are willing
to accept.
• If the value of the deal proposed to you is lower than
your reservation value, you’ll be better off rejecting the
offer and pursuing your BATNA. If the final offer is higher
than your reservation value, you should accept it.
 BATNA- example
• Michael is looking for a similar business and is interested
in buying this one, but he’s not ready to pay as much: his
limit is R350,000, although his BATNA is R380,000.
• Their positions seem to be too far apart and it looks too
difficult to reach an agreement.
• However, Laura, who has prepared the negotiation, has
come up with another alternative: sell for €380,000
without machinery included, renting this out instead of
selling it. Laura’s BATNA helps her reach an agreement
suitable for both parties.
 2. Opening negotiations
• The negotiator will open the process by
introducing parties, making small talks,
• create an environment conducive for
negotiations.
• Get parties to start with negotiations
 3. Exchanging information
• Parties must now consider substantive
issues
• A good negotiator will ask a lot of
questions
• Negotiator must identify issues that
important to both parties
 4.Exploring options
• When the negotiator is satisfied that she
has obtained necessary information to
identify interests.
• Negotiator should create value for all
parties
 5. Agreeing on solutions

• Parties start to distribute value

• Remember your BATNA- a negotiator
should always keep their BATNA in mind
• Think about the other side’s BATNA too
• Do you have more to lose or win by
walking away or taking the deal
 6.Closing the agreement

• Revisit the objectives of the negotiation

• Don’t be too quick to agree to any deal
• Only close agreement once sure that it’s
the best deal possible
 Negotiation skills
1. Competitive bargaining-
is an aggressive style of negotiation where
the winner takes all and the loser takes
nothing.
It is seen as a situation where only the
tough survive.
It is used in a situation where parties with
competing interest.
 1. Competitive bargaining
• This style of negotiation works best when
a fast result is required or where there are
not many variables to consider.
• It can only be used in a situation where
parties are in a competitive relationship.
• This type of negotiations can be
competitive but also cordial and respectful.
 2. Collaborative Bargaining
• Collaborative Bargaining-
• (also called interest-based negotiation) focuses
on the parties reaching a mutually beneficial
agreement.
• It involves and objective assessment of the
needs and interests of both parties.
• It involves brainstorming different ideas in order
to find a solution that is favourable for both
parties.
 Collaborative bargaining
• Methods for collaborative bargaining
include supportive factors, problem
definition, generating ideas and finding
solutions.
• Collaborative negotiation is supported by
factors such as a common objective, Trust,
exchange of information and effective
communication.
 3. Principled negotiation
• Principled negotiation- this type of
negotiation originated from the Harvard
project.
• It is based on the argument that
competitive negotiations are inefficient in
that parties are always left dissatisfied.
• also argues that parties in negotiation
might have a hidden agenda.
 Principle negotiation
• Principled negotiation is based on
four basic principles:
• Separate people from the problem
• Generate multiple options before
declining
• Separate people from the problem
• Use objective criteria to decide
 4. Passive negotiation
• Passive negotiation-involves a less confrontation way of
approaching a dispute passive negotiation styles
include: (2)
• Yielding-strategy is not to negotiate but to yield to the
other party
• Compromising-seeks to find a fair balance
• Accommodating-submissive style of negotiation.
• Avoiding- avoiding certain issues in a dispute.
 Game theory
• Game theory attempts to determine
mathematically and logically the actions
that parties should take to secure the best
outcome.
• Attempts to secure best outcome by
analysing costs and benefits
• Lessons from game theory?
 Game theory
• Lessons from game theory:
1. Pick the strategy where the maximum
advantage of the other party is
minimized- in this way you minimize the
other party’s risk better than the other
party.
2. Reduce the variable available to you-this
will strengthen your bargaining position
 Game theory
3. Trust and credibility are important- they
allow you to make valuable commitments
4. Long term commitments encourage
reliability. Short-term commitments do not.
 Prisoner’s Dilemma
• A prisoner's dilemma is a situation where
individual decision-makers always have an
incentive to choose in a way that creates a
less than optimal outcome for the
individuals as a group.
• In the classic prisoner's dilemma,
individuals receive the greatest payoffs if
they betray the group rather than
cooperate.
 Prisoner’s Dilemma
• The typical prisoner's dilemma is set up in
such a way that both parties choose to
protect themselves at the expense of the
other participant.
• As a result, both participants find
themselves in a worse state than if they
had cooperated with each other in the
decision-making process.
 Prisoner’s Dilemma
• The prisoner’s dilemma presents a
situation where two parties, separated and
unable to communicate, must each
choose between cooperating with the
other or not.
• The highest reward for each party occurs
when both parties choose to co-operate.