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Negotiation

When to Negotiate ?
When two or more parties are doing businessand would like to arrive at a solution withrespect to price , service or quality
When business risks involved cannot beaccurately pre-determined

When a long period of time is required toproduce the items purchased

Key Concepts of Negotiations

BATNA (Best Alternative To a Negotiated Agreement) Reservation Price ZOPA (Zone Of Possible Agreement) Value Creation Through Trade

Know your BATNA

The concept has been developed by Roger Fisher and William Ury It is ones preferred course of action the absence of a deal Knowing your BATNA means knowing whatyou will do if you fail to reach an agreement inthe negotiation Know your BATNA before the Negotiation.

Improving your position in the negotiation table

Improve your BATNA to improve your negotiating position Identify the other sides BATNA Weaken the other party's BATNA

Reservation Prices

Also Known as the walk away price Reservation price should be derived from your BATNA Don't enter a negotiation without a clear reservation price

Zone of Possible Agreement (ZOPA)

ZOPA is the area or range in which a deal that satisfies both parties can take place It is the set of agreement that potentially satisfy both parties Each Party's reservation price determines one end of the ZOPA

ZOPA in Distributive Negotiations

Value Creation Through Trades

The negotiating parties can improve their position by trading the values at their disposal. Getting what one wants in return for something it values much less Both parties often emerge as winners

Who are the real parties in the negotiation?


Identify people having decision making authority Identify the real parties in sophisticated business Identify all the influential parties to the negotiation as Identify the current and potential parties in

transactions.

they can redefine the whole endeavor.

negotiation.

What are the interests and priorities of the key parties?


Negotiators must ask following questions to themselves:

what due diligence needs to be done before, during and at

the end of the deal ?

what gives more value: short term benefits or long term


what is the best time to strike the deal ?

results ?

Is there a need to refine the interests due to changed

circumstances

How can value be createdand who will get it?

Value Creation: Not on common ground but by capitalization on differences More dimensions of differentiation add more value Differences may be in
Valuation,
Expectation,

or Attitude towards risk

Agreements can fetch gains for all parties involved Mutual gains not necessarily equal gains

Motive should be to reach Pareto Optimal

What obstacles might prevent agreement (or the maximization of value) and how can they be overcome?
Three main kind of barriers are :

Strategic Behavior
Parties One

shouldnt exaggerate

must weigh the benefits and risks of specific bargaining value

Psychological or interpersonal

Emotions should be kept aside on the negotiation table Negotiations should be free of power and status play

Should be resolved using skillful management of negotiation

Institutional
Legal/Policy

related barriers.

How can the various parties influence the negotiation process and its outcomes?

Recognize that the other party may not share your view of what constitutes power Hard to negotiate with someone who has lost it all !
e.g.

A company filing for Bankruptcy

Change the basic architecture of negotiation.


e.g.

Talk to Manager instead of a Salesman

Using time to increase bargaining power


e.g..:

Using deadlines to reach the agreement

Exert Power: attack BATNA of other party


e.g.

dont sweeten your offer rather worsen result of refusing your offer

What is the right thing to do?


Questions that negotiators must ask themselves

What do one party owe to the other party?

How are the equity of the agreements reached?


One

should be concerned whether the other party gets due share

Is it morally correct to force in negotiation?

How will it affect the parties not at the bargaining table?


What are the moral issues in negotiating on behalf of

others?