The Negotiation Process

Stage 1
Planning the Negotiation (Pre-negotiation, Planning
& Scheming, Agenda Setting)
 Planning the Negotiation

• This includes the pre-negotiation step in which the objectives

are clearly set.
• Objectives will include minimum expected outcomes,
anticipated outcomes and the best possible outcomes.
• The other party’s objective should also be considered before
commencing the actual negotiation. Planning is done in this
step.
• A contingency plan will also be created at this stage to
overcome any unreasonable result.
• The risks associated with the success and failure of the
negotiation should also be considered.
• Multi-dimensional analyses of negotiations will lead to
stronger outcomes for both parties.
 Stage 2
Exchanging of Information (Exchanging
Offers, Matching and Reaching)
 Exchanging of Information

•This step will reiterate the understanding of the other party’s goals clearly without
ambiguity.

• Clarity of objectives should be retained throughout the process. The concepts and
ideas that lead to the situation are exchanged.

• The origin of thought and expansion of concepts at this stage will lead to the
genesis of the process.

• This in turn will keep both the parties on the same page. Both the parties should
consider the best possible concessions that could be offered from their sides. This
will avoid a negotiation hitting a dead end.

•Alternative proposals can be proposed in case the expectations of either party is

not met. Usually this stage will make or break the deal.
 Stage 3
Closing the Negotiation (Ceasing Negotiation,
Completing Activity, Post-negotiation)
 Closing the Negotiation

• In this concluding stage, the counter arguments will

give way to closing the deal in a win–win mode.
• Both parties will begin to stabilise their positions in the
negotiation. Concessions and agreements would be
expressed clearly.
• This step calls for the final agreement to be in written
form in order to enhance the strength of the negotiation.
• If either party is completely in disagreement during the
negotiation process, it can be fully revisited from the
pre-negotiation stage.
Rational and emotional elements
of trust, cultural and psychological
differences of trusting people
 Rational trust
• Rational trust is based on the process the
customer follows to assess an organization’s
intention and ability to keep promises, by
identifying guarantees in term of
competencies, and predictability of
behaviours. Rational trust would include the
following aspects: Knowledge, Competence,
Ability, Reliability, Predictability, Creditability
and Dependability.
 Emotional trust
• Emotional trust is based on the process the
customer uses to evaluate a company according
to the qualities and characteristics that show
concern and care as well as their willingness to
compromise beyond the profit motive. Emotional
trust would include the following aspects:
Empathy, Feelings of security, Benevolence,
Good will, Personal beliefs and Altruism (selfless
concern for the well-being of others).
Elements of Trust Needed for Successful
Collaboration
 Competence
A collaborative relationship is doomed if there
is a gross mismatch of skills and experience
that is brought to the table. All sides of
collaboration need to have areas where they
excel, and a general understanding of the rest.
If one person doesn’t have competence, it will
become very difficult for the other person(s)
to gain trust in them and believe that they are
a valuable addition to the collaboration.
 Reliability
Although important in all relationships,
reliability may play an even bigger role in
collaborative relationships. If one person in a
collaboration repeatedly falls short, misses
deadlines or fails at following through, the
others are likely to lose trust in that person.
Without having confidence that everyone is
carrying his or her own weight, it can be a
challenge to maintain collaboration.
 Integrity

Would you ever enter collaboration if there was a

risk that someone was going to swoop in, gather up
all of the work, and present it as their sole project?
If each person in collaboration doesn’t demonstrate
integrity, there will be a serious lack of trust that
will make it impossible to work together.
 Communication

Even if someone has demonstrated all of the other

elements of trust, if communication is missing, the
rest doesn’t matter. Each side of collaboration has
to communicate often, clearly and honestly in
order to develop mutual trust and respect. Without
communication, there can’t be a meeting of the
minds, which is what collaboration is based upon.
https://www.beyondintractability.org/essay/win-lose

https://www.storyboardthat.com/articles/b/win-win-n
egotiation

https://www.beyondintractability.org/essay/win-lose#:
~:text=Win%2Dwin%20outcomes%20occur%20when,d
ispute%20feels%20they%20have%20won.&text=The%
20process%20of%20integrative%20bargaining,likely%2
0to%20be%20accepted%20voluntarily.
Different Ways Of Building Trust
Across Cultures
 Transactional trust 
In this form of trust building, the person building
the trust will think “This person is good at their job
and has reliably delivered work for me in the past,
therefore I trust them” Essentially this person
needs to have a working relationship with their
virtual colleagues, one where the colleagues can
demonstrate that they are capable and able to
deliver the required work on time and to the right
quality. Only after that will the individual begin to
trust their virtual partners.
 Relational Trust
In this form of trust building, the person building
the trust will think “This is a nice person, I enjoyed
working with them in the past, therefore I will
trust them” In this form of trust building, the
individual needs to have a personal relationship
with their virtual colleagues, one that is built
through spending time together and getting to
know one another, before they can start to trust
that virtual colleague in a working relationship.
 “In Group” Trust 
In this third form of trust building, the person building the
trust will think “This person comes from the same place
as I do, we share a lot of common experiences, language
and history, therefore I will trust them”  In this form of
trust building, the individual feels at their most
comfortable and trusting when they are working with
people who are like themselves, whether that is similar in
terms of place of birth, ethnicity, political perspective,
socio-economic standing or whatever, once they can
identify someone as being like them, from the same “in
group” they will begin to trust them.
 The psychology of trust 
How do psychologists and economists study trust? One of
the most prevalent routes has been via the trust game. In
this game, two players sequentially send money to each
other. The first player can choose to place a large sum of
money in the hands of the second player. Because the
second player is not obliged to reciprocate (and can keep
all gains for herself), the possibility of betrayal of the
initial investment simulates many real-life situations
involving trust. The results of hundreds of studies with
trust games have yielded fascinating insights into the
psychology and neurobiology of trust.
• The hormone and neurotransmitter oxytocin increases trust, likely by
suppressing the neural systems that regulate our fear of betrayal.
• When we feel negative emotions, we are less likely to trust others.
• We may base our decisions about whom to trust on their
attractiveness, how much they resemble our kin members, and their
facial features. One study, for instance, showed that males with
relatively wider faces (a feature associated with testosterone) were less
likely to be trusted during the trust game.
• Women tend to reciprocate their wealth in trust games more than men.
• People may have a “preconscious friend-or-foe mental mechanism”
that helps them to evaluate others during interactions (partners are
trusted more than opponents).
• Genetic variation and heredity influence how people invest or
reciprocate during trust games.
• Trust in strangers increases from childhood to early adulthood, and
then remains more or less stable in adulthood.
• There are differences in levels of trust across cultures. For instance,
Americans are more trusting of others compared to the Japanese and
the Germans during trust games.
Case 1

A manufacturing company provides jobs for many people in a small town where
employment is not easy to find. The company has stayed in the town even
though it could find cheaper workers elsewhere, because workers are loyal to
the company due to the jobs it provides. Over the years, the company has
developed a reputation in the town for taking care of its employees and being a
responsible corporate citizen.

The manufacturing process used by the company produces a by-product that

for years has flown into the town river. The by-product has been considered
harmless but some people who live near the river have reported illnesses. The
by-product does not currently violate any anti-pollution laws.

You are a renowned social activist in that small town. The people nearby have
requested you to look into their concerns.

Questions:
1. What will you do to protect the people. Is a win – win situation out of
scope?
2. What options does the company have, and what should it do and why? 
Story of Mr. Louis in 2008

“I was moving into a loft and I had no furniture. I sifted through Craigslist and found a
brand new Ikea sectional that was worth about $1200 brand new. I called and set up a
showing with the guy. While I was on the phone, I sensed a bit of desperation, so on my
trip to see the couch, I went to the bank and got $300 in hundreds and handed my
brother the $60 I already had in my wallet.

Sure enough, when we arrived, he was trying to sell us everything he had in his house. I
looked over the couch and pretended not to be impressed, even though it was brand
new and pretty much exactly what I wanted. At that point I told the seller I wasn't that
interested, but that I'd take it right now if he'd accept $300 dollars because that's all the
cash I had on me. He scoffed.

So I pulled out the $300 and dropped it on the end table and said I wasn't kidding, then I
asked my brother if he had any cash. And he ‘conveniently’ had the $60 I gave him
earlier. So I told the seller I could bump it to $360 if he'd throw in the end tables too. And
these end tables were steel-legged and rock-top so they weren't cheap.

I walked away from the money and let it sit there as I could tell he was thinking he
wanted it. Sure enough, he blurts out “fine!” and swipes the money up off the table while
my brother and I start loading up the couch and tables.”
 Negotiation tactics
• Reinforce negotiating power
• Gain some initial supremacy in negotiation
• Collect not disclosable information
• Make the other side in emotional disbalance
• Take control over the negotiation process
What’s at stake?
INTEREST V/S POSITIONS
 Types of interests
1. Substantive interests – They are typically the
items that are being negotiated. Distribution
of property, price, and rates are all examples
of underlying interests of the negotiation that
can be classified as substantive.
 2.Process interests
They are the parties desires to have a certain
method or procedure for deciding substantive
issues. Some parties prefer collaborative
bargaining and desire a mutually beneficial
agreement and some parties enjoy the
competition of distributive (win-lose) bargain.
 3. Relationship interests
• This involve one or more of the party having
an interest in the strength of the relationship
4. Interests in principals
 The Thomas-Kilmann Conflict Mode
Instrument in negotiations
• There are two underlying dimensions of human behavior
(assertiveness and cooperativeness) can then be used to
define five different modes for responding to conflict
situations.
• (1) Assertiveness, the extent to which the person
attempts to satisfy his own concerns, and
• (2) Cooperativeness, the extent to which the person
attempts to satisfy the other person’s concerns.
 Leigh Thompson’s 5 negotiation mental
models

1. KNOWLEDGE ECONOMY
2. SPECIALIZED EXPERTISE
3. INFORMATION TECHNOLOGY
4. GLOBALIZATION
 CA 1

CASE STUDY

 PART A (10 Marks)

Submit case analysis in a written document
Word limit: 100 – 300 words

 PART B (15 Marks)

Presentation and discussion of the case in class
Presentation – 10 marks
Participation of class – 5 marks

Individual or group of two

 Main negotiation tactics
1. To check the opponent resistant point/
reservation price/ maximum price
2. Aggressive
3. To gain positional advantage
4. To gain quantitative advantage (not equal
exchange)
5. To dis-balance opponents emotionally
1. To check the opponent resistance
point/ reservation price/ maximum price
a) Small steps – By adding a small improvement (step by
step) to the first offer you are reaching the maximum price
of the other side they are willing to pay.
b) Best offer for the budget you have – Offer to disclose
your budget/ maximum price: “How much you can spend?
We have the most suitable offer for you”.
c) Extreme position (Low ball/High ball) – Initial offer
received is done in the manner and under conditions to
be unacceptable for the other side in order to provoke
disclosure of the other side real intentions (resistance
point).
 2. Aggressive
a) First and Final offer (Ultimatum) – Requirement to accept
the first offer (or second) otherwise negotiation will be
stopped.
b) Threat of termination – Requirement to accept offer or
conditions under threatening to terminate negotiations
c) “Best” offer (Tak it or leave it) – Explicit pressure not to
enter into negotiations. Statement that the best offer is done
and there is nothing more to add to it
d) Attacks – Attacking you personally or attacking your
company or your country. “Tell me, why I usually enter into
some problems when we have a meeting or I’m coming to
your country?”
 3. To gain position advantage
a) Hand over (“Hot potato) – To handover your problem to the other side. “I
have the amount A but would like to have the thing B. Tell me, what I have to
do?
b) Misleading (Snow ball) – Concentration on some not really important issues,
overloading the opponents with too much information.
c) Wrong target – Over evaluation of an argument or issue done on purpose to
gain concession in return. Not important concession is traded-off after hard
bargaining.
d) Higher authority – Agreed issues or received offers have to be approved by
the higher management offer is done and here is nothing more to add to it.
e) Good cop/Bad cop – Deal with more sympathetic opponent while the other
is absent or excluded from negotiation
f) Reluctance – Showing to the opponents that you are not interested or
indifferent to negotiated subject.
g) The sequence – Telling the other side that he or she has to do better in order
to make the other side to give concessions without getting something back.
“Seems to be that you are not eager to work on it. We’ve done a number of
concessions and waiting for your adequate move”.
4. To gain quantitative advantage (not equal
exchange)
a) Split the difference – The split difference between initial
proposals “has to be approved” by one side’s higher authority.
You set and split the lower difference again
b) Demand for reciprocity – Requirement to reciprocate by giving a
concession or offer to not important concessions made or offer
given by the requesting side
c) Additional requirements – Not important requirements and
arguments are exchanged for important concessions. “If you
can’t deliver the goods in 2 weeks than we need additional
discount of 2% to cover our stock management costs”.
d) Narrowing – Starting from easy to agree issues and narrowing
the disagreement to the most important one. “If we did all
these, can’t we agree on this one?”
 5. To dis-balance opponents emotionally
a) Lost concentration (“Bus station”) – Permanently changes the environment
through the course of negotiations: changing negotiating team members,
inviting numerous experts, changing meeting places/rooms, stopping – starting
negotiations because of different “technical” reasons etc.
b) Overreaction – Not adequate emotional reaction to offers, concessions or
arguments of opponents. “You have to imagine me saying it to my boss. How I
should explain such your offer to him?”
c) Clarification – Permanently asking for clarification or additional substantiation of
position/argument/offer in order to minimize opponent explanatory power and
increase the chance of his mistakes.
d) Bad conditions – Disadvantageous seating arrangements (uncomfortable chairs,
opposite the windows etc.), very early/late meetings, noisy/disturbing
environment etc.
e) Changing the agenda – Skipping some issues, jumping back and forth through
agenda of the meeting, including not agreed points to the agenda.
f) Overload – Overloading the other side with unnecessary, not important
information, (statistics, reports, presentations, site visits etc.) or hide piece of
important information in disproportional amount of non-important one. Send
information on Friday afternoon requiring an answer on Monday morning etc.
NEGOTIATION SCENARIOS
While many people think of negotiations as a
competition where one side wins and the other loses,
in reality, negotiations involve a more complex
mixture of winning and losing. The outcome of
almost all two party negotiations can be categorized
as win-lose (one party benefits to the detriment of the
other), lose-lose (both parties are worse off after the
negotiation), or win-win (both parties come out
ahead). If the negotiation fails, no agreement has been
reached and the parties are forced to seek alternative
solutions.
WIN - LOSE
• Frequently in a win-lose scenarios, both sides have attempted
to win, without much regard for the outcome of the other party.
Both parties may have come into the negotiation with a desired
goal and a "walk away" point. In a win-lose scenario, one party
falls within this target range (or even exceeds it) and the other
party falls below their target range.

• Notice that win-lose outcomes occur when the losing side can
be pushed below their “walk away” point. This can happen
when the losing side doesn’t know what their best alternative is
to reaching an outcome in the negotiation, or where they keep
negotiating against their own interest. Many other factors, like
coercion and asymmetric information can also lead to win-lose
outcomes.
LOSE - LOSE
• In a Lose-Lose scenario either both parties concede
bargaining positions outside their target ranges. If the
negotiators fail to reach an agreement, both parties may end up
in worse positions than when they started the negotiations, this
is often included as a lose-lose outcome.

•If one or both parties can’t walk away from a negotiation, but
are unwilling to make concessions, both will be forced to deal
with the poor consequences of not reaching an agreement.
Alternatively, both parties could be too quick to make
concessions, reaching a compromise that is fair, but
detrimental to both sides. Likewise, if both parties are
mistaken about the benefits of what the other side is offering,
they may reach an agreement they later come to regret.
WIN - WIN
•In a Win-Win scenario, both parties end up, at minimum,
within their target ranges. This could simply be reaching a fair
middle ground that both parties benefit from, or it could mean
finding a creative new solution that improves the position of
both parties.
•If both parties come to the table with goals that are mutually
compatible, there is a good chance that the negotiation can
result in a win for both sides. Of course, there is nothing that
prevents a negotiator from trying to press an advantage and
push the other side into a losing position, but there is a risk in
that case that the other side will walk away from the
negotiation. Win-win results are the most stable outcomes of
negotiations; since both parties are happy with the result, they
have little reason to back out at a later time. Both parties have
an incentive to negotiate with each other again, laying the
foundation for a mutually beneficial working relationship.