Negotiation and Conflict

Management
Lecture 21

MUHAMMAD MOAZZAM
 • Negotiation?
• Negotiation framework
• Power in negotiation
• Negotiation tactics
Overview
• Win-win negotiation
• International negotiation
• The impact of the Internet on
negotiations

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What is Negotiation?

• A process of formal communication,

either face-to-face or via electronic
means, where two or more people or
groups come together to seek mutual
agreement on an issue
• The negotiation process involves
management of time, information, and
power between individuals and
organizations who are interdependent

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 • Approaches to negotiation
− Adversarial negotiation – distributive or win-lose
negotiation
− Partnership negotiation – integrative or win-win

Negotiation negotiation
• Factors in negotiation
− The negotiators
− The negotiating situation
− Time
 What Is Negotiation?

RELATIONSHIPS PERSUASION NEGOTIATION SKILLS CAN

BETWEEN PEOPLE, NOT BE HONED AND
JUST ORGANIZATIONS PRACTICED

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Terminology

BATNA Positions Interests

(Negotiator’s (Opening offer, (unspoken
bottom line) stated demand) motivation)

Needs (must Issue (to be

Wants (like to)
have) resolved)

Bargaining
Concession Rewards
power 6
Triangle Talk
Step 3:
Propose Action in a Way
that They Can Accept

The
Step 1: Negotiation Step 2:
Know Process Know
Exactly Exactly
What You What They
Want Want
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 Determine and write down
specific goals and objectives

Know
Exactly What Can be referred during the give
and take phase
You Want

Clearly define priorities

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 Attempt to discern the other party’s
likely needs and wants

Know Exactly Estimate underlying interests to the

other party’s stated positions
What They
Want Beware of expecting the other party to
think in the same way

Ask open-ended questions to confirm or

counter preconceived notions

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 Frame

• Frame your own needs in terms of the

other party’s needs
Propose
Action They Make

Can Accept • Make it easy for the other party to say,

“Yes”

Remain

• Remain fair, flexible, and reasonable

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Negotiation Framework
Identify or anticipate a purchase requirement

Determine if negotiation is required

Plan for the negotiation

Conduct the negotiation

Execute the agreement

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 Purchase requisitions

Inventory counts
1. Identify
or Reorder point systems
Anticipate
a Need New product development

New facilities

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 Is bid process inadequate?

Are many non-price issues involved?

Is contract large?
2. Is Are technical requirements complex?
Negotiation
Does contract involve plant and equipment?
Required?
Does contract involve a partnership?

Will supplier perform value-adding activities?

Will there be a high risk or uncertainty?

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 1. Identification of 6. Technological
allowable costs support needed
What to
Negotiate? 2. Delivery schedules
and lead times
7. Contract volumes
8. Special packaging
3. Expected product
and service quality 9. Loss and damage
levels liability

4. Performance metrics 10. Payment terms

and currency
5. Material lead times issues

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 11. Progress payment 16. Penalty clauses
schedules
What to 17. Performance
12. Transportation incentives
Negotiate? mode selection
18. Contract length
13. Carrier selection
19. Contract renewal
14. Filing freight mechanism
claims
20. Proprietary
15. Warranties and information
replacements

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 21. Capacity issues 25. Spare parts
What to 22. Intellectual 26. After-sale service
Negotiate? property
27. Operator and
23. Resources related
to closer buyer-
maintenance
supplier training
relationships
28. Access to
24. Contract resolution technology
mechanisms

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 Identify Identify participants of your negotiating team

Develop Develop objectives

3. Plan for the Analyze Analyze strengths and weaknesses

Negotiation
Gather Gather information

Recognize Recognize other party’s needs

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Establish Positions
Example is a buyer-seller
price negotiation
Buyer

Aspiration

Aspiration
B.A.T.N.A.
B.A.T.N.A.
Point

Point
Zone of Likely
Agreement

Seller

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 Perform fact finding

Recess or caucus as necessary

Work to narrow differences

4. Conduct Manage time pressures

the Maintain informal atmosphere

Negotiation
Summarize progress periodically

Employ tactics

Keep relationships positive

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 • Willing to compromise or revise goals
• View issues independently
• Establish upper and lower ranges for each major
issue
Being an • Explore additional options
Effective • Build on common ground between parties
Negotiator • Avoid making irritating comments
• Avoid argumentation by presenting too many
reasons
• Make fewer counterproposals

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 Provide performance feedback

5. Execute
the Build on the success of the
Agreemen negotiation

Monitor contract provisions

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 Power in Negotiation

• Power is the ability to influence another person or

organization
• Power by itself is neither good or bad; it is the
application or use of power that makes it good or
bad
• Both parties possess different sources of
negotiating power

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 1. Informational power
2. Reward power
Sources of 3. Coercive power
Negotiating 4. Legitimate power
Power 5. Expert power
6. Referent power

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 • Ready access to relevant and useful
information
• Presentation of facts, data, and persuasive
Information arguments
al Power • Positive and negative information
• Can be manipulated by withholding
information or by providing false information

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 • One party is able to offer something of
perceived value to the other i.e. purchase
Reward contract, new technology etc.
Power • It’s a direct attempt to exert control
• Individuals respond and behave accordingly
when valued rewards are available

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 • Opposite of reward power
• Taking away or withholding something of
value to the other party
Coercive • Ability to punish – financially, physically, or
Power mentally
• Repeated use can have damaging effects on
long-term relationships
• Promotes escalation of conflict or retaliation

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 • Relative status (market share) or position
dominates individual’s informational power
Legitimate • Parents, executives and elected officeholders
Power all possess legitimate power
• Other party must value the legitimate power
in order to be effective

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 • A special form of informational power
• An expert is recognized as having mastered a
high level of knowledge i.e. a senior scientist
Expert of a R&D company
Power • A powerful tool to overcome the refuting
power of the other party

MUHAMMAD MOAZZAM 28
 • Comes from attraction based on socially
acceptable personal qualities and attributes
− Physical personality
Referent − Honesty
Power − Charisma
− Friendliness
− Sensitivity

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 • Used to support one’s advantage
• Need to be careful not to abuse power
− Damaged relationships
Use of − Invited retaliation
Power − Diminished value of that power
• Some types of power interact synergistically
with others
− Example - expert and referent power

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 Movement away from a negotiating
position that has value to the other
party

Concessions Give-and-take process is normal in

most negotiations

Need to avoid giving away concessions

without receiving something of equal
or greater value in return

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 1. Give yourself enough room to make
concessions
2. Try to get the other party to start revealing
its needs and objectives first
Guidelines 3. Be the first one to concede on a minor issue
but not the first on a major one
for Making 4. Make unimportant concessions and portray
Concessions them as valuable
5. Make the other party work hard for every
concession you make
6. Use tradeoffs to obtain something for every
concession you make
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 7. Generally, concede slowly and give a little
with each concession
8. Do not reveal your deadline to the other
party – ever
Guidelines 9. Occasionally, say “No” to the other party
for Making 10. Be careful trying to take back concessions,
Concessions even tentative ones
11. Keep a record of concessions made to try
and identify a pattern
12. Do not concede too often, too soon, or too
much
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 Extremely
high price
followed by
concessions
Negotiation • Low ball • High ball
• Honesty and
Tactics openness
• Best and final offer
• Silence
• Questions What if I
discuss this • Planned
• Caucus with my concessions
manager
• Trial balloon • Venue
• Price increase (a
future threat)

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 • Watch this video and answer the questions

Activity − https://www.youtube.com/watch?v=BA0DParCiww

MUHAMMAD MOAZZAM 35
Principles of Negotiation

Reciprocation Consistency Social proof

Liking Authority Scarcity

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 • Modify tactics when they don’t work
• Prepare for likely tactics to be used against
you
Overcoming • Tactics are more effective on you if you are
Tactics unprepared, stressed, under severe
deadlines, inexperienced, fatigued, or
disinterested
• Try not to react without thinking

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 Win-Win
Negotiation

• Win-lose – competitive or
distributive bargaining
• Win-win – collaboration or
integrative bargaining
• Expand the value or
resources available to all
participants
• Equitable sharing of a larger
and expanded pie

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 Expand the pie

Logroll (solve critical issues of both first)

Win-Win Use nonspecific compensation

Methods
Cut the costs for compliance

Find a bridge solution

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 • Added complexity and challenge
• Substantial extra time and effort
required
International • Culture shock
Negotiation https://www.youtube.com/watch?
v=bdeFdFEbuqk
• Barriers and obstacles
• Need for translators

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 • Miscommunication due to language
Barriers • Time limitations
and • Cultural differences
Obstacles • Limited authority of international
negotiators

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 Cross-cultural Negotiation
• Negotiating goal: Contract or relationship?
• Negotiating attitude: Win-loose or win-win?
• Personal style: Informal or formal?
• Communication: Direct or indirect?
• Sensitivity to time: High or low?
• Emotionalism: High or low?
• Form of agreement: General or specific?
• Team organization: One leader or group consensus?
• Risk taking: High or low?
 • Electronically-based negotiations tend to
equalize the differences between the parties
Impact of − Normal visual and auditory clues are diminished
the Internet or not readily apparent

on − Status differences and social differences are less

discernible
Negotiations − Problem of being anonymous
• Negotiators tend to be more risk taking

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 • Real time vs. asynchronous

Impact of • Loss of information richness

the Internet • More difficult to provide feedback and

conduct active listening
on • E-negotiators ask fewer questions and tend
Negotiations to make more assumptions
• What does “silence” mean?

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 Case Study 3
Boost M6700 (A & B)
Buyer-Seller
Negotiation