Introduction to International Negotiations

1. Introduction to International Negotiations Verner Worm, Ph.D. Professor of Chinese Business and Development Asia Research Centre Copenhagen Business School vw.int@cbs.dk

2. What is negotiations? Negotiation is one of the most important global business skills Two or more parties combining their conflicting points of view into a single decision of mutual interest. Negotiation is about value claiming, value creation and trust building

3. Learning Objectives • Improved ability to negotiate • General strategy (mental model) for successful negotiation • Enlightened model of negotiation (fraternal twin)

4. Negotiation Skills as Core Leadership Competency • Key communication & influence tool for interdependent relationships (in & outside the company) • Most people are not very good at negotiation (e.g., over 80% of corporate executives and CEOs leave money on the table) • People don’t realize this

5. Conditions of negotiations • Perception of conflict • People hold different perceptions. Objective conflicts or perception of conflict • Communication opportunities • If people cannot communicate, they cannot negotiate. In explicit bargaining people communicate with one another. In tacit bargaining they coordinate through their actions. • Interdependence • People are interdependent if their actions affect others’ outcome. In the dyadic case parties must agree to the outcome to occur. Veto power to walk away.

6. The role of conflict • Predominantly negative • Competitive processes • Misperception and bias • Emotionality • Decreased communication • Positive aspects of conflicts • Discussing conflicts make people aware and able to cope with problems. • Create organizational changes • Promote awareness of self and other

7. Interdependence In negotiation, parties need each other to achieve their preferred outcomes or objectives • Interdependence and the structure of the situation shape processes and outcomes • Zero-sum or distributive – one winner (win-lose) • Non-zero-sum or integrative – mutual gains situation (win – win) • A mix of convergent and conflicting goals characterizes many interdependent relationships

8. Stages of negotiations • Preparation • Relationship building • Information gathering • Information using • Persuasion • Making concessions and agreements • Closing the deal (final offer) • Implementing the agreement

9. B.A.T.N.A.:Best Alternative To a Negotiated Agreement • What are you going to do if you do not make a deal with this person? • Determined by your available alternatives • Defines most you will pay (buyer) & least you will accept (seller) • Key source of power: Ability to walk away • Strategic advice: • Should you reveal your BATNA? • Falling in love rule

10. Goals, Strategy and Planning

11. The Direct and Indirect Effects of Goals on Strategy • Direct effects • Wishes are not goals • Goals are often linked to the other party’s goals • There are limits to what goals can be • Effective goals must be concrete/specific and measurable. • Indirect effects • Forging an ongoing relationship

12. Strategy, tactics, Planning • A negotiation strategy is an integrated set of behaviors chosen because they are thought to be the means of accomplishing the goal of negotiators. • Tactics are short-term moves. • Planning/Implementation: The “action” component of the strategy process; i.e. how will I implement the strategy?

13. Getting Ready to Implement the Strategy: The Planning Process • Define the issues • Assemble the issues and define the bargaining mix • The bargaining mix is the combined list of issues • Define your interests • Why you want what you want • Your “ideal” settlement • Your bottom line

14. Getting Ready to Implement the Strategy: The Planning Process • Know your limits and alternatives • Set your objectives (targets) and opening bids (where to start) • Target is the outcome realistically expected • Opening is the best that can be achieved • Assess constituents and the social context of the negotiation

15. Getting Ready to Implement the Strategy: The Planning Process • Analyze the other party • Why do they want what they want? • How can I present my case clearly and refute the other party’s arguments? • Present the issues to the other party

16. Influencing negotiations • Reciprocity (law of the universe) • Pertain more to pattern of concessions than to degree. • We feel upset if receiving a favor we cannot return. • Consistency • Need to appear to be consistent in our behaviors to others as well at to ourselves (psychological commitment) • Social proof • The behavior of others determine what is desirable, correct. • Liking. (Flattery can get you everywhere) • Make concession to people they like • Authority • We are inclined to accept opinions of people we consider authorities • Scarcity. • Rare things appear more appealing.

17. Making the first move • Making concessions • Reciprocity (i.e.. conditional concessions) • Size (Normally higher level concession in initial phase?) • Bargaining in good faith • Don’t falsify intention nor information (reputation again) • Offers remain valid until rejected or even after • Common concerns • Sharing information about reservation price (NO) • Negotiation is a matter of strategy, not trust. • Lying about reservation price (NO), the liar gets caught. • Tough or soft negotiation stance? Strategic creativity! • Making the final offer (no rush).

18. Advice for direct information • Ask questions about interests and priorities, things that you are willing to share information about in return. • Give a little information about your own interests and priorities. • Be sure to reciprocate information with information • Be honest when rejecting to give information. • Build trust by meeting expectation.

19. Advice for indirect information • Multi-issue proposals are more efficient in getting information • Do not make proposals that are unacceptable to you • Anchor proposal so that you receive an adequate distributive outcome. • Post proposals visually on a flipchart. • Make 2 or 3 at most proposal at a time • Analyse the proposal quickly (spreadsheet) • Allow time for running the numbers

20. Mutual Adjustment and Concession Making • When one party agrees to make a change in his/her position, a concession has been made • Concessions restrict the range of options • When a concession is made, the bargaining range is further constrained

21. Strategic Options • Per Dual Concerns Model, choice of strategy is reflected in the answers to two questions: • How much concern do I have in achieving my desired outcomes at stake in the negotiation? • How much concern do I have for the current and future quality of the relationship with the other party?

22. Mutual Adjustment • Continues throughout the negotiation as both parties act to influence the other • One of the key causes of the changes that occur during a negotiation • The effective negotiator needs to understand how people will adjust and readjust and how the negotiations might twist and turn, based on one’s own moves and the other’s responses

23. The Dual Concerns Model Avoidance: Don’t negotiate Competition: I gain, ignore relationship Collaboration: I gain, you gain, enhance relationship Accommodation: I let you win, enhance relationship

24. Two Dilemmas in Mutual Adjustment • Dilemma of honesty • Concern about how much of the truth to tell the other party • Dilemma of trust • Concern about how much negotiators should believe what the other party tells them

25. Provide alternatives Assume the close Take out the contract form Split the difference Exploding offers Offers containing tight deadlines Sweeteners I will give you X if you agree Closing the deal

26. Summary on the Planning Process “...planning is one of the most important activities in negotiation.” rk.hr@cbs.dk