2. WHAT IS NGOTIATION
• Negotiation is a dialogue between two or
more people or parties to reach a desired
outcome regarding one or more issues of
conflict. It is an interaction between entities
who aspire to agree on matters of mutual
interest. The agreement can be beneficial for
all or some of the parties involved.
3. • Negotiation is a process where two or more
parties with different needs and goals discuss
an issue to find a mutually acceptable
solution.
• Negotiation is a communication process used
to put deals together or resolve conflict. It is a
voluntary nonbinding process in which the
parties control the outcome as well as the
procedure by which they will make an
agreement
4. FEATURES OF NEGOTIATION
There are certain characteristics of
the negotiation these are
1.There is a minimum of two parties present in
any negotiation.
2. Both parties have pre-determined goals that
they wish to achieve.
3. There is a clash of pre-determined goals, that
is some of the pre-determined goals are not
shared by both the parties.
5. 4. There is an expectation of outcome by both
parties in any negotiation.
5. Both parties believe that outcome of the
negotiation to be satisfactory.
6. Both parties are willing to compromise, that
is, modify their position.
7. The incompatibility of goals may make the
modification of positions difficult.
8. The parties must understand the purpose
of negotiation
6. ELEMENTS OF NEGOTIATION
• In every negotiation , three crucial elements
are always present.
1. Information
2. Time
3. Power
7. 1.Information: Information is the heart of the
matter. It affects our appraisal of reality and the
decision we make. Information can play the
following roles in negotiation.
a. For helping one party, understand the other
party’s interest and motivation.
b. For evaluating credibility.
c. For predicting the directions the negotiation
may take.
8. 2. Time
Since we can not control the clock we must be
careful about the passage of the time since it
affects the negotiation process.
3. Power
Power is mind blowing entity.it is the capacity or
ability to get things done – to exercise control
over people, events, situations and oneself.
However all power is based on the perceptions
one’s ability to negotiate determines whether
he can or cannot influence his environment.
9. TYPES OF NEGOTIATION
• There are two types of negotiation. Both types
are essential to negotiating successfully in
business..
1. Integrative negotiation(win-win,
cooperative)
2. Distributive negotiation(win-lose ,
competitive)
10. Integrative negotiation: integrative negotiation
(also known as win-win) is a negotiation
strategy in which parties collaborate to find a
win –win solution to their problems.
Both sides work together for mutual
satisfaction.
Negotiating parties focus on common interest
rather than differences
Both parties willingly exchange information
and ideas
Negotiators invent option for mutual gain
11. OVERVIEW OF INTEGRATIVE
NEGOTIATION PROCESS
1.Create a free flow of information
2. Attempt to understand the other negotiators
need and objectives
3.Emphasize what is in common between
parties and minimize the differences
4.Search for solution that meet goals/objective
of both sides
12. Distributive Negotiation
• Distributive negotiation takes place when the
resources are fixed and limited and each
individual and party wants to get a large share
of itself. Therefore, distributive negotiation
becomes essentially a competition to get the
maximum for oneself
15. GLOBAL BUSINESS NEGOTIATION
• International business negotiations are
deliberate interactions of two or more social
units (at least one of them a business entity),
originating from different nations, that are
attempting to define or redefine their
interdependence in a business matter.
16. Negotiation Process
While there are many approaches to negotiation tactics, there
are five common steps that most effective negotiations follow to
achieve a successful outcome:
1. Prepare: it's a vital first stage of the negotiating process. To
prepare, research both sides of the discussion, identify any
possible trade-offs, determine your most-desired and least-
desired possible outcomes. Then, make a list of what
concessions you’re willing to put on the bargaining table,
understand who in your organization has the decision-making
power, know the relationship that you want to build or maintain
with the other party, and prepare your BATNA (“best alternative
to a negotiated agreement”).
17. • Preparation can also include the definition of
the ground rules: determining where, when,
with whom, and under what time constraints
the negotiations will take place.
2. Exchange information: This is the part of the
negotiation when both parties exchange their
initial positions. Each side should be allowed to
share their underlying interests and concerns
including what they aim to receive at the end of
the negotiation .
18. 3. Clarify: During the clarification step, both
sides continue the discussion that they began
when exchanging information by justifying and
bolstering their claims. If one side disagrees with
something the other side is saying, they should
discuss that disagreement in calm terms to
reach a point of understanding.
19. 4. Bargain and problem-solve: under this step both
sides begin a give-and-take. After the initial first
offer, each negotiating party should propose
different counter-offers for the problem, all the
while making and managing their concessions.
During the bargaining process, keep your emotions
in check; the best negotiators use strong
verbal communication skills (active listening and
calm feedback; in face-to-face negotiation, this also
includes body language). The goal of this step is to
emerge with a win-win outcome—a positive course
of action.
20. 5. Conclude and implement: Once an
acceptable solution has been agreed upon, both
sides should thank each other for the discussion,
no matter the outcome of the negotiation;
successful negotiations are all about creating
and maintaining good long-term relationships.
Then they should outline the expectations of
each party and ensure that the compromise will
be implemented effectively. This step often
includes a written contract and a follow-up to
confirm the implementation is going smoothly
21. CONCEPT OF BATNA
• BATNA is stand for Best Alternative To
a Negotiated Agreement. It is defined as the
most advantageous alternative that a
negotiating party can take if negotiations fail
and an agreement cannot be made. In other
words, a party’s BATNA is what a party’s
alternative is if negotiations are unsuccessful.
22. • Example of BATNA Mr. John has decided to buy the
second-hand car for which he went to the dealer to
enquire about the price of the same. As per the
dealer, the second-hand car that matches Mr. John’s
requirements is available at $3,000. And the same
car is offered at $2,500 by the colleague of Mr. John.
The minimum price Mr. John is willing to pay is
$2,400. So, the buyer’s settlement range is between
$2,400 – $2,500. And dealers in the future can sell
the same car to another customer at a minimum of
$2,450. Now, the buyer’s BATNA is $2,500, and the
seller’s BATNA is $2,450. A negotiation deal is
possible within the range, i.e., $2,450 – $ 2,500.
•
23.
24. • Aid in Determining the Importance of
Negotiation: It helps determine the best
alternative in an unsuccessful negotiation
deal. If no alternative is available or the cost of
the alternative is more than the current cost
of the deal. Then it helps in determining the
importance of the negotiation deal.
• Analyze the Best Alternative: It helps to
analyze the best alternative from all available
alternatives to gain the maximum.
25. • Helps to Reduce the Unavoidable Cost: It also
helps determine the maximum value the
buyer can pay for the deal. The best
alternative is available for the buyer to cut the
unnecessary, avoidable cost.
• Determines the Strategies for
Negotiations: Best Alternative to a Negotiated
Agreement also aids in determining the
strategies for the negotiations to make the
deal successful at the price beneficial for both
buyer and seller
26. Importance of BATNA
• It provides an alternative if negotiations fall
through.
• It provides negotiating power.
• It determines your reservation point (the
worst price you are willing to accept).
27. STEPS OF BATNA
• List your alternatives. Create a list of all the
possible alternatives available to you. ...
• Evaluate the value of your alternatives. ...
• Choose your preferred alternative. ...
• Determine the lowest deal you'd be willing to
accept.
28. • Example of BATNA
• Colin needs a car and is negotiating with Tom
to purchase his car. Tom offers to sell his car to
Colin for $10,000. Colin scours through
Craigslist and finds a similar car to which he
assigns a dollar value of $7,500. Colin’s BATNA
is $7,500 – if Tom does not offer a price lower
than $7,500, Colin will consider his best
alternative to a negotiated agreement. Colin is
willing to pay up to $7,500 for the car but
would ideally want to pay $5,000 only. The
relevant information is illustrated below:
29.
30. • In the diagram above, if Tom demands a price
higher than $7,500, Colin will take his business
elsewhere. In the example, we are not
provided with Tom’s BATNA. If we assume that
Tom can sell his car to someone else for
$8,000, then $8,000 is Tom’s BATNA. In such a
scenario, an agreement will not be made, as
Tom is only willing to sell for a minimum of
$8,000, while Colin is only willing to purchase
at a maximum of $7,500.
31. • If Tom’s best alternative to the deal is selling
the car to a dealership, which would offer him
$6,000, then both parties can come to an
agreement because Tom’s reservation point
would be $6,000. In the situation described,
the diagram would look as follows:
•
32.
33. • In this case, there is a zone of potential
agreement – $6,000 to $7,500. Somewhere
within this range, the two parties should be
able to come to an agreement.
•
34. • Identifying Your BATNA
• As illustrated in the example above, having a
best alternative to a negotiated agreement
before entering into negotiations is important.
Had Colin not had a BATNA, Tom would have
had more bargaining power. Knowing Colin’s
BATNA is at $7,500, the highest price that Tom
would be able to sell his car to Colin for is
$7,500.
