Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution.
Negotiation occurs in business, non-profit organizations and government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life.
The word "negotiation" is from the Latin expression, "negotiatus", past participle of negotiate which means "to carry on business".
Another view of negotiation comprises 4 elements:
Strategy, process and tools, and tactics. Strategy comprises the top level goals - typically including relationship and the final outcome. Processes and tools include the steps that will be followed and the roles taken in both preparing for and negotiating with the other parties. Tactics include more detailed statements and actions and responses to others' statements and actions.
Approaches to negotiation
The advocate's approach
In the advocacy approach, a skilled negotiator usually serves as advocate for one party to the negotiation and attempts to obtain the most favorable outcomes possible for that party. In this process the negotiator attempts to determine the minimum outcome(s) the other party is (or parties are) willing to accept, then adjusts their demands accordingly. A "successful" negotiation in the advocacy approach is when the negotiator is able to obtain all or most of the outcomes their party desires, but without driving the other party to permanently break off negotiations, unless the best alternative to a negotiated agreement (BATNA) is acceptable.
Indeed, the ten new rules for global negotiations advocated by Hernandez and Graham.
Accept only creative outcomes
Understand cultures, especially your own.
Don‘t just adjust to cultural differences, exploit them.
Gather intelligence and reconnoiter the terrain.
Design the information flow and process of meetings.
Invest in personal relationships.
Persuade with questions. Seek information and understanding.
Make no concessions until the end.
Use techniques of creativity
10.Continue creativity after negotiations
Emotion in negotiation
Emotions play an important part in the negotiation process, although it is only in recent years that their effect is being studied. Emotions have the potential to play either a positive or negative role in negotiation. During negotiations, the decision as to whether or not to settle rests in part on emotional factors. Negative emotions can cause intense and even irrational behavior, and can cause conflicts to escalate and negotiations to break down, while positive emotions facilitate reaching an agreement and help to maximize joint gains.
Positive effect in negotiation
Even before the negotiation process starts, people in a positive mood have more confidence, and higher tendencies to plan to use a cooperative strategy. During the negotiation, negotiators who are in a positive mood tend to enjoy the interaction more, show less contentious behavior, use less aggressive tactics and more cooperative strategies. This in turn increases the likelihood that parties will reach their instrumental goals, and enhance the ability to find integrative gains.
Indeed, compared with negotiators with negative or natural affectivity, negotiators with positive affectivity reached more agreements and tended to honor those agreements more. Those favorable outcomes are due to better Decision Making processes, such as flexible thinking, creative Problem Solving, respect for others' perspectives, willingness to take risks and higher confidence.
Post negotiation positive affect has beneficial consequences as well. It increases satisfaction with achieved outcome and influences one‘s desire for future interactions. The PA aroused by reaching an agreement facilitates the dyadic relationship, which result in affective commitment that sets the stage for subsequent interactions. PA also has its drawbacks: it distorts perception of self performance, such that performance is judged to be relatively better than it actually is. Thus, studies involving self reports on achieved outcomes might be biased.
Negative effect in negotiation
Negative effect has detrimental effects on various stages in the negotiation process. Although various negative emotions affect negotiation outcomes, by far the most researched is anger. Angry negotiators plan to use more competitive strategies and to cooperate less, even before the negotiation starts. These competitive strategies are related to reduce joint outcomes. During negotiations, anger disrupts the process by reducing the level of trust, clouding parties' judgment, narrowing parties' focus of attention and changing their central goal from reaching agreement to retaliating against the other side. Angry negotiators pay less attention to opponent‘s interests and are less accurate in judging their interests, thus achieve lower joint gains.
Moreover, because anger makes negotiators more self-centered in their preferences, it increases the likelihood that they will reject profitable offers. Anger doesn‘t help in achieving negotiation goals either: it reduces joint gains and does not help to boost personal gains, as angry negotiators don‘t succeed in claiming more for themselves. Moreover, negative emotions leads to acceptance of settlements that are not in the positive utility function but rather have a negative utility. However, expression of negative emotions during negotiation can sometimes be beneficial: legitimately expressed anger can be an effective way to show one's commitment, sincerity, and needs.
Moreover, although NA reduces gains in integrative tasks, it is a better strategy than PA in distributive tasks (such as zero-sum). In his work on negative affect arousal and white noise, Seidner found support for the existence of a negative affect arousal mechanism through observations regarding the devaluation of speakers from other ethnic origins." Negotiation may be negatively affected, in turn, by submerged hostility toward an ethnic or gender group.
Conditions for emotion effect in negotiation
Research indicates that negotiator‘s emotions do not necessarily affect the negotiation process. Albarracın et al. (2003) suggested that there are two conditions for emotional effect, both related to the ability (presence of environmental or cognitive disturbances) and the motivation:
Identification of the affect: requires high motivation, high ability or both.
Determination that the affect is relevant and important for the judgment: requires that either the motivation, the ability or both are low.
According to this model, emotions are expected to affect negotiations only when one is high and the other is low. When both ability and motivation are low the affect will not be identified, and when both are high the affect will be identify but discounted as irrelevant for judgment. A possible implication of this model is, for example, that the positive effects PA has on negotiations (as described above) will be seen only when either motivation or ability are low.
Cultural differences cause four kinds of problems in international business negotiations, at the levels of:
Thinking and decision-making processes
The order is important; the problems lower on the list are more serious because they are more subtle. For example, two negotiators would notice immediately if one were speaking Japanese and the other German. The solution to the problem may be as simple as hiring an interpreter or talking in a common third language, or it may be as difficult as learning a language. Regardless of the solution, the problem is obvious.
Anthropologist Ray L. Birdwhistell demonstrated that less than 35% of the message in conversations is conveyed by the spoken word while the other 65% is communicated nonverbally. Albert Mehrabian, a UCLA psychologist, also parsed where meaning comes from in face-to-face interactions. He reports:
7% of the meaning is derived from the words spoken
38% from paralinguistic channels, that is, tone of voice, loudness, and other aspects of how things are said 55% from facial expressions
Of course, some might quibble with the exact percentages (and many have), but our work also supports the notion that nonverbal behaviors are crucial – how things are said is often more important than what is said.
Exhibit 2 provides analyses of some linguistic aspects and nonverbal behaviors for the 15 videotaped groups, that is, how things are said. Although these efforts merely scratch the surface of these kinds of behavioral analyses, they still provide indications of substantial cultural differences.
Differences in managerial values as pertinent to negotiations
Four managerial values objectivity, competitiveness, equality, and punctuality that are held strongly and deeply by most Americans seem to frequently cause misunderstandings and bad feelings in international business negotiations.
Americans make decisions based upon the bottom line and on cold, hard facts. Americans don‘t play favorites. Economics and performance count, not people. Business is business. Such statements well reflect American notions of the importance of objectivity.
The single most successful book on the topic of negotiation, Getting to Yes, is highly recommended for both American and foreign readers. The latter will learn not only about negotiations but, perhaps more important, about how Americans think about negotiations. The authors are quite emphatic about separating the people from the problem, and they state, every negotiator has two kinds of interests: in the substance and in the relationship. This advice is probably quite worthwhile in the United States or perhaps in Germany, but in most places in the world such advice is nonsense. In most places in the world, particularly in collectivistic, high-context cultures, personalities and substance are not separate issues and cannot be made so.
Competitiveness and Equality
Simulated negotiations can be viewed as a kind of experimental economics wherein the values of each participating cultural group are roughly reflected in the economic outcomes. The simple simulation used in this part of our work represents the essence of commercial negotiations it has both competitive and cooperative aspects. At least 40 businesspeople from each culture played the same buyer-seller game, negotiating over the prices of three products. Depending on the agreement reached, the ―negotiation pie could be made larger through cooperation (as high as $10,400 in joint profits) before it was divided between the buyer and seller.
Just make them wait. Everyone else in the world knows that no negotiation tactic is more useful with Americans, because no one places more value on time, no one has less patience when things slow down, and no one looks at their wristwatches more than Americans do. Edward T. Hall in his seminal writing is best at explaining how the passage of time is viewed differently across cultures and how these differences most often hurt Americans.
Differences in thinking and decision-making processes
When faced with a complex negotiation task, most Westerners (notice the generalization here) divide the large task up into a series of smaller tasks. Issues such as prices, delivery, warranty, and service contracts may be settled one issue at a time, with the final agreement being the sum of the sequence of smaller agreements. In Asia, however, a different approach is more often taken wherein all the issues are discussed at once, in no apparent order, and concessions are made on all issues at the end of the discussion. The Western sequential approach and the Eastern holistic approach do not mix well.
Common Assumptions of Most Theories
Negotiation is a specialized and formal version of conflict resolution most frequently employed when important issues must be agreed upon. Negotiation is necessary when one party requires the other party's agreement to achieve its aim. The aim of negotiating is to build a shared environment leading to longterm trust and often involves a third, neutral party to extract the issues from the emotions and keep the individuals concerned focused. It is a powerful method for resolving conflict and requires skill and experience. Zartman defines negotiation as "a process of combining conflicting positions into a common position under a decision rule of unanimity, a phenomenon in which the outcome is determined by the process."
However, most theories of negotiations share the notion of negotiations as a process. Yet, they differ in their description of the process. Structural Analysis considers this process to be a power game. Strategic analysis thinks of it as a repetition of games (Game Theory). Integrative Analysis prefers the more intuitive notion of process, in which negotiations undergo successive stages, e.g. pre-negotiation, stalemate, settlement. Especially structural, strategic and procedural analysis build on rational actors, who are able to prioritize clear goals, are able to make trade-offs between conflicting values, are consistent in their behavioral pattern, and are able to take uncertainty into account.
Negotiations differ from mere coercion, in that negotiating parties have the theoretic possibility to withdraw from negotiations. It is easier to study bi-lateral negotiations, as opposed to multilateral negotiations.
Structural Analysis is based on a distribution of empowering elements among two negotiating parties. Structural theory moves away from traditional Realist notions of power in that it does not only consider power to be a possession, manifested for example in economic or military resources, but also thinks of power as a relation.
Based on the distribution of elements, in structural analysis we find either power-symmetry between equally strong parties or power-asymmetry between a stronger and a weaker party. All elements from which the respective parties can draw power constitute
Structure. They may be of material nature, i.e. hard power, (such as weapons) or of social nature, i.e. soft power, (such as norms, contracts or precedents). These instrumental elements of power, are either defined as parties‘relative position (resources position) or as their relative ability to make their options prevail. Structural analysis is easy to criticize, because it predicts that the strongest will always win. This, however, does not always hold true.
According to structural analysis, negotiations can therefore be described with matrices, such as the Prisoner's Dilemma, a concept taken from Game Theory. Another common game is the Chicken Dilemma.
Strategic analysis starts with the assumption that both parties have a veto. Thus, in essence, negotiating parties can cooperate (C) or defect (D). Structural analysis then evaluates possible outcomes of negotiations (C, C; C, D; D, D; D, C), by assigning values to each of the possible outcomes. Often, co-operation of both sides yields the best outcome. The basic problem however is that the parties can never be sure that the other is going to cooperate, mainly because of two reasons: first, decisions are made at the same time or, second, concessions of one side might not be returned. Therefore the parties have contradicting incentives to cooperate or defect. If one party cooperates or makes a concession and the other does not, the defecting party might relatively gain more. Trust may be built only in repetitive games through the emergence of reliable patterns of behavior such as tit-for-tat.
Process analysis is the theory closest to haggling. Parties start from two points and converge through a series of concessions. As in strategic analysis, both sides have a veto (e.g. sell, not sell; pay, not pay). Process analysis also features structural assumptions, because one side may be weaker or stronger (e.g. more eager to sell, not willing to pay a certain price). Process Analysis focuses on the study of the dynamics of processes. E.g. both Zeuthen and Cross tried to find a formula in order to predict the behaviour of the other party in finding a rate of concession, in order to predict the likely outcome.
The process of negotiation therefore is considered to unfold between fixed points: starting point of discord, end point of convergence. The so called security point, that is the result of optional withdrawal, is also taken into account.
Integrative analysis divides the process into successive stages, rather than talking about fixed points. It extends analysis to pre-negotiations stages, in which parties make first contacts. The outcome is explained as the performance of the actors at different stages. Stages may include pre-negotiations, finding a formula of distribution, crest behavior, settlement Disadvantages of International Business – Conflict in International Business – Sources and Types of Conflict – Conflict Resolutions – Negotiation – The Role of International Agencies – Ethical Issues in International Buusiness – Ethical Decision-Making.
Conflict in intern ational business Negotiation
International business ethics
Conflict in Organizations:
Incompatible behavior Antagonistic inter action
Block another party from reaching her or his goals
Interdepen dence with another party
Perception of incompatible goals
o Preventin g someone from reaching valued goals
Functional and Dysfunctional Conflict
Functional conflict: works toward the goals of an organization or group
Dysfunctional conflict: blocks an organization or group from reaching its goals
Dysfunctional high conflict: what you typically think about conflict
Dysfunctional low conflict: A typical view. Levels vary among groups
“Constructive Conflict”--Mary Parker Follett (1925) Increases information and ideas
Encourages innovative thinking
Unshackles different points of view
Dysfunctional high conflict
Tension, anxiety, stress
Drives out low conflict tolerant people Reduced trust
Poor decisions because of withheld or distorted information Excessive management focus on the conflict
Dysfunctional low conflict
Few new ideas
Poor decisions from lack of innovation and information Stagnation
Business as usual
Levels and Types of Conflict
Level of conflict Type of conflict
Organization Within and between organizations
Group Within and between groups
Individual Within and between individuals
Levels and Types of Conflict
o Conflict that occurs within an organization o At interfaces of organization functions
Can occur along the vertical and horizontal dimensions of the organization
Vertical conflict: between managers and subordinates
Horizontal conflict: between departments and work groups
Conflict among members of a group Early stages of group development
Ways of doing tasks or reaching group's goals
Intergroup conflict: between two or more groups
Between two or more people
Differences in views about what should be done Efforts to get more resources
Differences in orientation to work and time in different parts of an organization Intrapersonal conflict - Occurs within an individual
Threat to a person’s values
Feeling of unfair treatment
Multiple and contradictory sources of socialization
Related to the Theory of Cognitive Dissonance and negative inequity
Between two or more organizations Not competition
Examples: suppliers and distributors, especially with the close links now possible
Simple conflict episode
Latent conflict: antecedents of conflict behavior that can start conflict episode Manifest conflict: observable conflict behavior
End of a conflict episode
Often the starting point of a related episode
Becomes the latent conflict for another episode Conflict reduction: lower the conflict level
The antecedents of conflict
Example: scarce resources
Some latent conflict in the lives of college students
Library copying machines Computer laboratory
Books in the bookstore
School and other parts of your life University policies
Observable conflict behavior
Example: disagreement, discussion
Residue of a conflict episode
Example: compromise in allocating scarce resources leaves both parties with less than they wanted
o Become aware that one is in conflict with another party o Can block out some conflict
o Can perceive conflict when no latent conditions exist
o Example: misunderstanding another person’s position on an issue
o Emotional part of conflict o Personalizing the conflict o Oral and physical hostility
o Hard to manage episodes with high felt conflict o What people likely recall about conflict
Conflict Frames and Orientations
Conflict frame dimensions
Relationship: focuses on interpersonal relationships Task: focuses on material aspects of an episode
Emotional: focuses on feelings in the conflict episode (felt conflict) Intellectual: focuses on observed behavior (manifest conflict)
Cooperate: emphasizes the role of all parties to the conflict Win: wants to maximize personal gain
Limited research results
End an episode with a relationship or intellectual frame: feel good about relationship with other party
Cooperation-focused people end with more positive results than those focused on winning
Dominance: wants to win; conflict is a battle
Collaborative: wants to find a solution that satisfies everyone Compromise: splits the differences
Avoidance: backs away
Accommodative: focuses on desires of other party
Lose-lose methods: parties to the conflict episode do not get what they want Win-lose methods: one party a clear winner; other party a clear loser Win-win methods: each party to the conflict episode gets what he or she wants Summary
Lose-lose methods: compromise Win-lose methods: dominance
Win-win methods: problem solving
International Business Negotiation
Negotiation is the action and the process of reaching an agreement by means of exchanging ideas with the intention of dispelling conflicts and enhancing relationship to satisfy each other’s needs.
Characteristics of negotiation:
Every negotiation involves two or more parties.
The objective of a negotiation must be definite.
Negotiation must be conducted on an equal basis.
A consensus must be built on the basis of mutual concession.
Negotiation involves exchange of ideas, communication, persuasion, compromise and suchlike (process).
The Dual Concerns Model:
Business negotiation is a proce ss of conferring in which the participants of business activities communicate, discuss, and adju st their views, settle differences and finally reach a mutually acceptable agreement in order to close a deal or achieve a proposed financial go al.
Characteristics of Business Ne gotiation:
The objective of business negotiation is to obtain financial interest
The core of business neg otiation is price
(3). Its principle is equality and mutual benefit
(4). Items of contract should keep strictly accurate and rigorous.
Principles of business negotiation:
Cooperation principle Flexibility principle
Depersonalizing principl e (Separating the people from the problem) Using objective criterion
International Business Negotiation is the business negotiation that takes p ace between the interest groups from different countries or regions.
Features of International Busi ness Negotiation:
International laws and domestic laws are both in force
International political factors must be taken into account
The difficulty and the cost are greater than that of domestic business negotiations
Forms of International Business Negotiation:
Classification by chief negotiator Classification by negotiation object Classification by form Classification by procedure
Classification by chief negotiator
Government- to- government’s negotiation
Government- to- Business’s negotiation
Producer- to- Producer’s negotiation
Producer- to- Trader’s negotiation
Retailer- to -Producer’s negotiation
Business- to- Business’s negotiation
Business- to- Consumer’s negotiation
Classification by negotiation object
(1)Product trade negotiation (2)Technology trade negotiation
Service trade negotiation
International project negotiation
Classification by form:
One- to- one negotiation
Classification by procedure
The Basic Forms of International Business
Host Court” negotiation and “Guest Court” negotiation Oral negotiation and written negotiation Formal and informal negotiation
“Host Court” negotiation and “Guest Court” negotiation:
Host- Court negotiation
Guest- Court negotiation
Changing- Court negotiation
Third- place negotiation
Oral negotiation and written negotiation
Formal and Informal negotiation:
More complex than domestic negotiations
Differences in national cultures and differences in political, legal, and economic systems often separate potential business partners
Steps in the International Negotiation process
The successful international negotiator: personal characteristics
Tolerance of ambiguous situations Flexibility and creativity
Humor Stamina Empathy Curiosity Bilingual
BASIC NEGOTIATION STRATEGIES:
The negotiation as a win-lose game Problem solving
Search for possible win-win situations