18

Business Negotiation
-LEARNING OBJECTIVES
After studying this chapter you will learn:
18.1 Meaning of Negotiation
18.2 Features of Negotiation
18.3 Stages in the Negotiation Process
18.4 Management of Negotiation Process
18.5 Negotiation Strategies
18.6 Skills Required for Successtul Negotiation

18.1 Meaning of Negotiation

or more individuals or groups are
EGOTIATION IS THE process in which two
acceptable resolution of one or more
N Working together to arrive at a mutually
a commnercial transaction or a deal of any kind.
It is a
parties feeling
1Ssues, such as a contract, when conducted well, leaves all
that, Graham,
gve-and-take bargaining process committed to achieving it. According to J.L.
concerning a
and
Satisfied about the result decision making process between parties solution of the
negotiationis "a face-to-faceobjective of negotiation is to arrive at a parties.
basic negotiating
Specific issue." The satisfaction and benefit of all the
Conilict to the nmutual acquired. The VP
Finance of ABC
willing to be G.
Vishwanathan
XYZ Ltd. which is (Finance) of XYZ Ltd. Mr. conditions of the
ABC Ltd., wants to acqulre and the Director terms and
Ltd. Mr. Sudhakar Talpade Mumbal to negotiate the
ABC Ltd. While ABC Ltd.
by
at Hotel Taj Mahal, onthe price tobe pald Talpade and Vishwanathan
decide to meet disagreement 6175 milllon. highlights the fact that the
takeover.. There is some Ltd. wants
million, XYZ discussion Vishwanathan
wants to pay ? 5750 during the
discuss the issue and
 Modern Business Communication
18.4
acquisition will provide ABC Ltd. a foothold in the African market wherein XYZ Ltd. has a
distribution network. Talpade realises that his company will lose the opportunity by taking a
Vishwanathan consults his Managing Dire
rigdstand and agrees to pay 75950 milllon. Mr. 6000 million. Mr. Talpade agrees a r
amount of ?
on telephone. He is told to go for an
deal is made to the satisfactton of both the parties.
and how both ot
This is an example of a negotiation between two companies
them resolve the conflict to their mutual benefit.
18.2 Features of Negotiation
A negotiation can take place only when:
(i) There are two or more interested parties.
(u) There is a clash of interestsor conflict between the parties which requires
resolution.
(tit) The parties have predetermined goals.
(iv) The parties believe that the conflict can be resolved through negotiation.
They are of the opinion that the outcome of negotiation may be satisfactory.
(v) No party is rigid in its stand and is willing to comnpromise to a certain
extent.
(vi) All the parties are willing for negotiating the deal.
(vii) All parties come with a positive attitude to resolve the conflict.
(viit) The parties understand the purpose of negotiation.
Thus, negotiation is a decision making process amongpartieswhose preferences
and expectations differ.
18.3 Stages in the Negotiation Process
According to J.L. Graham the process of negotiation can be divided into four broad
stages as follows :

Non-task Sounding 1

Exchange of Information 2

Persuasion 3

Concession and Agreement 4

1, Non-Task Sounding (0pening the

Negotiation). n the first stage, each party
observes, analyses and understands the other. This is the stage of socializing, building
acquaintances and developing relationship that will facilitate the forthcoming stages.
2. Exchange of Information. In the
second stage the negotiating parties share
their information and expectations. The issue to be
The needs, resources and power of negotiation will negotiated is put on the table.
party. determine the strength of each
Business Negottation
185

3. Persuasion. In thisstage the negotiating

parties
toacceptits point of view and to make concessions to persuade each other
to itstrybenefit.
Concession and Agreement. In the final
Theytry to getthe best deal or bargaln to their stage, both sides nodify their stand
best advantage. When the mutually
bencficial agreement is arrived at the negotiation is closed.
The outcome of a negotiation can be anyone of the
Win-Win Situation. In this situation, both the following:
sides standto gain. This is the
best and most stable outcome because both the sides feel that they got what they
expected, They are happy, reconciled and satisfied. Joint problem solving,
laboration and compromise are used to handle conflict. According to Stephern
Covey. "win-win is based on the paradigim that there is plenty for everybody. that
One perSon's success is not achieved at the expense or exclusion of the success of
others.
Win-Lose Outcome. In this situation, onlyone side achieves its goals and the
ather side stands to lose. It is also known as 'Zero Sum' because one party's loss
oounter-balances the other party's gain. Such an outcome is unstable because the
losing party is unhappy and dissatisfied. In this situation threats, force, position
power, are used to handle conflict. This is an authoritarian approach.
Compromise. In this situation, both parties make some compromises to resolve
the issue.
Lose-Lose Situation. In this situation both the parties stand to lose because
outcome.
there is no resolution of the issue. This is the worst

18.4 Management of Negotiation Process

effectively the following steps can be taken :
In ordér to manage the negotiation process
Collection of Information. Information is the most powerful weapon of a
1. negotiation process.
negotiator. Youshould be well informed on all aspects of the
information about everything relevant to negotiation you can minimise
With adequate
chances of being fooled or cheated. of every
the Goals. You must be quite clear about the objectivenegotiation
2. Defining objectives you can focus better during the
negotiation. With clearly defined
process.
place of negotiation should suit both the parties.
The secretarial
3. Place of Negotiation. because the surroundings are familiar and any
offer social
Your workplace is desirablenegotiation is easily available. You can also negotiate at
assistance needed during the other side may not bewilling to
party. But
cOurtesies to the other
your workplace. holding the negotiation must be convenient
Negotiation. The time for the issue, toexplore
all
4. Time of Adeguate time is needed to discuss ofadequate
t0 both the sides. rushed schedule or lack
allthe differences. A
POssibilities and to sort out
hinder the process of negotiation. cooperation and trust is necessary
Ume can ambience ofmutual compromise.
Ambience. An listen and
O. Right be willingto
for negotiation. Each party must
 186 Modern Business Communication
5. Proper Closing. The final agreement must take care of all the relevant issues
he conctusion nust be summed up beforc closing the negotiation.
18.5 Negotiation Strategies
There are two main strategies used in business negotiatlons :
I. Win-Win Strategy. In this strategy the negotiating parties collaborate and
compromise to arrive at a mutually beneficial agreement. This is called 'principled
negotiation'. R. FIsher and W. Ury in their book Getting to Yes' have given the
following principles for win-win strategy.
() Separate the People From the Problem. This principle suggests that the
negotiating parties should separate the basic issue of negotiation from their
interpersonal relationship. Instead of attacking each other they should work side by
side to resolve the conflict.
(ii) Focus on Interests Not Positions. The concerned
on their stated positions as it would obscure their parties should not focus
they should focus on the underlying needs and real needs and interests. Rather
interests due to which they haye
adopted hose positions. Personal egos of negotiators
interfere negotiation. should not be allowed to
(iiü) Invent Options for MutualGain. The
parties should generate a variety of
possibilities to facilitate joint decision making. Searching
narrows down thinking, It makes resolution for the one right solution
are high. difficult, particularly when the stakes
(iv) Insist on Using
value, expert opinion, customObjective Criteria. When objective criteria such as
both sides feel the solution isor law are used neither party has to compromise market
fair. Therefore, and
process should focus on such criteria discussion during the
rather than on what the parties arenegotiation
unwilling to do. willing or
2. Win-Lose
Strategy. In this strategy, each party
gain at thecost of the
It is a other party. Therefore one
party's
attempts to grab maximum
combative competitive approach to
and gain is the other party's
loss.
are used in this approach.
i) IWant It AIM. In
negotiation. The following strategies
makesminor concessionsthis strategy, a party first makes an extreme offer and
major concessions. The other grudgingly. The party pressurisès the other party to then
(ii) Time Wrap. One party party may or may not make
períod and pressurises the other suggests that the offer reciprocate.
is valid only for a
party nay do so or may party to accept the arbitrary limited
(iti) Good Cop, Bad stall/delay the deadline. other
progress of The
Cop. One party
other party walks out of the negotiation. becomes negotiation.
irrational or threatening. The
sympathetic. The fîrst party
(iv) Ultimatumn. Onc party makes a becomes reasonable and
force the other party to accept the offer.
take-l-other
accept the offer. The first party makes the The or-leave-i
partyt showSandunwillingness
offer overtly tries to
to
necessary concessions.
Business Negotiation
187
18.6 Skills Required for
Successfui Negotiation
Agood negotiation requires several skills, some of which are
(0 Adopt aposittve and gjven below:
or win-lose attitude is win-winattituçle
likely
frOm the very beginning An
to make the other party aggressive
(8) Set an optimistic tone for defensive.
negotiating the deal and focus on arriving at a
mutually beneficial solutlon.
iii) Adopt a step-by-step approach. Focus
atime. Arrive at an your attention on one issue/point at
agreement before taking up any other point.
(ip) Understnd the other party's
expectation, state of mind, cuitural
background, strengths and weaknesses, etc. Also know how far you can
push the other party.
(v) Think beforeyou speak. Youare likely to be loser in the
if youspeak in haste.
negotiation process
(pi) Have patience)and control your emotions. If you show too much
for the solution, the other party gets a chance to exploit you. eagerness
(vii) Talk about your point of view but also listen to the view point of the other
party.
(viüi) Try to persuade and convince the other party of the gains it would obtain
by accepting your proposal.
(ix) Listen carefully the tone of voice and observe the body language of the
other party to know its true motives and feelings.
(x) Do not present your complete proposal in the beginning. Do it in stages,
opening up the points at appropriate intervals.
(xi) Focus on the issue rather than on personality or personal likes and dislikes
or egos.
(xii) Do not interrupt or comment when the other side is making its
presentation. Interruptions causea break in negotiation process and may
aggressive. Listen
also annoy the other party.Be cooperative not offensive or
with patience.
take a break of a few minutes.
(xitt) In case of a deadlock or a heated argument,
provide a chance to look
The break willcalm both the parties. It will also communication
position. Keep the
at the issue afresh and reconsider one's
open.
Aconciliatory approach may be necessary when there is a deadlock.Make
(XW) moment without harming your own
necessary compromises at right
your priorities and options. Compromise on issues that
interests. Know
are not very important. are not familiar with so that youdo
issues which you
XU).Consult an expert on or weaken your
something which might harm your interests
notagree on
position. moment.
trump card and bring it outat the critical impressionthat the
x01) Keep a victory. Never give the
(xvil) Be tactful and gracious in your
18.8 Modern Business Communication

outcome is solely in your favour. Let the other party also get the impression
of being a winner.
(xviiÜ) Summarise the discussion and write down the agreement so that there is
no misunderstanding later on. Both the parties must sign the Written
document so that no one can go back later on. f necessary, put in a legal
clause.

TEST aUESTIONS
1. What do you understand by Business Negotiation? State its distinguishing features.
2. Explain the various stages involved in the negotiation process.
3. What steps would you take for the management of negotiation process? Explain.
4. Discuss the win-win and win-lose strategies of negotiation.
5. Explain the skills required for successful negotiations in business.