Free International University of Moldova

Business Negotiations
Galina LISA Larisa TRIFONOVA

PhD in Economics Ass. univ. teacher

+37369336628 +37369657711
lgalina@ulim.md larisatrifonova@inbox.ru
www.ulim.md www.ulim.md
 WHAT DO YOU WANT TO GET
FROM NEGOTIATIONS?

Chapter 1.
CONTENTS

Distributive and Choosing the

01 integrative 02 strategy

When not to
03 negotiate at all
 1.1. Distributive and integrative
“What are you trying to get?”
This is a key overall question to answer before beginning the planning and talking

Fig. 1.1 What are you trying to get?

 1.1. Distributive and integrative
The following two concepts are fundamental to understanding negotiation and how negotiators think.

Fig. 1.1 What are you trying to get?

Distributive perspective. Integrative perspective.

Negotiators try to dominate the other party because they believe
they are in direct conflict with the other party over limited
resources.
Negotiators in a distributive situation fight hard for their
positions (specific prices or amounts) because their loss is the
other side’s gain.
The negotiators believe there will be a clear winner and loser,
but not multiple winners.
Negotiators believe that all parties can win through mutually
beneficial solutions.
Integrative negotiators take a problem-solving approach,
putting focus on exchanging information in order to identify
underlying issues and interests and to generate outcomes that
benefit all parties.
Negotiators reach agreement by employing creative problem
solving approaches to develop solutions that increase the
benefits available to everyone.
 Once there were two little children and
1.1. Distributive and one old broken bicycle.

Each one wanted the bicycle; they could

integrative not agree to share it.

Eventually they started talking … they

learned that one wanted the old tires to
make a catapult, and the other wanted
the body to make pipes.

Integration of their needs and

interests made it possible to
distribute everything
successfully.
 1.1. Distributive and integrative

Another basic way to think about negotiation is Claiming and Creating Value.

When you claim When you create

value, you are value, you are aiming
aiming for the left for the right side and
side as a beyond. Creating
distributive value is certainly
negotiator. integrative; you must
Claiming value bring many issues
means getting as together, even issues
much as possible not planned for the
of limited Fig. 1.1 What are you trying to get? negotiation, to create
resources. new value.
 1.1. Distributive and integrative

the idea of going beyond “Best”...

Fig. 1.2. Try to get more

Example of
creating new value
Movius and Susskind (2009, pp. 180–181)

A manufacturer and a distributor were negotiating a typical limited distribution agreement. After some discussions, they
agreed to have the distributor make a small change to products sold in one region. Therefore, the manufacturer sold more
products and the distributor gained value-added work. Both sides created new value together, beyond their plans for “typical
distribution”.
It is a good habit to think about opportunities for creating new value from the start of a negotiation, even during the early
planning phases.
Movius and Susskind (2009, pp. 180–181) include a checklist for new value creation such as looking for different ways
that the parties value the same issue, joint use of resources, differences in risk tolerance, and additional issues to
add to the core transaction.
Following the ideas of Movius and Susskind, negotiators should look for opportunities to create new value in the gaps where
the parties cannot easily match their abilities, viewpoints, values, or resources. For example, a party which sees no value in
retail sales may be happy to let another party with distribution skills handle some retail work.
Along the way, parties should look for new value opportunities where skills, interests, viewpoints, and abilities overlap. For
example, if both parties are good at an activity, they could bring their teams together to share best practices and gain
efficiency.
 1.1. Distributive and integrative

Figure 1.3 illustrates the gaps and overlaps.

Fig. 1.3. Creating new value: gaps and overlaps

 1.1. Distributive and integrative
Figure 1.4 provides additional practical ideas about where to search for new value
opportunities in typical contracts and agreements.

Fig. 1.4. Where to find new value opportunities

 1.1. Distributive and integrative - Section terminology

01 02 03 04

Integrate Resources Tangible Intangible

combine things used physical non-physical
various to conduct things you things
information, business can touch (brand,
needs, and such as time, (money, reputation,
goals. money, equipment, feelings, etc.)
equipment, products,
staff, etc. etc.)
1.1. Section summary Most negotiations
include sharing finite
limited resources
(distributive) that are
connected with more
complex, tangible or
intangible issues
(integrative).
 1.2. Choosing the strategy

Five broad negotiation

strategies, The goal is „to yield” The goal is „to find win-win solution”
accommodate,
collaborate,
compromise, avoid, and
compete are described
by Lewicki, Hiam and The goal is „to find a middle ground”
Olander (1996) in their
well-known graphic
(Figure 1.5)
The goal is „to delay” The goal is „to win”

Fig. 1.5. Choosing a negotiation strategy

 1.2. Choosing the strategy

The figure only deals with two

dimensions: importance of substantive
outcome (tangible and intangible gains 02 04
that are at the center of a negotiation)
and importance of relationship 03 However, in addition to
These ideas make a the relationship and
useful starting point for substance, there are
Negotiators use this considering the whole many other factors that
figure above to decide
01 negotiation, and each may have an impact on
which approach is best issue within the choosing the negotiation
negotiation strategy.
 1.2. Choosing the strategy
The following list of factors should be taken into consideration when choosing strategies. They include psychological, social,
technical, and contextual factors. These additional factors are flexible and changeable, so reassessing these factors as the
negotiation develops will help you adjust strategies to match the situation.

01 02 03
Resources Among the negotiating parties Environment around the
negotiating parties

• Scarcity of time, money, manpower,
skills, and other resources needed
for execution of an agreement;
• Need to allocate resources
precisely.
• Mutual respect among the
negotiators;
• Personality of the negotiators;
• Empathy among the negotiators;
• Team internal relationships;
• Trust among the negotiators;
• Physical environment;
• Procedural matters;
• Negotiator skill level.
• Complexity of issues;
• Political and regulatory
environment;
• Importance of maintaining a good
relationship;
• Relative power of the parties;
• Uncertainty surrounding issues;
• Pressure from stakeholders;
• Limited time for negotiating;
• Importance of outcomes.
 1.2. Choosing the strategy

It is helpful to select a few of the factors

above to guide your choice of strategy.

Since the factors above are relative, and

not absolute, we can assess them as
roughly high, low, or medium.

Plotting the selected factors on a scale Collaborative strategy

from 0–5 allows a visual determination of
the most suitable strategy.

For this purpose, variables such as: time,

resources, relationship, power, trust, skills, Competitive strategy
and complexity can provide an overview of
the negotiation.

These factors are plotted for two different

negotiations in figure below

Fig. 1.6. Compete or collaborate

 1.2. Choosing the strategy

01 02 03

Urgency Stakes Relationship

refers to the speed refers to the importance of the refers to the
with which the outcome, for example, high quality of the
organization hopes stakes might mean survival or existing
to complete the failure of the organization. Low relationship
negotiation stakes, however, means little
impact on the organization
 1.2. Choosing the strategy

To use the graphic,

consider the three
categories in order from
left to right for each
issue or for the overall
negotiation.
Follow the arrows based
on your evaluation of the
urgency, stakes, and
relationship.

For example, if the urgency

is low and stakes are low,
there is no reason to
immediately deal with the
issue. If there is enough
time (low urgency) and the
issue is important (high
stakes) and the quality of
the relationship is medium,
look for compromises.
Fig. 1.7. Choosing negotiation strategies
 1.2. Choosing the strategy
Changing your strategy appropriately – staying flexible

A negotiation might move from competitive to collaborative as the parties interact more. For example, trust
might increase, more time might become available, the importance of the relationship might change and so
on. Because integrative, collaborative negotiations tend to create more value for all parties, it is best to
attempt to move a negotiation from competitive to collaborative.

However, a collaborative negotiation can break down into a competitive one as deadlines approach and
parties feel the pressure of time.

Many negotiations include issues demanding collaborative/integrative approaches as well as ones that are
more distributive. Therefore, it may be useful or necessary to switch strategies. Ware (1980) suggests
separating the approaches in time and space with appropriate sequencing and packaging.
 1.2. Choosing the strategy
Reasons a factor might change from distributive to integrative or reverse appear in Table „How negotiation factors change”
Factors Possible sources of change

Resources
Factors
• Time, money, manpower, skills, and other resources needed for execution of an
• Possible
Deadlines sources
may become of change
more flexible;
• Labor costs decrease/increase; B
agreement;
• Highly skilled staff is recruited or lost;
• Need to allocate resources with precision.
• Scope and funding change.
Among the negotiating parties
• Mutual respect among the negotiators; • New staff;
• Personality of the negotiators; • Team dynamic improves or breaks down;
• Empathy among the negotiators; • Counterparties know each other better;
• Team internal relationships; • Skills improve;
• Trust among the negotiators; • New Possible sources
location/venue is agreed; of change
• Physical environment; • Procedures become more comfortable/difficult;
• Procedural matters; • Negotiators link or delink issues in the negotiation to make them more or less
• Negotiator skill level. flexible.

Environment around the negotiating parties

• Complexity of issues;
• Regulations become more friendly or more difficult;
• Political and regulatory environment;
• Political support or pressure from the back table increases/decreases;
• Importance of maintaining a good relationship;
• New technology simplifies or complicates matters;
• Relative power of the parties;
• Power changes;
• Uncertainty surrounding issues;
• Knowledge and understanding increase/decrease;
• Pressure from stakeholders;
• Time constraints expand or contract;
• Limited time for negotiating;
• Stakes increase or decrease.
• Importance of outcomes.
1.2. Choosing the strategy

Power

BATNA power consists of the ability to walk away if a

deal is not attractive enough.

Coercive power is rarely experienced in the business world in

countries with sound legal systems. Often this kind of power
comes from organizations or individuals in authority that can
demand bribes or threaten serious consequences with no
danger to themselves.
Power

Perceived power, comes from the perception that one

side has a dominant position. One party may promote
the idea that they are powerful, but the “power” can only
have impact if the other party believes it and reacts to it.
In other words, this kind of power is only real if others
believe it. Parties with this kind of “power” might include
a company that is dominant in its industry and so well
respected that suppliers and partners do not want to
challenge it.
 1.3. When not to negotiate at all

Some negotiations should not happen. These include for example negotiations about issues
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 Some years ago, a new translation services company in the Washington,

CASE: THE INCOMPETENT DC area ordered a translation from English into Czech. The translation was
not long and the cost was only about $500. The translator provided the
Czech text on time by email. There was only one problem: the project
manager who received the text immediately recognized that it used none of
the special characters from the Czech alphabet.

The Czech language uses the Latin alphabet plus several modified
characters for a total of 42 characters. For example, the language uses “c”
TRANSLATOR
and “č” and “a” as well as “á”. These special characters have different
pronunciations and carry important grammatical meaning.

The project manager asked the translator to put the characters in, but he
refused. “The text is understandable to a Czech,” he said. “It is good
enough.”

This was certainly true; the text was comprehensible to a Czech. However,
no Czech office manager or school teacher would accept any writing
lacking the special characters. Text of that sort would only be usable in a
very informal setting. It was not “good enough”. The agreement with the
translator had not specified any “normal” or “special” purpose or setting or
formality.

The project manager, feeling the situation was very clear, refused to pay
the translator. The translator insisted on payment and threatened action in
the California court system. At the same time, he lodged a complaint with
the American Association of Translators (AAT), of which he was a member.
AAT promptly sent a demand to the project manager for payment stating
that they would blacklist the company from their services not only in
California but nationwide. They did not respond to the project manager’s
irritated letter claiming that the text was unusable.

At this point the project manager faced a choice: try to negotiate, fight a
court case 4,000 kilometers away, or give up.
 Decision time
Negotiate: The other party in the negotiation, the translator, refused to talk. The translator had successfully drawn in a powerful ally,
CASE: THE INCOMPETENT AAT, and seemed to have their full support.
Court: Assembling the evidence against the translator would be easy. However, judges are specialists in law, not linguistics. An
TRANSLATOR (cont.) expert witness would cost an additional $500–1,000. Indeed, a single plane ticket would cost at least $500. A lawyer’s services
would cost $2,000–3,000. Of course, the problem might not be resolved in just one visit. With experts and AAT weighing in, the
court case could have gone either way, a victory or a loss.
Give up: Giving up would cost only $500 and take no time at all. There would be no concern about losing the court case and paying
the costs of the other side.
The project manager’s choices could be drawn like this.
After considering the situation described in Figure below, the project manager, with the agreement of the owner of the translation
services company, gave up. The fee was paid despite the fact that the product delivered was worthless.
? Do you think the project manager and owner made the right decision? Why?
 Business Negotiations

Thank You
Galina LISA Larisa TRIFONOVA
PhD in Economics Ass. univ. teacher
+37369336628 +37369657711
lgalina@ulim.md larisatrifonova@inbox.ru
www.ulim.md www.ulim.md