 What is negotiation?

o A social process by which interdependent people with conflicting interest

determine how they’re going to allocate resources or work together in the
future.
o Negotiation is a form of decision making in which two or more parties talk with
one another in an effort to resolve their opposing interests.

 Why negotiate?
o To something new that neither party could attain on their own: When we believe
that we can achieve more with others than without them.
o To solve a problem or dispute between parties: when the 2 parties are willing
and able to adjust their differences.
o To agree on how to share or divide a limited resource: when we interact with
someone because we want them to take something from us or because we want
something from them.

 Characteristics of negotiation
o There are two or more parties.
o There is a conflict of needs and desires between two or more parties.
o Parties negotiate because they think they can get a better deal than by simply
accepting what the other side offers them.
o Parties expect a “mutual” agreement.
o Implied quid pro quo.
o Involves both tangible and intangible components

 Nature of negotiation
o Interdependence:
o Issues Vs Interests:
o The Role of Incentives
o Conflict

 How does negotiation typically flow?

 Prepare for negotiation

o Identify the potential interest and issues involved, tangibles and intangibles
o Prioritize the relevant issues and interest
o Find the alternatives of all parties
 o Opening the negotiation – what and how to say
 Ethics/approaches in negotiation
 When not to negotiate
o If you may lose everything by negotiating.
o If you do not have time, are inadequately prepared or have no stake in the
outcome.
o If waiting will improve your ability to satisfy your needs.
o If the other party’s demands are unethical or illegal.
 Meaning of the following:
o Bargaining Mix
o The bargaining mix is the package of issues up for negotiation.
o Each item in the bargaining mix, can have its own starting, target and
resistance point.
o The point beyond which a negotiator is unwilling to settle is her resistance or
reservation point.
o Bargaining mix is the mix of interests at stake over which both the parties are
negotiating.

o Initial Offer / Opening Offer

 First offer made by any party (From seller standpoint, this is the asking price)

o Target Point / Aspiration

 The best outcome each party can reasonably and realistically expect to
obtain as a result of negotiation.

o Resistance Point/Reservation Price

 Negotiator’s bottom line or point beyond which he will not go (for seller it is
the Walkaway price)

o BATNA (Best Alternative To A Negotiated Agreement)

 The most ideal alternative outcome one party to a negotiation can get
without negotiating with the other party

o ZOPA
 The area between parties’ resistance points.
 Also known as bargaining range or settlement zone.

o Settlement Point
  The point at which the parties agree.

o WATNA (Worst Alternative To A Negotiated Agreement)

 The worst outcome to face if no negotiation happens

 7 elements of negotiation
o Interest – All of the needs, wants, desires and fears that motivate us to negotiate
o Alternatives – All of the things the parties can do without the consent of the other
parties at the table
o Options – Possible solutions that satisfy one or more of the parties at the table
o Legitimacy – Objective or reasonable standards to establish what is fair , right or
acceptable
o Commitment – The written or oral declaration of what the parties agree to do or not
do
o Relationship – Behaviours and emotions that impact the ability of the parties to walk
through their differences
o Communication – All verbal and non-verbal means of exchanging information

 How people negotiate: dual concern model

o This model poses 5 different approaches for handling conflict:
 Competing (win-lose strategy)
 Attach more importance to their own outcomes than they attach to the
other party’s outcomes.
 Collaboration
 People who seek a win-win outcome- attach great importance to both
parties’ outcomes.
 Compromising
 This is what people do if they’re only moderately concerned about
both parties’ outcomes.
 Accommodating (lose-win)
 People who place greater importance on the other party’s outcomes
than their own.
 Avoiding
 When people completely withdraw from the situation.
 Negotiating strategies
o Distributive strategy
 Distributive bargaining is a competitive bargaining strategy in which one
party gains only if the other party loses something.
 It is used as a negotiation strategy to distribute fixed resources such as
money, resources, assets, etc. between both the parties.
 For example, if you go to the supermarket and buy some products, you won't
be able to bargain because they have a fixed price. Either you can buy the
product or leave it.
 Tactics:
 Plan your concessions.
 Provide objective support and explanations for your offers.
 Do not say yes to the other party’s first offer.
 Use silence.
 Use time to your advantage.
 Appeal to norms of fairness.
 Be willing to walk away.
o Integrative strategy
 Integrativeisanegotiationstrategyinwhichpartiescollaboratetofind a "win-
win" solution to their dispute.
 Focuses on developing mutually beneficial agreements based on the
interests of the disputants.
 The classic example involves two teenagers and an orange. If there's only
one orange in the refrigerator and both teenagers demand it simultaneously,
a distributive bargain might well involve each of them getting half of it.
 Tactics:
 Emotions must be managed.
 Recognize and understand that emotions are an inevitable part of the
bargaining process.
 Do not attack the other side even if you think it might feel good to do
so because of the way he or she is behaving.
 If the other party is very emotional, allow him or her to vent his or her
frustrations but do not react to them.
  If your emotions are strong, do the same things.
 If he or she attacks you, recast it as an attack on the problem and not
you.
 Taking a short break might help.

 7 tactics of negotiation
o Focus on the other party’s BATNA and Reservation Value
o Avoid making unilateral concessions
o Be comfortable with silence
o Label your concessions
o Define what it means to reciprocate
o Make contingent Concessions
o Be aware about the effects of diminishing rates of concessions.

 Alternative dispute resolution

o Alternative dispute resolution (ADR) refers to the different ways people can
resolve disputes without a trial. 
o It is faster and less expensive than the legal system.
o It often yields solutions that are more beneficial for you than walking away
without an agreement or settling for a court-imposed solution.
o The most common forms of ADR: Negotiation, Mediation, Arbitration.
o Arbitration and mediation are both used if negotiations fail, but mediation is
preferred because it affords outcome control to the negotiators.

 Mediators
o Mediators have no authority to make final outcome decisions – that is left to the
negotiators.
o They do manage or facilitate the process and that includes making process-
oriented decisions .
o There are different models or approaches used by mediators.
o One of the key variables differentiating these approaches is how directive the
mediators are, or how much control they exercise over the process.

 Arbitration
o It is a method for resolving failed negotiations by having a third party impose a
decision on the negotiators.
o It is usually used to settle disputes – violations of legal, contractual or policy
provisions.
o It is used to finish negotiations that fail to produce a new contract.
o A person who has no vested interest in the outcome listens to the evidence and
testimony and renders a decision that is usually binding – legally enforceable.
o Arbitrators exert limited control over what information is presented and how.

 Hardball tactics & dirty tricks

 BATNA

o The Best Alternative To A Negotiated Agreement (BATNA) is the course of action

that a party engaged in negotiations will take if all talks fail, and no agreement
can be reached.
o BATNAs exist when negotiations are not agreeable to the parties involved.
o It represents the most attractive option available if negotiations fail. 
o BATNAs are used to determine the reservation value–the worst possible offer a
negotiator is willing to accept. 
o Negotiators can also improve their position by exploring multiple BATNAs.

o For instance, Colin needs a car and is negotiating with Tom to purchase his car.
Tom offers to sell his car to Colin for Rs. 10,000. Colin looks online and a similar
car to which he assigns a value of Rs. 7,500. Now, Colin’s BATNA is Rs. 7,500 – if
Tom does not offer a price lower than Rs. 7,500, Colin will consider his best
alternative to a negotiated agreement. Colin is willing to pay up to Rs. 7,500 for
the car but would ideally want to pay Rs. 5,000 only.
o In the diagram above, if Tom demands a price higher than Rs. 7,500, Colin will
take his business elsewhere. In the example, we are not provided with Tom’s
BATNA.
o If we assume that Tom can sell his car to someone else for Rs. 8,000, then Rs.
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 Rs.8,000, while Colin is only willing to
purchase at a maximum of Rs. 7,500.
o If Tom’s best alternative to the deal is selling the car to a dealership, which would
offer him Rs. 6,000, then both parties can come to an agreement because Tom’s
reservation point would be Rs. 6,000. In the situation described, the diagram
would look as follows:

o In this case, there is a zone of potential agreement – Rs. 6,000 to Rs. 7,500.
Somewhere within this range, the two parties should be able to come to an
agreement.

ZOPA

o A zone of possible agreement (ZOPA) is a bargaining range in an area where two

or more negotiating parties may find common ground.
o A ZOPA can only exist when there is some overlap between each party's
expectations regarding an agreement.
o A ZOPA can only exist if there is some overlap between what all parties are
willing to accept from a deal.
o For example, in order for Tom to sell his car to John for a minimum Rs. 5,000,
John must be willing to pay at least Rs. 5,000. If John is willing to offer Rs. 5,500
for the car, then there is an overlap between his and Tom’s bottom lines. If John
can only offer Rs. 4,750 for the car, then there is no overlap, and there cannot be
a ZOPA.
o When negotiating parties cannot reach a ZOPA, they are in a negative bargaining
zone. A deal cannot be reached in a negative bargaining zone, as the needs and
desires of all parties cannot be met by a deal made under such circumstances.
o For example, let’s say that Dave wants to sell his mountain bike and gear for Rs.
700. Suzy wants to buy the bike and gear for Rs. 400, and can’t go any higher.
Dave and Suzy have not reached a ZOPA; they are in a negative bargaining zone.
o However, negative bargaining zones can be overcome if negotiating parties are
willing to learn about one another’s desires and needs.
o For example, let’s say Dave explains to Suzy that he wants to use the proceeds
from the sale of the bike to buy new skis and ski gear. Suzy has a pair of gently-
used, high-quality skis that she is willing to part with. Dave is willing to take less
cash for the mountain bike if Suzy throws the used skis in. The two parties have
reached a ZOPA and can, therefore, make a successful deal.