CHAPTER 2 2-1

Preparation:

What to Do Before
Negotiation
主观题 分
10

Let’s review
What are the five elements of negotiation?

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作答
CHAPTER 2 2-3

The Fixed-Pie Perception

• Most negotiators usually take one of three
suboptimal approaches when preparing for
negotiation:
• Resignation to capitulating to the other side (soft
bargaining)
• Preparation for attack (hard bargaining)
• Compromise (often regarded to be a win-win
negotiation, but in fact, it is not)

Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson

Education,
The Mind and Heart of the Negotiator 5/e (Thompson) Inc. publishing as Prentice Hall
主观题 2 分

The total efforts of negotiation is 100%

What do you think is the rule applied to
negotiation
A. Preparation e.g. 50%
B. Actual work involved in negotiation process
e.g. 50%

????

正常使⽤主观题需2.0以上版本⾬课堂
作答
 Preparation
• 1. self-assessment
• 2. assessment of the other party
• 3. assessment of the situation
CHAPTER 2 2-6

Preparation: Self-Assessment (I)

• What do I want (target or aspiration)?
• What is my alternative to reaching agreement in this
situation (BATNA)?
• Determine your reservation point
• Be aware of focal points
• Beware of sunk costs
• Do not confuse your target point with your
reservation point

Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson

Education,
The Mind and Heart of the Negotiator 5/e (Thompson) Inc. publishing as Prentice Hall
单选题 分
1
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Self-assessment
As for target/aspiration, what kind of negotiator
are you?

A Under-aspiring negotiator
B Over-aspiring negotiator
C The grass-is-greener negotiator
D none of the above
E I am not sure
提交
主观题 10分

1. Have you experienced winner’s curse in your

life?
2. What do you learn from the story I gave you
just now?
3. What do most of the sellers do when they
agree with your first counter-offer so as to avoid
the winner’s curse?

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作答
 Best alternative to a
negotiated agreement
• In negotiation theory, the Best Alternative
to a Negotiated Agreement or BATNA is
the most advantageous alternative course
of action a party can take if negotiations
fail and an agreement cannot be reached.
BATNA is the key focus and the driving
force behind a successful negotiator. A
party should generally not accept a worse
resolution than its BATNA.
• Care should be taken, however, to
ensure that deals are accurately valued,
taking into account all considerations,
such as relationship value, time value of
money and the likelihood that the other
party will live up to their side of the
bargain. These other considerations are
often difficult to value, since they are
frequently based on uncertain or
qualitative considerations, rather than
easily measurable and quantifiable
factors.
• The BATNA is often seen by negotiators
not as a safety net, but rather as a point
of leverage in negotiations. Although a
negotiator's alternative options should,
in theory, be straightforward to evaluate,
the effort to understand which
alternative represents a party's BATNA
is often not invested.
 Discussion
• If you were a manufacturer of certain
product, in negotiation of price, how to
determine your BATNA? (what factors
should be considered when determine
BATNA)
• Options need to be real and actionable to be
of value, however without the investment of
time, options will frequently be included that
fail on one of these criteria. Most managers
overestimate their BATNA whilst
simultaneously investing too little time into
researching their real options. This can
result in poor or faulty decision making and
negotiating outcomes.
 discussion
• Negotiators also need to be aware of the
other negotiator's BATNA and to identify
how it compares to what they are
offering.

• If you were a manufacturer of certain

product, in negotiation of price, how to
predict buyer’s BATNA?(what factors
determine negotiator’s BATNA in this
case?)
• Some people may adopt aggressive,
coercive, threatening and/or deceptive
techniques, this is known as a hard
negotiation style; a theoretical example
of this is adversarial approach style
negotiation. Others may employ a soft
style, which is friendly, trusting,
compromising, and conflict avoiding.
According to Fisher and Ury, when hard
negotiators meet soft negotiators, the
hard negotiators usually win their
position, but at the cost of potentially
damaging the long term relationship
 Discussion
• As for negotiation style, how do you
think members in one group cooperate
with each other?
• Attractive alternatives are needed to
develop a strong BATNA. In the best-
selling book Getting to YES: Negotiating
Agreement Without Giving In, the
authors give 3 suggestions of how to
accomplish this:
• Inventing a list of actions one might take
if no agreement is reached
• Converting some of the more promising
ideas and transforming them into
tangible and partial alternatives
• Selecting the alternative that sounds
• In negotiations involving different cultures
, all parties need to account for cultural
cognitive behaviors and should not let
judgments and biases affect the
negotiation. The individual should be
separate from the objective.
• The purpose here, as Gulliver mentions, is
for negotiation parties to be aware.
• Preparation at all levels, including
prejudice-free thoughts, emotion-free
behavior, bias-free behavior are helpful.
 Case study 1: selling a car
• If the seller of a car has a written offer
from a dealership to buy the seller's car
for $1,000, then the seller's BATNA
when dealing with other potential
purchasers would be $1,000 since the
seller can get $1,000 for the car even
without reaching an agreement with an
alternative purchaser.
• In this example, other offers that
illustrate the difficulty of valuing
qualitative factors might include:
• An offer of $900 by a close relative
• An offer of $1,100 in 45 days (what are
the chances of this future commitment
falling through, and would the seller's
prior BATNA still be available if it did?)
• An offer from another dealer to offset
$1,500 against the price of a new car
(does the seller want to buy a new car
right now, and the offered car in
particular?)
单选题 分
1
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What is the best alternative?

A An offer of $900 by a close relative

B An offer of $1,100 in 45 days

C
An offer from another dealer to offset
$1,500 against the price of a new car
D It depends

提交
 Case study 2: (Elaine’s selling
• house)
Elaine put her house at GBP 120000 on
market, and received the best offer in the
first week as 115000, while she refused
without hesitation.
• While it was time mid-June, no better offer
than that, and she had to wait for August to
resell her house, because she had already
missed the golden season for house sales,
but if that was the case, she had to paid
more than two- month banking loan
cost(GBP5000 per month).
• Take BATNA into consideration, what
主观题 10分

What is the best season for house selling in

Guangzhou?
What is the worse season for house selling in
Guangzhou?
And do you know the reasons why?

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作答
 Simulation negotiation
• Elaine went back to the house’ s first
offeror, with the intention of selling her
house at GBP 115000.
主观题 10分
Assignment 1
Make a detailed negotiation plan with the intention of selling
her house at GBP 115000, which should include:
1. Negotiation process:1)
2)
3)
4) etc.
2. How to apply Negotiation skills/persuasion skills
3. Are you willing to make any concessions(any price less than
115000), why? What is your reservation point(the point that you
are not willing to make any further concession
4. What are your plans of making concession

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作答
 Case study 3
• You have already been working in the
company for many years, while the
income and benefits remain the same,
recently you just got a big project for
the company, and you would like to
negotiate about pay rise with the top
manager.
• What is your BATNA in the case?

• Simulate the case in your group.

主观题 10分
Assignment 2
Make a detailed negotiation plan with your
boss which should include:
1. What is your purpose
2. Negotiation process: 1)
2)
3)
4) etc.
3. What material/information you should
prepare before negotiation
4. Negotiation skill applies
5. BATNA
正常使⽤主观题需2.0以上版本⾬课堂
作答
 Case study 4: preparation before
negotiation
• If you negotiated “agency agreement”
with a noted distributor on behalf of a
Food Company.
• The distributor agreed to be agent of
your product, but disagree with cash
delivery of goods, while in this point,
your company cannot make any
concession.
• What preparation work would like to do
before go for further negotiation?
CHAPTER 2 2-29

Preparation: Self-Assessment (II)

• Identify the issues in the negotiation
• Identify the alternatives for each issue
• Identify equivalent packages of offers
• Assess your risk propensity
• Endowment effects
• Am I going to live to regret this?
• Violations of the sure thing principle
• Do I have an appropriate level of confidence?

Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson

Education,
The Mind and Heart of the Negotiator 5/e (Thompson) Inc. publishing as Prentice Hall
 CHAPTER 2 2-30

Developing a Reservation Point

Step 1: Brainstorm Your Alternatives. Imagine that you want to sell your house. Your target point—$275,000. What will you do in the event that you do not get
an offer of $275,000? Consider as many alternatives as possible.
Step 2: Evaluate Each Alternative. Order the various alternatives in terms of their relative attractiveness, or value. If an alternative has an uncertain outcome, such
as reducing the list price, you should determine the probability that a buyer will make an offer at that price. Suppose that you reduce the list price to
$265,000. Based on research, you assess the probability of an offer to be 60%. The best alternative should be selected to represent your BATNA.
Step 3: Attempt to Improve Your BATNA. In this case, you might contact a rental company and develop your rental options, or you may make some
improvements that have high return on investment (e.g., new paint). Of course, your most attractive BATNA is to have an offer in hand on your house.
Step 4: Determine Your Reservation Price. The least amount of money you would accept for your home at the present time. You assess the probability of an
offer of $250,000 or higher to be 95%. You think there is a 5% chance that you will not get such offer and will rent it. The probabilities always sum to
exactly 100%. We have considered all possible events occurring. No alternative is left to chance. You can assess your expected probabilities of selling
your house:

Reduce the price of your home to $265,000 Psale = 60%

Reduce the price of your home to $250,000 Psale = 35%
Rent the house Prent = 5%

An overall value for each of these “risky” alternatives is assessed by multiplying the value by its probability:
Value of reducing price to $265,000 = $265,000 x 0.6 = $159,000
Value of reducing price to $250,000 = $265,000 x 0.35 = $87,500
Value of renting the house = $100,000 x 0.05 = $5,000

Add all the values of the alternatives to arrive at an overall evaluation:

= 0.6($265,000) + 0.35($250,000) + 0.05($100,000) = $159,000 + $87,500+ $5,000 = $251,500

Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson

Education,
The Mind and Heart of the Negotiator 5/e (Thompson) Inc. publishing as Prentice Hall
 Case study 5
• Company A is negotiating with the
overseas sales agent B, while the latter
does not agree with the 6% commission
for agency.

• What do you think are the alternatives

for A’s negotiation plan?
 After brainstorming, company A has the
following options for overseas sales and
their annual agency commission are as
follows:
• 1. sale by domestic distributor 7%
• 2. sale by internet 4%
• 3. increase commission to 10%

￥
• Suppose the potential sales amount is 20
million per year, based on the above
information, can you make decision which is
the best alternative?
• And what is the reservation point?
CHAPTER 2 2-33

Preparation: Assessing the Other

Party
• Who are the other parties?
• Are the parties monolithic?
• Counterparties’ interests and position
• Other negotiators’ BATNAs

Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson

Education,
The Mind and Heart of the Negotiator 5/e (Thompson) Inc. publishing as Prentice Hall
CHAPTER 2 2-34

Preparation: Assessing the Situation

(I)
• Is the negotiation one-shot, long-term, or repetitive?
• Do the negotiations involve scarce resources,
ideologies, or both?
• Is the negotiation one of necessity or opportunity?
• Is the negotiation an exchange or dispute situation?
• Are there linkage effects?
• Is agreement required?
• Is it legal to negotiate?
• Is ratification required?
• Are there time constraints or other time-related costs?
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Education,
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CHAPTER 2 2-35

Preparation: Assessing the Situation

(II)
• Are contracts official or unofficial?
• Where do the negotiations take place?
• Are negotiations public or private?
• Is third-party intervention a possibility?
• What conventions guide the process of negotiation
(such as who makes the first offer)?
• Do negotiations involve more than one offer?
• Do negotiators communicate explicitly or tacitly?
• Is there a power differential between parties?
• Is precedent important?

Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson

Education,
The Mind and Heart of the Negotiator 5/e (Thompson) Inc. publishing as Prentice Hall
 Case simulation 6
• For long, Chinese silk manufacturers get a
very limited market share in Hongkong, in
face with fierce competition from
manufacturers from natives in HK, Taiwan
makers etc. Factory director Mr. Fan in
shaoxing, Zhejiang province thinks of
better ways of promoting their product, e.g.
new design, quality silk product, and low
price, etc. with a hope to get a stand in
European silk market.
• After the market survey, Mr. Fan put his
• American business woman Nicola was
impressed by the demonstrate of the
products, and came to communicate with Mr.
Fan, saying she would purchase seven
patterns, and offer $3 for each pattern per
yard.
• The cost price for each yard is $5, and
processing charges for each yard is $ 0.36
per yard.
• Simulate the negotiation within your group,
paying attention to the questions:
• 1. what are BATNAs for each party?
• 2. what are reservation points for each party?
CHAPTER 2 2-38

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