Creating Value MBA 2023

• Haggling is iterative give and take process that gets started
after the initial offer. Concessions are central to negotiations

• Other side’s BATNA and RV will provide you a handle
• Avoid unilateral concessions....invite reciprocity
• Listen…speak only when you must…be comfortable with
silence
Haggling • In addition to trying to convince the other side to your offer,
try to learn about the other side
tips: • Observe…God has given us two eyes, two ears and one mouth
Concessions • Prefix your concessions with your reason, wishes and
expectations
• Make concessions contingent upon outcome
• Follow diminishing rates of concessions
• Sometimes dramatic last big concession to close the deal also
helps
Pradeep Mehra Negotiations for Business Success MBA Q6 2023

• Generally concede slowly
• Concede first on minor issue but not be first to concede
on major issue
• Make unimportant concessions and portray them as
more valuable than they are
Haggling • Picture the pattern of concession made by other side

• Concessions, once given, are given…taking back is
tips…some normally not feasible....
more • People normally do not like the take it or leave it

approach…fait accompli option is often resented
• Not reciprocating concessions – message of firmness by
other side….can lead to breakdown of
negotiations….other side may feel insulted….so should
you always reciprocate?….it depends

• Your boss gives you lot of work on Friday
evening. What to do?
• Your junior wants to work from home
Situations…..think regularly and you cannot allow it. What to
do?

Creating Value
Negotiations
Pradeep Mehra Negotiations for Business Success

MBA Q6 2023
• Pizza sharing
Dividing the Leveraging different wants

pie Enlarging the pie

• Recognizing multiple issues
• Camp David negotiations. Egypt
and Israel negotiations on Sinai
desert Recognize
• Let us try to identify examples of multiple
truly single-issue situation……that
will be very rare issues

• You are negotiating license fee
for sale of five-year contract of a
popular TV serial of 100 episodes
with a TV channel.
• Your earlier negotiations with
Case Study some other channel have
resulted in sale value for 6 runs
per episode, the industry
practice, at $ 3.5 million.

• You estimate that it can generate following
Ad revenue for the TV channel with whom
you are now proposing to negotiate. You
guess rating of 5-6 and expect license fee of
$ 7 million for 6 runs per episode. Revenue
of the TV channel:
Case Study • Rating 2-3, likelihood 10%: $ 7 million
• Rating 3-4, likelihood 10%: $ 8 million

• More exposure means lower resale value for you
after the license period. Following is its effect on
your revenue:
• 4 runs per episode: you gain $ 0.5 million
• 5 runs per episode: you gain $0.25 million
Runs per • 6 runs per episode: Neutral
episode • 7 runs per episode: you lose $0.25 million
• 8 runs per episode: you lose $ 0.5 million
You are negotiating sale of another program with

another channel and that channel has offered you $ I
million for it which you are inclined to accept

Your aim
• Maximize profit
• Preserve relationship
Contract term for license fee and runs per episode. You will need to
think:
How would you prepare for the negotiation
Which issue you would discuss it during the negotiations
What information would you plan to share and how would you respond
to tough questions
• You justify and ask $ 9 million
• Other side is shocked but stays for
negotiation
Start of • They expect rating of 3-4.
negotiation • They showed interest in your other program
but you told them to keep that apart.
• They showed interests in 8 runs per episode
which is beyond industry practice

Making the Deal
• You finalized fee of $ 5.5 million on the basis of 6 runs per episode. You
clarified that more runs per episode mean overexposure of your show and
you would not agree beyond the industry practice
• Rating of 3-4 would have meant your expectation to decrease from $7 M to
$5 M. But you were able to get $5.5M.
• You are happy
• By this deal, you have created value over earlier negotiation with some
other channel at $ 3.5 million. Value now created by you for your self is $ 2
million (5.5-3.5)
• You are happy

Analysis
• You do not know but RV of TV channel was $6.5 million. Your RV was
$3.5 million. So ZOPA was a range of $ 3 million.
• You were able to capture $2 million out of the $3 million ZOPA perhaps
because you started aggressively at $9 million. TV channel gets
remaining $ 1 million of the value.
• Value created by the deal is $ 3 million….$ 2 million for you and $ 1
million for the TV channel
• You are happy

Runs per episode
You did not negotiate for runs per episode because you felt that
buyer will not agree for less than 6 and you would not agree for
more than 6
Did it occur to you check out why the TV channel was keen beyond
industry practice of 6? If you had discussed, you would have got an
idea about revenue sensitivity of the TV channel….

• 4 runs: you gain $0.5 million, TV channel
loses $1.6 million
• 5 runs: you gain $0.250 million, TV channel
loses $0.8 million
Differential
• 6 runs: neutral
outcomes • 7 runs: you lose $0.250 million, TV channel
provide gains $0.8 million
opportunity • 8 runs: you lose $0.5 million, TV channel
gains $1.6 million
What does it mean?
Logrolling: Trading across issues.

• TV channel could have passed to you
$1 million out of $1.6 million, if the
deal was finalized for 8 runs per
episode. They would still get extra $0.6
million and you would get net $0.5
million (1-0.5)
• Size of the pie gets enlarged by $1.6-
Logrolling 0.5 = 1.1 million.
• Revised value created in this deal will
be: 3 (for 6 runs per episode) + 1.1
(additional value for 8 runs per
episode) = $4.1 million
• You get $2.5 million (2+0.5), TV channel
gets 1.6 million (1+0.6)

Learning: relative importance of issues
creates conflicts but also provides
opportunity for value creation
Logrolling is better than compromise….why

haggle whether to have 4 or 6 or 8 runs……
Logrolling put on table and negotiate its value
Adding issues sometimes helps in

balancing….some issue may be a roadblock
but adding another issue could balance it

How about adding another program too
• You shut up a discussion on another program saying that as a separate matter.
But if you did not do so, you may have known that this TV channel is ready to pay
more
• This TV channel’s RV was $ 2 million for this program. This is $1 million more than
the offer in hand with you from some other TV channel. So there is an
opportunity to enlarge pie further from $4.1 million to $ 5.1 million
• You finalize this part of the deal at $ 1.5 million thereby adding $0.5 million to
you (1.5-0.5). Value to the TV channel is increased by $ 0.5 million
• Revised value to you becomes $ 3 million (2.5+0.5) and to the TV channel $ 2.1
million (1.6+0.5)

Packaged deal
• What if you have worked out a package deal?
• Remember more issues = more money in a deal = more possibility of
problem solving in a dispute
• Do not treat more issues as more complexity. Treat it as opportunity.
• Every issue is on the table. Every issue is negotiable

Leaving money on the table
• $ 2.1 million was left behind on the table if the deal was left as it got finalized in first iteration
• Objective should be not to leave money on the table
• Subsequent iterations in the example are instances of what is called Pareto improvements
• Pareto efficient agreement is an agreement where you have reached the limit of value maximization,
and any further negotiation will benefit one side at the cost of the other side
• How to know if you have reached Pareto efficient limit? You can only guess. Have you understood
concerns of the other side, their interest, priorities
• Have you left money behind in this deal

Dealing with
uncertainties
• There is difference in perception on rating of
the show – is it 3-4 or 5-6? You decided agree
to disagree. But buyer would not pay more
so you end up on lower side
• How to do better. (can share past experience,
can share market research data, may take
some expert opinion) Both sides could have
taken middle point i.e. 4-5 as a
compromise….requires haggling
• How about making contingent
contract/concessions

Expectation from contingency contract
• If rating is less than 4, buyer receives $1 million rebate
• If rating is more than 5, seller receives $1 million extra license fee
• If rating is 4-5 – neutral position
• How each side looks at the above:
• Suppose for the seller: likelihood of more than 5 is 70%, less than 4 is 20%. So
expectation is: 0.7*1-0.2*1=$0.5 million
• Buyer had differing expectation. Suppose buyer’s expectation is: 2-3: 20%; 3-4: 50%; 4-
5:10%; 5-6: 10%; 6-7: 10%.
• For buyer, the deal will mean differently. Likelihood of more than 5 is 20% and less than 4
is 70%. So expectation of seller is: -0.2*1+0.7*1=0.5 million
• So both sides feel that they have gained $0.5 million by this

Caution in contingency contract
Contingency contract can be disadvantageous when the other side has

better information
Measurement criteria should be clear. Otherwise dispute will defeat the

purpose of the contract and sour relationship.
Other side should not resort to negative tactics to win the bet. In this
example, what if the buyer does not advertise the program properly and
rating becomes less.

Best possible packaged deal
Issues were: Not only price but also number of runs, another program
addition, difference in expectations on rating
Goal is not about getting a best deal on one issue say price but about
the best possible packaged deal….so identify your multiple issues and
also multiple issues of the other party and their relative importance

Terminology
Win-Lose and Win-Win are also called as below:
Distributive – Integrative
Competitive – Cooperative
Zero sum – Non zero sum
Adversarial – Problem solving
Position based – Interest based
Claiming Value – Creating Value
Win Lose - Win Win
A. Position: Things people say they want,
demands, terms and conditions
B. Interests: Underlying motivations, needs,
concerns, fears, aspirations: security, economic
well being, sense of belonging, recognition,
Interest control
versus • Always look for underlying situation/reason in

Position any negotiation
• Differentiate between Interest and Position.

What people say is position they state and why
they say so is their interests behind it

• If you negotiate for position, it is more like I
win you lose and may end up in both sides
losing. Positions become non-negotiable
• Positions can shift if negotiation gets into

Interest vs negotiations for interest
Position
• Reconcile Interests rather than compromise
positions. Reconcile interests means
reconciling shared interests as well as
competitive interests

Interests
• Substantial Interests: Financial, Economic

• Relationship Interests: Preserving relationship
• Interest in Principles: fair, right, ethical….Example: application in
electoral politics….usually more difficult to change
• Process Interest: want to have a say, manner in which deal or decision is
arrived
• Subjective Interest: liking Example: fast car or safe car

Interests
• Interests thinking does not come automatically. You will need to develop
your mind’s orientation towards underlying interests. Position people
take are outcome of underlying Interests.
• Address the cause, not the effect. Address the disease, not the symptom
• Ask why rather than what?
• Build convergence for interest rather than demands or position

023
Interests • There is almost always more than one type
of interest underlying a negotiation….
• Parties can have different types of interests
• Interests can also change
• Surfacing Interest and focus on interest can
some time be counter productive to
negotiated outcome (example: in
diplomacy, in family life, in ugly situation)

Interests example
Reducing risk (financial, physical, etc)
Precedent (setting/not setting)
Respect (to be treated with)
Reputation/image
Saving face
Deterrence
Time (availability)
Win
Relationship
Vindication
Teach (a lesson)
Ego

023
Approval (recognition, be valued)
Reward (good behavior)
Punish (bad behavior)
Help/give
Fairness, legitimate
Bargain
Interests example Joy
Closure (desire for)
Success
Legacy
Cut loss
Fear

023
Impress (others)
Evasion (of responsibility)
Consistency
Pride
Peace of mind
Interest examples Loyalty
Accountability
Right (to be proven)
Mission (achieving)
Cut loss
Access (allow or block)

023
• A non-interest is something specific that a
person does not particularly care about or
Non Interest
is of very low importance
• Knowing or predicting a person’s non-
interest will help you eliminate what is not
motivating the person

023
Visualize their view point: Research shows good
Visualize negotiators spend four times more time considering
other view point than average negotiators
Identifying Research Research about their interests

about
Interests
Ask. Especially if you are surprised or skeptical: ask

Ask direct or indirect questions depending upon the
situation

023
• In a conflict, sometimes better to not dwell on who is
right or wrong
• Arguments can cause resistance and resentment
• Arguments tend to assert who is right or wrong
Arguments • Be aware that persuasive arguments often do not often
result in acceptable agreements because arguments
themselves may not satisfy important interests
• Arguments are also used to strengthen or weaken the
perception of the parties’ BANTA. So arguments are
typically more used in distributive negotiations. Focusing
on arguments too much detracts integrative negotiations

023
Think……MESO
01 02 03
Why other side Then work towards Work out multiple
could disagree to finding solutions equivalent
your proposal simultaneous offers
(MESO)

023
• Suppose that a tour operator is negotiating a travel
package with a community group.
• The issues at stake include overall cost, travel dates,
and level of accommodations.
• The tour operator, who already knows that the
community group is on a budget, ranks the issues
Example of using a scoring system and comes up with three
packages, equally valued by the operator.
MESO • Package 1 is a relatively low-cost package with low-
end accommodations and peak travel dates.
• Package 2 is also a relatively low-cost package, but
with high-end accommodations and off-season
travel dates.
• Package 3 is a costlier package with midrange
accommodations during the peak travel season.

023
• Once you have put together your MESOs, present them to
the other side.
• Rather than telling your counterpart that you value these
Meso example offers equally, explain that you want him/her to choose the
offer that’s best for him.
(continued) • If he/she rejects all the offers, ask to tell you which one is
more preferable.
• Response will give you valuable information about how to
fine-tune the proposal.

023
• Suppose the community group’s leader tells the
tour operator that the group prefers Package 2, but
that the price is still too high.
• Now the tour operator understands that the group
is willing to travel during the off-season in exchange
for a lower cost. She reduces the cost of Package 2
by downgrading the accommodations slightly.
Meso example • After negotiating a bit more on price, the two sides
(continued) come to agreement on a modified version of
Package 2.
• Research tells us that MESOs approach succeeds
because it takes both parties’ interests into account
and, in the process, improves negotiators’
outcomes and satisfaction.

023
• Because MESOs contain ample information about your interests,
you should counterbalance such disclosures by anchoring your
offers to your advantage.
• All of your offers should exceed your target price or ideal
outcome to allow some wiggle room for further negotiation.
• A savvy counterpart may try to cherry-pick the best elements of
Meso: Caveat each proposal to create a new deal that works against you.
• Respond to such attempts by using your scoring system to come
up with say three new offers that respond to your counterpart’s
priorities without sacrificing your own goals.
• Because the abundant choices offered by MESOs could be
overwhelming, avoid presenting many offers at a time. You may
use rule of thumb as three

023
Learning is:
Discovering Negotiating multiple issues and making multiple offers

what is helps you understand other side’s relative importance
regarding various issues
important
Negotiation is information game

023
Identify Identify your multiple interests
Identify Identify multiple interests of the

Value other side
creating Assign Assign relative priority to interests
ways: and issues
summary Guess Guess relative priority of various

issues by the other side
Work Work out package RV and package
out target value

• Keep decisions pending and conditional
till all aspects are finalized
• Minimize formality until the close of final
agreement
• Have faith in your own problem solving
ability
Execution
ways Always look for shared and conflicting
interests

023
Who can be of help
(whether indirect or
temporary or otherwise),
even enemy’s enemy is a Demands may even be
friend. Even your opportunities: example in
competitor could be your contract business
ally in some bidding to
defeat some other
Investigative
competitor
Negotiations
There may be hope even
Nothing usually is “their
after failing of
problem”
negotiation

023
Negotiations
Claiming and Creating value

023
Separate the people
from the problem
• Negotiators are people first

• Understand substantive interests,
relationship and other interests
• Disentangle people issues, relationship
issues and substantive issues in a
negotiation
Pradeep Mehra Negotiations for Business Success MBA Q6

2023
• Do not deduce their intentions from your fears
• Do not blame them for your problems
• Discuss each other’s perceptions, as far as
possible
• Allow them to save face
People - • Distinguish how they treat you from how you
treat them
perception • In conflict situation, most of the time, conflict is
not objective reality. It lies in people’s head. So
put yourself in their shoes to understand them
• Important Note: Generally speaking, come hard
on the problem and soft on the people.

• Provides reasoning and legitimacy to your offer.
Improves your haggling
• Fair standards such as precedents, industry norms
• Fair procedures: Two examples: (a) dividing a cake.
Fairness and One cuts and the other chooses. (b) In a divorce
proceedings, decide visiting rights of parents first
Standards: before deciding on custody of children
• If other side advocates different standards, discuss
Legitimacy how….usually one standard will be more persuasive
than the other….agreement on best is not
to proposals necessary…….using standards for fair deal is after all
only an aid to your negotiations…….whether
distributive or integrative

Research findings
During pre-negotiation planning:
a) Spent more time in finding common ground
Negotiations b) Conceptualized more options
– Superior c) Considered long term consequences
negotiators d) Prepared their goals in range rather than
point
e) Did not have rigid sequential order

During face to face bargaining:
a) made fewer immediate counter proposals
b) avoided defend-attack cycles
c) asked more questions to test understanding
Research on d) did not dilute their arguments by including
weak reasoning
superior e) did not describe their offers in glowing terms
negotiators
During post negotiations review:
Reserved time to review what they learned from
their past negotiations

• Most gains are about differences
• Most gains are created when parties receive
something valuable in exchange of giving up
Creating something less valuable.
joint gains • If the other side values something more than
you do, let them have it – but do not just
give away………sell it

• Think about the closure from the beginning
• Plan a framework agreement
• Be persistent in your interests but not rigid on any
particular solution
Moving from • Diagnose the barrier to closing of the deal

• Use the clock as negotiations expand to fill the time
option to available
• If the other side asks for more concessions after closing
deal: Tips but before signing ask for favorable adjustment in return.
• Be uncomfortable whenever you are in a situation for
giving unreciprocated concessions
• Normally, be generous in the end
• Sign here: conclude formally leaving no open ends

• Identify your worries
• If you do not feel insecure, you can meet at
their place….you have option to walk
Where out…..or meet in neutral place where you
have facilities required for negotiating a deal
should we • If you are anticipating ugly scenes, you can
meet consider meeting at public place where the
other side may find it difficult to create ugly
scene

• Clarify what you will do or not do….in
clear words….if you want someone to
join your company…don’t just talk
about it; make an offer.
• Written offer is more credible than oral
Carefully craft • Sometimes you may also like to clarify
what you will do if the other side does
commitments not accept your offer……you will call
police….you will stop supplying goods
• Clarify what you want them to
do….otherwise they may do nothing

• Usually most negotiations may involve
claiming value at some stage of the
negotiations. However creating value till
Mixed Pareto frontier is reached in enlarging the
bargaining pie should be attempted.
• Concentrating only on claiming value,
positional bargaining, should be very rare

Prepare in advance for tensions
that usually arise in the following
situations:
• Distributive negotiation and
creating value (situation related)
Managing • Principal and agent or boss-
tensions subordinate or supplier-customer
(relationship related)
• Empathy as well as assertiveness
(emotions related)

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• Haggling is iterative give and take process that gets started

after the initial offer. Concessions are central to negotiations

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Haggling • Picture the pattern of concession made by other side

more • People normally do not like the take it or leave it

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success

Dividing the Leveraging different wants

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

You are negotiating sale of another program with

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Logrolling is better than compromise….why

Adding issues sometimes helps in

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Contingency contract can be disadvantageous when the other side has

Measurement criteria should be clear. Otherwise dispute will defeat the

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

versus • Always look for underlying situation/reason in

• Differentiate between Interest and Position.

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

• Positions can shift if negotiation gets into

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

• Substantial Interests: Financial, Economic

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2023

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Reward (good behavior)

Punish (bad behavior)

Closure (desire for)

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Evasion (of responsibility)

Interest examples Loyalty

Right (to be proven)

Access (allow or block)

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Identifying Research Research about their interests

Ask. Especially if you are surprised or skeptical: ask

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Pradeep Mehra Negotiations for Business Success MBA Q6 2

Discovering Negotiating multiple issues and making multiple offers