SSPB 3223

INTERNATIONAL BUSINESS NEGOTIATION

WEEK 6 LECTURE 6
NEGOTIATION PROCESS

Prepared by:
Siti Nur Shahida, AFHEA
PPI, UTMSPACE
 LECTURE OUTLINE

• Introduction
• Negotiation Process
• Negotiation Stages
• Negotiation Procedures
• Negotiation Structure
• BATNA, ZOPA
• Contract Negotiation
 INTRODUCTION
Negotiation process is always viewed as a combination of
inter-related parts of stages, consisting of activities such
as information-sharing, persuasion attempts, concessions
and trade-offs, which make a final negotiated agreement
possible.

Lewicki et al., (2010) view IB negotiation as a process of

give and take between parties from different countries in
which the parties keep modifying their offers in order to
come close to each other and make an agreement.

The negotiation process is a structured series of

interactions between two or more parties aimed at
reaching a mutually acceptable agreement.

Negotiations can occur in various contexts, such as

business, diplomacy, legal proceedings, or personal
relationships. The process involves discussing and
bargaining over different issues, interests, or positions to
find common ground and resolve conflicts.
NEGOTIATION PROCESS: DEFINITIONS
Negotiation process consists of a sequence of
inter-related stages or activities. It includes
communication between parties, information
exchange, persuasion attempts, concessions
and trade-offs, all leading to the final negotiated
agreement (Das & Teng, 2002).

The concept of the negotiating process

encompasses several key elements that is
communication, preparation, position and
interests, bargaining and concessions, problem
solving and collaboration and agreement and
implementation.

The process sometimes fuzzy since the different

stages often overlap, are of different duration and
develop over time.
Negotiation process can be represented as a series
of milestones leading to the final negotiated
agreement.
 NEGOTIATION PROCESS: CONCEPT

• Effective communication is fundamental to the negotiation

process.
• Parties involved must exchange information, express their
Communication perspectives, and actively listen to understand each
other's concerns and interests.
• Clear and transparent communication helps build trust
and facilitates the exploration of potential solutions.

• Adequate preparation is vital for a successful negotiation.

• This involves gathering relevant information, analyzing the
issues at hand, identifying goals and priorities, and
understanding the strengths and weaknesses of both
Preparation parties.
• Thorough preparation enables negotiators to develop
strategies and anticipate potential obstacles or
challenges.

• Negotiators often bring their positions or initial proposals

to the table.
• However, it is essential to move beyond positions and
Positions and focus on the underlying interests or needs driving those
positions.
Interests • Identifying and addressing the interests behind the stated
positions can open up possibilities for creative problem-
solving and finding win-win solutions.
NEGOTIATION PROCESS: CONCEPT (CONT.)

• Bargaining involves the process of making offers,

counteroffers, and concessions. Negotiators engage in give-
Bargaining and and-take interactions, adjusting their positions and seeking
mutually agreeable compromises. Skilled negotiators employ
Concessions various tactics and strategies to influence the other party and
secure favorable outcomes.

• Successful negotiations often involve a problem-solving

Problem-solving approach where parties work collaboratively to find innovative
solutions. This may involve brainstorming, exploring different
and options, and seeking common ground. By focusing on shared
interests and engaging in constructive dialogue, negotiators
Collaboration can reach mutually beneficial agreements.

• The negotiation process culminates in reaching an agreement.

This agreement reflects the mutually acceptable terms and
Agreement and conditions that address the parties' interests. Once the
agreement is reached, it needs to be implemented effectively,
Implementation with both parties fulfilling their commitments and monitoring
progress to ensure compliance.
 NEGOTIATING GOALS AND INTERESTS

Negotiating goals refer to the specific Negotiating interests refer to the

outcomes or objectives that individuals or underlying needs, concerns, or
parties aim to achieve through the motivations that drive the positions or
negotiation process. These goals guide demands put forward by parties in a
negotiators in their decision-making and negotiation. Interests represent the why
help shape their strategies and tactics. behind the what, and understanding and
Negotiating goals can vary depending on addressing these interests is crucial for
the context and the parties involved. reaching mutually beneficial agreements.
 TYPES OF NEGOTIATING GOALS
• These goals pertain to the tangible and specific outcomes that
Substantive parties seek to obtain.
• Substantive goals can include aspects such as price, quantity,
quality, terms, or resources.
Goals • For example, in a business negotiation, a party may seek a lower
price, a larger share of profits, or favorable contractual terms.

• Relationship goals focus on the maintenance or improvement of the

Relationship relationship between the parties involved.
• Building trust, preserving long-term partnerships, or fostering a
positive rapport can be examples of relationship goals.
Goals • Parties may prioritize these goals when they anticipate future
interactions and ongoing collaboration.

• Procedural goals relate to the process and procedures followed

during the negotiation.
Procedural • These goals aim to ensure fairness, transparency, and efficiency in
the negotiation process.
Goals • Parties may seek goals such as open communication, information
sharing, balanced participation, or a structured decision-making
process.

• Personal goals reflect the individual motivations and aspirations of

negotiators. These goals may be driven by personal interests,
Personal Goals values, or career objectives. Personal goals can include
professional recognition, career advancement, skill development, or
personal satisfaction.
 KEY POINTS ABOUT NEGOTIATING
INTERESTS
• Parties involved in a negotiation often have a range of interests that
may go beyond their initial positions.
Identifying • Interests can be tangible or intangible and can include financial
considerations, resource allocation, security, reputation, personal
Interests values, or future opportunities.
• Effective negotiators seek to uncover and understand the interests
of all parties involved.

• Not all interests hold equal importance to the parties.

Prioritizing • Prioritization helps negotiators focus on the most critical interests
and identify potential trade-offs.
• By understanding the relative importance of different interests,
Interests negotiators can explore solutions that address the most significant
concerns for all parties involved.

• Negotiators should assess the compatibility of their interests with

those of the other party.
Compatibility of • Identifying shared interests or areas of overlap can create
opportunities for collaboration and finding win-win solutions.
Interests • However, incompatible interests may require more creative
problem-solving or compromise to find mutually acceptable
outcomes.

• Interests often provide the basis for generating creative solutions

Creative that satisfy the underlying needs of both parties.
• By exploring different options and brainstorming possibilities,
Problem-Solving negotiators can find solutions that go beyond simple compromises
and create additional value.
 NEGOTIATION STAGES

The negotiation process typically consists While the specific number and names of
of several stages or phases that guide these stages may vary, the following is
the interaction and progression of the the commonly recognized framework for
negotiation. negotiation stages, that includes:
Preparation, opening, exploration,
bargaining, closing and implementation.
COMMON FRAMEWORK FOR NEGOTIATION
STAGES
• This stage occurs before the actual negotiation begins.
• It involves gathering information, analyzing the issues,
Preparation clarifying goals and interests, and developing a strategy.
• Preparation also includes understanding the other party's
perspective and potential alternatives.

• The opening stage marks the start of the negotiation.

• It involves establishing rapport, setting a positive tone,
and defining the ground rules for the negotiation.
Opening • Parties may introduce themselves, state their initial
positions, and express their overall goals and
expectations.

• During this stage, parties exchange information and

engage in active listening to understand each other's
interests, concerns, and underlying needs.
Exploration • They may ask questions, seek clarification, and share
relevant data.
• The focus is on identifying areas of agreement and areas
that require further discussion.
COMMON FRAMEWORK FOR NEGOTIATION
STAGES (CONT.)
• The bargaining stage is where parties engage in proposing
and counter-proposing offers, concessions, and compromises.
• They negotiate specific terms, such as price, quantity, or
Bargaining conditions, and seek to find mutually acceptable agreements.
• This stage often involves back-and-forth discussions and may
require creative problem-solving.

• In the closing stage, parties work towards finalizing the

negotiated terms.
• They review the agreed-upon points, clarify any remaining
Closing issues, and ensure mutual understanding.
• This stage may involve drafting a written agreement or contract
that captures the negotiated terms accurately.

• After the negotiation, the implementation stage begins. Parties

undertake the necessary actions to fulfil the agreed-upon terms
Implementation and obligations.
• They may establish timelines, allocate resources, and monitor
progress to ensure compliance with the negotiated agreement.
 NEGOTIATION MODELS

• There are various negotiation models that provide frameworks and

guidelines for understanding and conducting negotiations.
• The four (4) most commonly recognized negotiation models are:
1. Harvard Negotiation Model
2. Win-Win Negotiation Model
3. Distributive Negotiation Model
4. Interest-Based Negotiation Model
 NEGOTIATION MODELS (CONT.)

• Developed by Roger Fisher and William Ury.

Harvard • This model emphasizes principled negotiation and focuses on
reaching mutually beneficial outcomes.
Negotiation • The key elements of the Harvard Negotiation Model include
separating people from the problem, focusing on interests
Model rather than positions, generating options for mutual gain, and
insisting on objective criteria to evaluate proposals.

• Also known as the Integrative or Collaborative model.

• It aims to find solutions that satisfy the interests of all parties
Win-Win involved.
• It emphasizes collaboration, open communication, and a
Negotiation problem-solving approach.
• Negotiators seek to create value by exploring multiple options,
Model considering trade-offs, and finding creative solutions that
maximize mutual benefits.
 NEGOTIATION MODELS (CONT.)

• The Distributive or Competitive model is commonly associated

with zero-sum negotiations, where one party's gain comes at
Distributive the expense of the other party.
• It focuses on dividing a fixed pool of resources.
Negotiation • Negotiators employ tactics such as setting extreme initial
positions, making concessions strategically, and using
Model persuasive techniques to gain an advantage.
• This model is often used in situations where there is limited
cooperation and a high level of conflict.

• Also known as the Mutual Gains or Problem-Solving model.

• This approach emphasizes understanding the underlying
Interest-Based interests and needs of all parties involved.
• Negotiators seek to identify common ground, explore options
Negotiation for meeting interests, and find win-win solutions.
• It promotes open communication, active listening,
Model collaboration, and creative problem-solving to generate
outcomes that address the concerns of all parties.
OTHER NEGOTIATION MODELS
 NEGOTIATION PROCEDURES

• Negotiation procedures refer to the specific steps or

methods followed during the negotiation process to
facilitate effective communication, decision-making, and
resolution of issues.
• These procedures help structure the negotiation, ensure
fairness, and promote a constructive atmosphere.
 COMMONLY USED NEGOTIATION
PROCEDURES
• Establishing an agenda helps structure the negotiation
and provides a roadmap for discussion.
• The agenda outlines the topics to be addressed, the order
Agenda Setting of discussion, and the time allocated to each item.
• Setting an agenda allows for a systematic and organized
approach to the negotiation, ensuring that all relevant
issues are covered.

• Establishing ground rules helps create a productive and

respectful negotiation environment.
• Ground rules may include guidelines for respectful
Ground Rules communication, active listening, turn-taking, and
managing emotions.
• By agreeing on ground rules at the outset, parties can
foster a collaborative and cooperative atmosphere.

• Parties involved in a negotiation need to share relevant

information to facilitate understanding and informed
decision-making.
Information • Information exchange procedures may involve the sharing
of documents, reports, or data that are pertinent to the
Exchange negotiation.
• Parties may also request and provide clarification on
specific points or seek additional information as needed.
 COMMONLY USED NEGOTIATION
PROCEDURES (CONT.)
• Negotiators present their initial proposals or positions on the
issues under discussion.
Proposal and • Proposals outline their desired outcomes, preferences, and terms.
• The counterproposal is a response to the initial proposal, often
Counterproposal including modifications, alternatives, or conditions.
• Parties engage in a back-and-forth exchange of proposals and
counterproposals to seek common ground.
• In some negotiations, parties may choose to have private
meetings, also known as caucuses, with their respective teams or
Caucus or advisors. These meetings provide an opportunity for internal
discussion, strategizing, and seeking guidance.
Private Meetings • Caucuses can help parties reassess their positions, explore
alternative options, or consult with experts before reengaging in
the negotiation.
• In complex or challenging negotiations, parties may engage a
neutral third party, such as a mediator or facilitator, to assist in the
Mediation or negotiation process.
• The mediator or facilitator helps manage communication, clarify
issues, identify common interests, and guide parties towards
Facilitation resolution.
• They may employ various techniques and tools to facilitate
productive discussions.

• At the end of the negotiation, it is crucial to review the negotiated

Review and terms and ensure mutual understanding.
• Parties may document the agreed-upon terms in a written
agreement or contract.
Documentation • Reviewing and confirming the details help minimize
misunderstandings and provide a basis for implementation.
 APPROACHES TO NEGOTIATION
PROCEDURES

• Simple and sophisticated procedures are TWO (2)

different approaches to negotiation procedures that can
be employed depending on the complexity of the
negotiation and the parties involved.
• The choice between simple and sophisticated
procedures depends on factors such as the complexity
of the negotiation, the importance of the issues at stake,
the number of parties involved, and the available time
and resources.
• It is essential to select the appropriate procedure that
aligns with the specific needs and objectives of the
negotiation.
 SIMPLE PROCEDURES

Simple negotiation procedures are Simple procedures are often used in smaller-
straightforward and easy to implement. They scale negotiations, where there is a lower
are often used in relatively straightforward or level of complexity, fewer stakeholders
less complex negotiations. Some examples of involved, or when time constraints necessitate
simple procedures include: a more streamlined process.

• Open Discussion: Parties engage in open

and direct discussion, sharing their positions,
concerns, and interests openly. They aim to
find common ground and reach agreements
through direct communication and exchange
of ideas.
• Concession-Based Bargaining: Parties
engage in a give-and-take process, making
concessions on certain issues in exchange
for concessions from the other party. This
procedure focuses on reaching compromises
and finding middle-ground solutions.
• Single-Issue Focus: In some negotiations,
the focus may be on a single primary issue.
The parties concentrate their efforts on
resolving that specific issue before moving
on to other topics.
 SOPHISTICATED PROCEDURES

Sophisticated negotiation procedures are more

Sophisticated procedures require more extensive
complex and involve additional techniques and
preparation, analysis, and strategic thinking. They
tools. They are often employed in high-stakes or
may involve the use of specialized tools, such as
multi-faceted negotiations that require a deeper
decision trees, scenario planning, or modelling, to
understanding of the issues and a more strategic
assess potential outcomes and evaluate different
approach. Some examples of sophisticated
options.
procedures include:
• Interest-Based Bargaining: Parties focus on
understanding and addressing underlying
interests rather than solely focusing on
positions. They seek to create value and find
mutually beneficial solutions by exploring the
interests and priorities of all parties involved.
• Multi-Issue Bargaining: Parties address multiple
issues simultaneously, considering the
interdependencies between them. They aim to
find package deals or trade-offs that optimize
outcomes across different issues, rather than
negotiating each issue in isolation.
• Problem-Solving Workshops: In complex
negotiations, problem-solving workshops may
be conducted, bringing together experts,
stakeholders, and decision-makers. These
workshops employ collaborative techniques to
generate creative solutions, analyze potential
outcomes, and explore alternatives.
 NEGOTIATION STRUCTURE
• Negotiation structure refers to the organization and
framework of a negotiation process.
• It provides a systematic approach to guide the
interaction between parties and facilitate the resolution
of issues.
• A well-defined negotiation structure helps maintain
focus, clarity, and progress throughout the negotiation.
 COMPONENTS OF A NEGOTIATION
STRUCTURE
• An agenda outlines the topics to be discussed and the
order in which they will be addressed during the
Agenda negotiation.
• It helps provide structure and ensures that all relevant
issues are covered.

• Ground rules establish guidelines for the negotiation

process. These rules may include principles of respect,
active listening, turn-taking, confidentiality, and any other
Ground Rules specific rules agreed upon by the parties.
• Ground rules help create a constructive and respectful
environment for negotiation.
• Clearly defining the roles and responsibilities of each party
involved in the negotiation helps ensure clarity and
Roles and accountability.
• This may include designating a lead negotiator, decision-
Responsibilities makers, spokespersons, or any other relevant roles based
on the negotiation context.
• Determining the communication channels and methods
for the negotiation is crucial.
Communication • This includes identifying how and when communication
will take place, whether through face-to-face meetings,
Channels video conferences, written correspondence, or a
combination of methods.
 COMPONENTS OF A NEGOTIATION
STRUCTURE (CONT.)
• Agreeing on the decision-making process is essential, especially in multi-
Decision-Making party negotiations. It involves determining how decisions will be made,
whether by consensus, majority vote, or other agreed-upon methods.
Process • Clarifying the decision-making process helps avoid ambiguity and
potential conflicts.

• Setting a timeframe and specific deadlines for different stages of the

Timeframe and negotiation provides structure and helps manage expectations.
• It ensures that the negotiation progresses efficiently and allows for
Deadlines effective planning.

• Establishing a system for documentation and record-keeping

Documentation and helps maintain an accurate record of the negotiation process.
• This may involve taking meeting minutes, summarizing
Record-Keeping agreements reached, documenting proposals, and any other
relevant documentation.

• Depending on the nature of the negotiation, certain tools and

Supportive Tools techniques can enhance the structure.
• These may include decision-making frameworks, analytical
and Techniques tools, facilitation techniques, or technology platforms that
support collaboration and communication.
 COMPONENTS OF A NEGOTIATION
STRUCTURE (CONT.)

Conflict • Anticipating potential conflicts and

mechanisms for resolving them is important.
establishing

Resolution • This can involve designating a neutral third party, such as

a mediator or arbitrator, or agreeing on specific conflict
Mechanisms resolution processes in case disagreements arise.

• Building in opportunities for review and evaluation helps

assess the progress of the negotiation and make
Review and adjustments if necessary.
• It allows parties to reflect on their strategies, assess the
Evaluation effectiveness of the negotiation structure, and identify
areas for improvement.

• number of issues refers to the quantity and complexity of

the topics being discussed in the negotiation.
Number of • A negotiation structure should take into account the
number of issues to be addressed and provide a
Issues framework for systematically addressing each one.
• Parties may prioritize and sequence the issues based on
their importance and interdependencies. The
 COMPONENTS OF A NEGOTIATION
STRUCTURE (CONT.)

• The number of parties represented in the negotiation can

significantly impact the structure and dynamics.
Number of • In multi-party negotiations, there may be more diverse
perspectives, interests, and potential conflicts.
Parties • The negotiation structure should accommodate the
Represented involvement of multiple parties, allowing for effective
communication, decision-making processes, and addressing
the needs of each party.

• The interests of the parties refer to their underlying needs,

motivations, and desired outcomes in the negotiation.
Interests of • Understanding and addressing these interests is crucial for
reaching mutually acceptable agreements.
Parties • The negotiation structure should provide opportunities for
parties to express their interests, explore common ground, and
seek creative solutions that satisfy their respective interests.
 BEST ALTERNATIVE TO A NEGOTIATED
AGREEMENT (BATNA)

It is a concept commonly used in negotiation theory to determine the

course of action one should take if the current negotiation fails to
reach a satisfactory agreement.

Understanding and evaluating BATNA is crucial in negotiation because

it provides a basis for assessing the value of a proposed agreement.

• If the proposed agreement is better than the party's BATNA, it may

be considered a favorable outcome.
• On the other hand, if the proposed agreement is worse than the
party's BATNA, it may be more beneficial for the party to pursue
their alternative option.
 EXAMPLE OF HOW BATNA IS USED
Let's say you are selling a used car and negotiating with a potential buyer. Your initial asking price is $10,000,
but the buyer is offering only $7,000. You need to determine your BATNA before deciding whether to accept
the buyer's offer or continue negotiating.

Your BATNA in this scenario could be the highest price you could reasonably get for your car from an
alternative option. For instance, you could research similar cars for sale in your area and find that the average
price for a comparable vehicle is $8,500.

Based on this information, your BATNA would be $8,500. This means that if you cannot reach an agreement
with the current buyer for a price higher than $8,500, you would be better off pursuing an alternative option
such as selling the car elsewhere or waiting for another potential buyer.

With this knowledge, you can evaluate the buyer's offer of $7,000 against your BATNA. If you believe that the
buyer's offer is the best you can get and it exceeds your BATNA, it may be in your best interest to accept the
offer and sell the car. However, if you feel that you can negotiate for a higher price closer to your BATNA or
even above it, you can continue negotiating or potentially walk away from the current offer.

Remember, the strength of your BATNA plays a significant role in determining your negotiation strategy and
the decisions you make throughout the process.
ZONE OF POSSIBLE AGREEMENT (ZOPA)

It is a term used in negotiation to refer to the range or area in which

an agreement can be reached between two parties.

The ZOPA represents the overlap between the seller's and buyer's
acceptable price or terms.

When negotiating, each party typically has a range of acceptable

outcomes or positions. The ZOPA exists when there is an intersection
between these ranges, where both parties can find a mutually
acceptable agreement. It is within this zone that negotiations can
occur and a potential agreement can be reached.

To determine the ZOPA, both parties must understand each other's

interests, needs, and priorities. This information helps identify the
potential range of acceptable outcomes for each party. By exploring
and understanding these ranges, negotiators can work towards
finding a solution that falls within the ZOPA.
ZONE OF POSSIBLE AGREEMENT (ZOPA)
(CONT.)
EXAMPLE OF ZOPA
Consider a scenario where a buyer is interested in purchasing
a house and the seller has set an asking price of $300,000.
The buyer's maximum budget for the house is $280,000, while
the seller's minimum acceptable price is $290,000.

In this case, the ZOPA would be the range between $290,000

(seller's minimum) and $280,000 (buyer's maximum). The
overlap between these two ranges is $280,000 to $290,000,
representing the potential zone where an agreement can be
reached.

Negotiating within the ZOPA involves finding creative

solutions, exploring trade-offs, and potentially making
concessions to reach a mutually beneficial outcome. It is
important for both parties to understand their own positions
and priorities while also considering the other party's
perspective to facilitate a successful negotiation.

However, it's worth noting that the ZOPA can vary depending
on factors such as market conditions, individual
circumstances, and the specific negotiation context. Therefore,
it is crucial for negotiators to gather relevant information,
communicate effectively, and engage in a collaborative
process to identify and expand the possibilities within the
ZOPA.
 CONTRACT NEGOTIATION

• Contract negotiation involves discussions and

agreements between two or more parties regarding the
terms and conditions of a contract.
 WESTERN CULTURES APPROACHES OF
CONTRACT NEGOTIATION

Direct • Western cultures often value direct and explicit communication.

Negotiators tend to express their interests, positions, and
Communication concerns openly and directly.

Individualistic • Western negotiation approaches typically prioritize individual

goals and outcomes. Negotiators focus on maximizing their
Orientation own interests and gaining a competitive advantage.

• Western negotiators tend to value efficiency and may prefer to

Time Sensitivity reach a quick agreement. They often set deadlines and expect
negotiations to proceed at a relatively fast pace.

• Western cultures place significant emphasis on legally binding

Legalistic contracts and rely heavily on the legal system to enforce
agreements. Clarity, specificity, and legal precision are
Framework important in contract terms.
NON-WESTERN CULTURES APPROACHES
OF CONTRACT NEGOTIATION
• Non-Western cultures may use more indirect and context-
Indirect dependent communication styles. Negotiators may rely on
nonverbal cues, gestures, and shared cultural
Communication understandings to convey messages.

Collectivistic • Non-Western negotiation approaches often prioritize

collective goals and harmony. Building relationships and
Orientation maintaining group harmony are considered essential.

• Non-Western negotiators place a strong emphasis on

Relationship relationship building and trust development. They may
spend more time on building personal connections and
Building rapport before discussing business matters.

• Non-Western cultures tend to have a long-term

Long-Term perspective on negotiations. They may be willing to invest
more time and effort into building relationships and
Orientation reaching a consensus that benefits all parties involved.

• Non-Western negotiation approaches may take into

Contextual account broader contextual factors, such as social status,
hierarchy, and the importance of face-saving. Cultural
Factors norms and traditions often influence the negotiation
process.
 PRACTICE QUESTIONS

1. Define BATNA and explain its significance in negotiation. Discuss

why it is essential for negotiators to identify and evaluate their
BATNA before entering into a negotiation. Provide example to
support your explanation.
2. Explain the concept of ZOPA in negotiation. How does it impact the
negotiation process and the potential outcomes? Provide an
example to illustrate your understanding.
3. Why is it important for negotiators to identify and understand the
ZOPA? Discuss the benefits of recognizing the ZOPA during a
negotiation and how it can help achieve mutually beneficial
agreements.
 REFERENCES

Maude, B. (2020). “International business negotiation: Principles and

practice”, 2nd Ed., Macmillan International Higher Education.