Essentials of Negotiation - Essay Example

 Essentials of Negotiation The purpose of this paper is to answer the following questions based on readings in the cited text. 1. Identify three situations that illustrate the benefits of conflict. 1a. Conflict can provide awareness: In a corporate environment, there are often many levels of authority and management. One situation that illustrates the benefits of conflict is the employee of an overbearing supervisor. Rather than simply put up with an abusive or unreasonable person, the employee can respectfully confront the supervisor regarding a particular issue, e.g., an unattainable deadline, and through that conflict the supervisor will be able to gain an awareness of the feelings of others in the department. 1b. Conflict can strengthen relationships: In the case of a married couple, conflict can actually strengthen the relationship by demonstrating to both parties that their love for each other is strong enough to endure a significant disagreement. This is particularly true if the parameters of the conflict remain constructive and a consensus is reached without degenerating into personal animus. 1c. Conflict can empower an individual: Fear of conflict can lead to self-induced oppression. In the case where a daughter is faced with a controlling parent, choosing to respectfully engage in conflict can demonstrate to the young person that she has a measure of control over her life and does not have to endure oppressive oversight. A successful confrontation will build her own self-esteem. 2. Describe your negotiation style. My negotiation style tends to be integrative and principled. My primary strength is that I have a good motive in seeking to obtain a win/win situation for all parties; I want to define the goals and maximize the objectives for everyone within a discussion framework that has fair standards and a high level of integrity. The weakness in my position is that a dishonest bargainer could possibly use my desire for consensus to manipulate me through deceit or hardball tactics. 3. Provide two examples of each of the following types of negotiations: 3a. Win/Win 3a.1 I had two friends who engaged in an integrative bargain resulting in a win/win situation. The first had a vehicle with relatively high monthly payments. His objective was to get out from under the financial strain and he wasn’t concerned with making a profit on the deal. My other friend didn’t really need another car, but liked our friend’s vehicle more than the one she was driving. They both wanted to be sensitive to the other’s position. She sold her vehicle, bought his for the payoff and, after refinancing with the down payment from the sale of her car, obtained lower monthly payments for herself. Everyone ended up happy. 3a.2 A family friend was the chief financial officer for his company. In analyzing the corporate debt, he determined that a refinance of the mortgage would save thousands of dollars. He called in his banker and asked for a reduced interest rate. At first the banker was reluctant, but when the CFO mentioned that he could find a better deal at a competing bank if he moved all of the company’s accounts (savings, checking, and investments), the banker quickly conceded. The company got a reduced payment and the banker kept the all of the accounts, the loss of which would have cost far more than lowering the interest rate. Even though a concession was made, both parties ultimately won. 3b. Win/Lose 3b.1 One of my relatives knew an individual that had come into some very difficult financial conditions. That person wanted to sell their car to pay off a hospital bill. My relative knew exactly what the other person owed on the car, and hardballed them into taking a price that yielded a $500 profit by pulling out the cash and putting it on the hood. The person took the money; and my relative sold the car two days later for a $2000 profit. My relative won; the other person lost because they didn’t wait for a better offer. 3b.2 An acquaintance wanted to purchase a small business, but did not have the money to do so. The seller offered to finance the deal at 98%% and stay on to help the business grow. Within six months, the seller didn’t have time to be around much, business fell off, and the purchaser had to give the business back; losing all of the money put down and paid over the six months. The seller won; my acquaintance lost. 3c. Lose/Lose 3c.1 One of my friends owned a business that provided on-going services for a larger company. Using distributive bargaining and hardball tactics, he “successfully” negotiated an over-priced monthly rate for services on a long-term contract. The other company realized its mistake about three months later and cancelled the contract. Overly-aggressive bargaining resulted in loss of services to the large company and loss of business to my friend. 3c.2 I had a relative who owned a building in a very bad part of town. She wanted to sell the building, but she had invested so much money in renovating it that she had to price the sale higher than the value of the property. She received a reasonable offer for the type of building and area, but she refused to consider any price lower than her break-even point. Four years later, she finally sold the building to another buyer for less than the first buyer had offered. The first buyer lost the deal, and my relative lost a lot of time and money due to her inflexibility. 4. Cognitive Bias in Negotiation – 12 examples. 4.1 Irrational Escalation of Commitment – A good example of this would be the person who goes to an art auction and sees a painting they like. They know that painting is only worth so much, but during the heat of bidding they just can’t let it go. They end up paying way too much because they emotionally committed to purchasing the item no matter what. 4.2 Mythical Fixed-Pie Beliefs – A good example of this bias is the person who opens a checking account at a financial institution across town because it is “free.” By solely focusing on the issue of service charges, the individual does not consider that the bank’s hours of operation, absence of online account management, and the costs of driving so far at inconvenient times has cost far more than any savings on service charges. 4.3 Anchoring and Adjustment – This bias can be demonstrated by the person who goes to a car lot to purchase a new car, and simply pays the sticker price. Their anchor point is that the value of the vehicle is reflected by the price, and they do not allow for adjustments or negotiations that could reduce the cost. 4.4 Issue Framing and Risk – A good example of framing an issue to one’s advantage is the real estate buyer who views a house that has been on the market for a while. If the purchaser can get the owner nervous enough about the fact that they may never sell their house (thus, framing the negotiation as a possible loss), they can take advantage and lower the seller’s resistance point. 4.5 Availability of Information – This bias can be seen in the situation where inaccurate information on the true cost of buying a service agreement on a copier is presented so well, it is believed and becomes part of the fabric of the negotiation even though the same service could be purchased independently for far less money. 4.6 The Winner’s Curse – An individual goes to a garage sale and sees a set of golf clubs that are known to be of high quality. Trying to set up his target point, the buyer offers a price that is too low and the seller accepts. The buyer then wonders what is wrong with the clubs or what price would the seller have taken because of the fact that his first offer was readily accepted. 4.7 Overconfidence – So convinced of her intellectual superiority and negotiating prowess, the purchasing officer of a company negotiates a great deal for printer cartridges from a national supplier; not even allowing her subordinate to get three words into his objection. After the deal is made and feeling justified in her win, she is informed that the organization doesn’t own any printers that take that type of cartridge. 4.8 The Law of Small Numbers – After two successful business negotiations using the good cop/bad cop tactic, two small-business partners are so convinced of the efficacy of the tactic that they are embarrassed when, in an important negotiation with a potential client, the other side asks them if they always “play that game” before walking out. 4.9 Self-Serving Biases – A great example of this bias is the dictatorial corporate executive who signs a contract that is not to the company’s advantage because everyone else on the negotiating team was too intimidated to do anything but agree with his errant perceptions of the deal. 4.10 Endowment Effect – So convinced of his talent, the aspiring painter who has just opened a small gallery over-prices his work and refuses to reduce the price; even when his work doesn’t sell. In six months, he is evicted because he can’t pay his rent. 4.11 Ignoring Others’ Cognitions – Convinced that the rather complicated issues being negotiated are really only about price, an aspiring real estate developer decides to lowball the best general contractor in the county. By not considering the fact that the contractor has more considerations than price per square foot, he is surprised when the contractor walks out. 4.12 Reactive Devaluation – A classic example of this bias is the new department head who convenes a staff meeting to discuss departmental objectives. Due to his disregard for his predecessor’s assistant, the very good advice given by this individual and confirmed by others is ignored and the department fails to meet its goals. 5. Critical analysis of international and Cross-Culture Negotiation. 5.1 Political and Legal Pluralism – I think that history has shown that the legal and political climate is dynamic rather than static, and so an international negotiation has elements that can change; and the negotiator should take that into consideration. For example, an American business that wants to open a manufacturing facility in China should be very aware of the political and legal differences between the Chinese authoritarian culture and standard American business practices. Failure to realize this type of dynamic could render a very negative surprise to the Americans when, in five years, the Chinese decide to reduce the foreign commercial presence in the country and nationalize the new production plant just built by the Americans. 5.2 Ideology – Cultural ideology will obviously play a very important role in any international negotiation, and any individual who engages in such processes should be educated on the ideological norms of the country in which the proposed business will take place. An example would be the labor practices in manufacturing. While a small Asian country may have no compunction about using under-aged, under-paid workers, several U.S. corporations have found that the American public has a strong opinion regarding individual rights and the exploitation of children. The wise negotiator will take these types of ideological differences into account when putting the deal together. 5.3 Relationship between Negotiators – This concept is well established in many industrialized nations. Any negotiator who does her homework will discover the popularity of golf in Japan. When a delegation of Japanese negotiators arrive to discuss a strategic partnership, a round or two prior to sitting down at the table could pay tremendous dividends because of the social relationships forged while swatting a small, white ball around the course. This principle also helps explain the prevalence of expense-account dinners at pricey restaurants. Whether food or recreation, having a bond between parties will facilitate an inclusive negotiation and could make the difference in obtaining a win/win scenario. References Lewicki, R.J., Barry, B., & Saunders, D.M. (2006) Essentials of Negotiation (Fourth Edition). New York: McGraw-Hill Primis Read More