Strategic Negotiation in Business and Management

Examination and evaluation of a business negotiation and a negotiation in a private environment


Scientific Essay, 2011
38 Pages

Excerpt

CONTENT

1 About the author

2 CONTENT

3 Introduction
3.1 1st Phases: Preparation
3.2 2nd Phases: Sharing
3.3 3rd Phases: Haggling and Bargaining
3.4 4th Phases: Closure and Commitment

4 Negotiation in a private environment
4.1 Introduction to the case and background information / problem statement
4.2 Preparation phases
4.2.1 Self-assessment
4.2.2 Assessment of the other party
4.2.3 Assessment of the situation
4.2.4 Negotiation Strategy
4.3 Sharing phases
4.4 Haggling and Bargaining phases
4.5 Closure and commitment phases
4.6 Reflection of the negotiation
4.6.1 Away from the negotiating table
4.6.2 At the negotiating table
4.6.3 Judging Performance

5 Negotiation in a business environment
5.1 Introduction to the case and background information / problem statement
5.2 Preparation phases
5.2.1 Self-assessment
5.2.2 Assessment of the other party
5.2.3 Assessment of the situation
5.2.4 Negotiation Strategy
5.3 Sharing phases
5.4 Haggling and Bargaining phases
5.5 Closure and commitment phases
5.6 Reflection of the negotiation
5.6.1 Away from the negotiating table
5.6.2 At the negotiating table
5.6.3 Judging Performance

6 REFERENCES

Keywords: Preparation, Sharing, Haggling, Bargaining, Closure, Commitment, Self assessment, Assessment of the other party, Assessment of the situation, Negotiation Strategy, Reflection, negotiating table, Judging Performance, BATNA, ZOPA, reservation point, Strategic Negotiation, Business and Management

1 About the author

Markus B. Baum, MBA

Markus Baum is Group Finance Director at a management consulting firm with focus on business strategy, supply chain management (SCM), manufacturing & logistics, sourcing & purchasing, marketing & sales, financial management and information technology (IT- strategy). The company has subsidiaries in Germany, Switzerland, Belgian, France, United Kingdom and Russia.

He is responsible for the management and control of the financial shared service center (FSSC) which includes accounting, controlling, reporting, taxation, treasury and ERP; development and execution of financial strategies, management and further development of financial and corporate processes, workflows, controls, standards, policies, governance and compliance; financial analysis and board decision support (business partnering) , financial planning and budgeting, internal and external audits, project management, corporate law and contract management, investor relationship.

Markus Baum has a unique background of combined senior experience in financial excellence, strategy, process excellence, accounting, controlling and cash flow management. He previously worked as an Accounting and Controlling Manager (consulting firm), Finance Analyst (global brand leader) and Consultant (tax, accounting, audit).

Markus Baum earned a MBA with distinction from the University of Surrey (UK), is an international certified accountant, has and graduation in accounting & controlling and an apprenticeship as tax adviser assistant. Markus Baum is a member of the International Controlling Association.

3 Introduction

This assignment evaluates two negotiation cases. Please note the cases are theoretical nature, any resemblance to living persons and real actions are purely coincidental. The first case takes place in a private environment, the second in a business environment. The evaluation of each case is based on the four phases of negotiation and describes the preparation for, strategy during and process of the negotiation.

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Figure: The 4 phases of negotiation (adopted from Pealing, 2008)

The basic theory of negotiation to which the individual cases refer is described in this section. Detailed aspects of the theories and approaches are given in the cases as appropriate.

3.1 1st Phases: Preparation

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Figure 2: The 4 elements of the preparation phases (adopted from Pealing, 2008)

The first part of the preparation phase consists of a self-assessment in which the negotiator needs to prepare for targets and alternatives in the negotiation. The target or aspiration is preparation that results in an ideal outcome and in which the alternatives involve the preparation of the BATNA (Best Alternative To a Negotiated Agreement) (Fischer, Ury and Patton, 1991).

The second part of this phase is the assessment of the other parties, with regard to the counterparties' interest and position. Evaluating their possible BATNAs is also recommended (Thompson, 1990).

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Figure 3: Identifying your BATNA (adopted from Harvard College, 2010)

The third part of this phase is the assessment of the situation. This assessment covers the terms and time (one shot, long-term, repetitive), resources (people, third parties), necessity (necessary or opportunistic, legal, contract, official or unofficial), source (exchange or dispute, ratification) and place (place, public or private) (Thompson, 2009).

The fourth and most important part is the preparation of the strategy. Usually, the strategies are tailored to distributive (slicing the pie) or integrative (expanding the pie) negotiations.

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Figure 4: negotiation strategies (adopted from Thompson, 2009)

In distributive strategies, the negotiation parties are only negotiating with a fixed pie which means, generally, that one party gains at the expense of another party (win-lose). These strategies are:

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Figure 5: distributive strategies (adopted from Thompson, 2009)

In integrative strategies, the parties try to involve the aims and goals of all parties and reach an agreement through a creative and collaborative problem solving process (win-win). Win-win situations are explicitly not compromises, result in even splits, overall satisfaction and the continued building of a relationship. Such situations usually do not squander money; or waste resources. Win-win situations leverage opportunities and involve all resources. Distributive strategies are integrative agreements which are, according to Thompson (2009), divided into three levels:

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Figure 6: a pyramid model of integrative agreements (adopted from Thompson, 2009)

Negotiators should always try to achieve the highest level possible. Strategies for this approach are outlined in the figure below:

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Figure 7: integrative strategies (adopted from Thompson, 2009)

3.2 2nd Phases: Sharing

The second phase takes place at the table during the negotiation. The first part of the sharing phase consists of sharing the gathered information that supports the starting positions and tries to build a relationship and establish trust. The second part consists of an agreement on the details of the negotiation process (e.g. fairness) and sharing the expectations of both parties. During the process, the principle rules of negotiation should be kept in mind.

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Figure 8: principle rules of negotiation (adopted from Fischer and Ury, 1981)

3.3 3rd Phases: Haggling and Bargaining

The third phase of haggling and bargaining is the heart of the negotiation, in which each party discusses their target and tries to reach an agreement. This involves maximizing of power through anchoring, making concessions, maintaining momentum and handling deadlocks.

In distributive negotiations (slicing the pie, win-lose), the main goal during this phase is to obtain the largest piece of the pie or, in other words, to not give up too much of the bargaining zone. The bargaining zone or ZOPA (zone of possible agreements) is the range in which an agreement is satisfactory to both parties (Lax and Sebenius, 1986).

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Figure 9: Zone of possible agreements (El Kahal MacLean, 2010)

An agreement is only possible if the zones overlap. If not, an agreement is not possible (negative bargaining zone). To achieve the above-mentioned goals, it is important to pay attention to the follow principles:

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Figure 10: principle rules of distributive negotiation (adopted from Levine and Thompson, 1996)

1. Consistency = on settings, time, with respect to procedure
2. Simplicity = clearly understandable methods, each member is able to explain the procedure
3. Effectiveness = clear choices to make clear decisions
4. Justifiability
5. Consensus = agreement on the method of allocation
6. Generalizability = procedure is applicable to a wide variety of situations
7. Satisfaction = to ensure that each party will follow the agreement

In integrative negotiations (expanding the pie, win-win), the goal during this phase is to reach an agreement that covers the aims and goals of both parties. This negotiation refers more to problem solving that requires the creativity of both parties. To achieve the above-mentioned goals, the “decision making model of integrative negotiation” is recommended. The model describes the following phases:

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Figure 11: decision making model of integrative negotiation (adopted from Thompson, 2009)

1. Resource assessment = identification of bargaining issues and alternatives
2. Assessment of differences = valuation
3. Offers and trade-offs = focus on high value to one party and low cost for the other
4. Acceptance/rejection of decision = expand the set of acceptable agreements
5. Prolonging negotiation and re-negotiation

An advanced negotiator is an enlightened negotiator who, by applying integrative strategies, also does not forget distributive strategies in order to achieve the highest benefit from the negotiation and best utilize resources.

[...]

Excerpt out of 38 pages

Details

Title
Strategic Negotiation in Business and Management
Subtitle
Examination and evaluation of a business negotiation and a negotiation in a private environment
College
The University of Surrey  (School of Management )
Author
Year
2011
Pages
38
Catalog Number
V193880
ISBN (eBook)
9783656190844
ISBN (Book)
9783656193586
File size
838 KB
Language
English
Tags
Preparation, Sharing, Haggling, Bargaining, Closure, Commitment, Self-assessment, Assessment of the other party, Assessment of the situation, Negotiation Strategy, Reflection, negotiating table, Judging Performance, BATNA, ZOPA, reservation point, Strategic Negotiation, Business and Management
Quote paper
Markus Baum (Author), 2011, Strategic Negotiation in Business and Management, Munich, GRIN Verlag, https://www.grin.com/document/193880

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