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FW26 - Negotiation
  1. General Principles
  2. Preparation
  3. Negotiating Techniques
  4. Do It Yourself
  5. Author

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FW26-BUSINESS NEGOTIATION

YOUR POSITION

Look at the map

MAP

150 days before opening.

 1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


INTRODUCTION

Business is negotiation. You will have to negotiate right now with the contractors, suppliers and staff.

The communication techniques may be used in negotiation. Here, we shall only pay attention to the specific negotiation topics.

Duration

Lesson: 1 hour

External readings and quiz: 2 hours

Do it yourself: 5 hours

Total : 8 hours

Objectives:

Our objectives are to teach you:

-How to prepare a negotiation

-How to negotiate

By the end you should have all the tools to be a good business negotiator.

 1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


1-GENERAL PRINCIPLES

Business is negotiation. You will negotiate to buy, to sell, to conclude contracts with suppliers, to fix the staff salaries and so on. What is more, you have to negotiate with regulators, Banks, Insurances. It means that the business life is a permanent negotiation with others people who are defending their own interests.

Real life example:

I have surveyed a lot of MBA curriculum. Negotiation is rarely a core course. Very often, it's only an elective mainly dedicated to international business.

It means that these MBA prepare their people to be clerk or chief accountant! For a future businessman, negotiation must be obviously a core topic.

The fact that divergent interests exist does not mean that you have to negotiate with everybody. Very often you have just to use authority instead of negotiating. What is more, many business matters are regulated by contract. A contract is made to avoid any contestation and consequently any possibilities of negotiation. When you have a good contract, just apply it. There is nothing to negotiate any more.

Down earth advice:

Many dishonest people are always asking you to negotiate because they do not want to fulfil their obligations. For example, buyers ask more delays to pay, suppliers ask more delays to deliver the stuff, staff ask raise of salaries or advantages going far away of that had been concluded.

In all these matters that have been settled by writing contracts there is no room for any negotiations. Just say No.

On the contrary, a negotiation is often an obliged step when you are preparing a new contract. As business implies to prepare, and to sign a lot of contracts with buyers, sellers, bankers, and staff there are anyway a large part of time dedicated to negotiation.

In this case there are divergent interests but there are also a common one. If you have only divergent interests and no common interests, it's not useful to negotiate. If there are only common interests and no divergent interests, you can go straightly to an agreement and a real negotiation is not justified.

In fact these two situations can be very frequent in business. It means that you must always carefully analyze the situation before engaging a real negotiation.

 1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


2-PREPARATION

Preparation is a must.

Real life example:

One of the most astonishing observation that I have made over my career is that people usually do not prepare a negotiation: They just have a prior meeting. They note their goals and their bottom line and finally they say "We shall see".

More often than you believe, people and notably haughty top managers do not know really their files. They just gather a lot of useless notes written by their staff.

Many top conferences go to a down consensus because of a lack of preparation on both sides!

21-Carefully examine the case.

Negotiating file are often complex and in specific matter, you have better to call a consultant. It can be the best and less expansive way to prepare your negotiation.

Carefully study your file. Take notes. Do not only rely on your memory. It's a good opportunity to use mind mapping.

Carefully examine the assets and the weaknesses of your files. Tell the truth to you. Do not be emotional and see your file in a detached way as if it was not yours. What is more, imagine that your opponent has access to your files and what should be the main argument it could retire from it. List this main argument. That is your main weaknesses. Can you improve it. Can you hide it. That's the problem.

Of course, except in case of espionage, you do not know the files of your opponent. Nevertheless you can have a remote viewing of it. Scrutinize the letters they have sent to you. Observe very carefully the words they use and observe also, in different letters, how these words and arguments have changed or evolved. It could give you a good intuition about the weak and strong lines of your opponents.

Down earth advices:

We have all the habit to practice fast readings. By this time, do not use it. Read like a child, word by word, and if necessary read at high voice and write the words on your notebook.

Scrutinize the most little change in the words, sentences or arguments. If you feel something unclear, repeat the exercise several times and you will discover the change that has occurred and its meaning.

When you know your case and have a good intuition of the opponent case, you can prepare your strategic planning.

22-Define your goals

Strategic planning determines the goals and the moves to reach them.

Your goal is to win the bargain. Despite your possible weaknesses, you must assert that your goal is to win because otherwise you should place yourself in a loser position.

A limited result could coincide with a common interest. It's that people call the win-win principle. You must position on your plan the win-win result and you must define it in a written sentence.

You can just get the minimum issue: It's your bottom line. You have also to define it on your paper.

What should happen if the negotiation is a failure? You must clearly define your BATNA. It means the Best Alternative to a Negotiated Agreement. You must clearly examine this option. Of course, your Batna must always be a lower issue than your bottom line. If you have a good Batna, it means that a failure in the negotiation will not hurt you too much. Consequently, you can lift your bottom line!

On the contrary, if your Batna is a bad issue, it means that you must lower your bottom line. In the same way, you have to evaluate the BATNA of your opposite party. This examination determines the balance of power and consequently dictates the tactics you will adopt during the negotiations.

23-Define the strategy

Any strategy begins by a clear apprehension of the balance of powers and consequently of the possible movements.

231-Balance of powers:

It just result from the examination of your case, goals and best alternative. Clearly, the balance of power is not in your favor if you have more to lose than your opponent in case of a failure of the negotiation.

Do not confuse this balance with the quality of your case. May be, your files are not good but if your opponent has a big loss to expect in case of failure, the balance of power weights strongly in your favor, despite the weakness of your files.

Real life example

One of our suppliers complained that we did not respect his contract and that he could sue us. In order to avoid a trial, he proposed a negotiation and asked for indemnities.

I examined the files and I got to the conclusion that our case was bad. On the other hand, I examined his financial statements. I realized that we were his main customer and that he had not too much cash.

Clearly, he could win a trial but afterwards he could also close his business. Despite a bad case, the balance of power was in our favor. Then I defined a strategy. Read the next episode in negotiating techniques!

232-Movements:

There are two main strategic movements depending on the balance of power:

The balance of power weights in your favor: Attack and be aggressive. Try to destabilize the opponent and to get the deal closed in a short time!

The balance of power does not weight in your favor: Appease or attempt to convert.

the following drawing illustrates the two situations.

You are the blue line. In the first situation, you attack in front to break off the opponent line. In the second situation, you wait and try to circumvent the opponent by the sides:

233-Detailed scenario:

According to all this previous studies, you must write a complete scenario describing all the arguments you will use and all the events you will produce: Starting from the negotiation room, asking for a suspension, asking for a drink and so one.

Of course things never run off as you have described but try to precise everything in taking in account the opposite arguments. It means that you must write your arguments and also those that you expect from your opponents: To do that use extensively mind mapping.

We shall examine these negotiating techniques in the next chapter but right now your preparation is not yet finished.

24-Psychological preparation

You know your case. You have define your goals and your strategic movements. You have to be psychologically prepared. Negotiation is hard business. You have to use your personal development resources!

-Firstly, try to know your negotiator opponent. If you don't know him, get information about his reputation. As a boss, you have to negotiate with a boss. On the other hand, being a small biz, you can't expect to negotiate with the boss of a big corporate. However, you have to make sure that your opponent is empowered to conclude a settlement. It's not easy because this accreditation to conclude or not is part of the negotiating techniques.

-Secondly, try to see the place where the negotiation will take place.

Down earth advice:

The place of the chairs and the shape of the table are a big matter in international negotiations. These disputes about the shape of the table enable the diplomats to get a lot of time for asking some complementary instructions from their governments.

In business, these matters are only important for superficial people and beginners. We ask you to see the place only for your psychological preparation.

Then, as we have learnt, relax and vision. Visualize your file, the opposite negotiator, the place and then imagine yourself speaking, persuading and finally winning the deal. Visualize in detail your chain of arguments and all your scenario.

 1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


3-NEGOTIATING TECHNIQUES

When they deal with negotiations, business schools emphasize on the quality of the relationship between the two parties. The negotiation is mainly described as a conversation between polite persons. The two parties explore their common interests and try to reach the win-win option.

Real life example

These scholars have certainly only experienced negotiations in an academic context. In this case, the win-win option is perceived like the politically correct option between well educated persons.

Unfortunately, I must tell you that the small business world is merciless. People fight like dogs because their own money is at stake. It's no more a conversation in an academic lounge. Any negotiation is heavily stressing!

According to the balance of powers, we have two main strategy: Attack or appease. In fact, during the negotiation the two can be mixed.

31-Attack

The balance of power is clearly in your favor. Don't hesitate: Attack immediately once the negotiation is open.

Real life example

We take again our previous example about the complaint of a supplier. First, I entered into the negotiation room looking absolutely furious just like if I had swallowed a living frog ( I precise a living one because thanks to our british friends, we have the reputation to eat cooked frogs with all our meals!)

"What is this cranky paper!" I screamed out in showing the complaint letter. " you can sue me" I said " I do not care about it. But prepare you to leave any business because I will not renew your contract!"

"No! No!" said the other party. "We has never intended to sue you or to ask any indemnities! Don't take any account of this letter that has been written by a young clerk we have just fired few days ago" . I go on in grumbling a little, then after several heavy sighs, I just said "OK, I prefer that".

And the so called negotiation ended. Of course we do not paid any indemnities but I gave them a little advantage about another clause of the contract. Even when you win, never humiliate your opponent and always try to give him a small reward.

Of course, even when the balance of power is clearly on your side, things are not always so easy and we have to envisage all the type of situations

311-Opening:

As in chess game, the opening is very important in any negotiation. As the balance is for you, begin by stating your upper position and make clear that it is also your only possible solution. You have to opt for an aggressive opening but it's better for everybody to avoid to make threats, menace, insult and so on.

Down earth advice

Unfortunately, in many small business, people are not very polite. If you are too cool, be sure that they will think that you are weak.

Consequently, I recommend you to be polite but to look tough once the negotiation is open. A firm behavior could prevent the other party to play the aggressive role.

312-Middle course:

Usually, during the middle course, each party tries to concentrate on the core of common interests. Negotiation then comprises common thought and not confrontation. Try as much as possible to change from being an opponent to advisor analyzing with him his own options.

In the event of deadlock, proceed as follows: Re-clarify the common aims. Reformulate the questions that have been badly posed. It is sometimes just necessary to call things otherwise to free the situation. Faced with an option, rather than refusing it, propose another option.

Remember, as a last resort, the negative consequences of failure for the other party. Always stay calm when your opponent becomes aggressive. Disassociate yourself to remain in control of your emotions.

However, most negotiators try to manage a crisis during the middle course. When they feel that things are not doing in their way, they suddenly menace to leave the negotiation and so on. This crisis is a part of the negotiation and must be carefully prepared and managed. As the balance is on your side, you have interest to take the initiative of the crisis.

Down earth advice

A good tip is to have a colleague that plays the inverse role of you. You are the naughty and he is the good. When you have just attacked, he comes to appease. The goal is to destabilize the opponent with a constant mixture of hot and cold!

313-End of the negotiation:

Be very careful about the final minutes of the negotiation. You think that you have gotten your goals and you relax. What is more you want to be friendly with your opponent. It's at this time that an agile opponent can demand one-sided gains. You could agree because you have down your defense and sometimes you realize that these outside gains give to the opponent an advantage that you should have never conceded in the cursus of the negotiation!

32-Appease

321-Opening:

It's not your interest to attack. Just start with your upper position but try to explain it as fairly as you can. Insist on the idea that your goal is to find a common agreement with a high value placed on the constant relationship between you and your opponent. Play the good Guy. Be courteous but nevertheless be firm to deter the aggressiveness of the other party.

322-Middle course:

Do not hesitate to make one sided concessions with the expectation that the opponent will reciprocate. You don't lost anything because anyway you should have been quite obliged to make these concessions.

Consequently, go to the win-win position and try to defend it. Always say that you are seeking for solving a problem and not to gain a benefit. Explore and take in account the problem of the other party. Your fellow should now be the naughty. Let's him complaint and try to place you above the fight just as if you were a mediator between two parties!

If you are under a strong pressure, use the following tips: Say that you do not understand, come back in the previous discussions, make your best to keep the debate unclear and confuse. By the end your opponents can lose the follow of their arguments and concede a card just because they have been too much confused!

On the other hand, prepare to face a crisis. The opponent will say that they are losing their time, that you are incompetent, that they have never experienced a so stupid bargaining. No matter. Keep cool and play the outrageous dignity. Give a feeling of culprit to your opponents. Bored by this feeling, they can left you more advantages than you expected!

323-End of the negotiation:

Thanks if you have survived. If the result is too bad, you always can ask for a delay. Anyway, when you have given your agreement, you have to respect it. A person who does not respect his parole is "burned" on the market place.

External readings:

Go to www.pertinent.com and click on negotiation. You will find here a lot of short articles regarding all the tips used by a famous negotiator.

Go to http://negotiations.org . Click on "major negotiations topics" and you will find interesting papers about culture and negotiations and about regulatory negotiations: This paper deals with the negotiations between you and the government agencies. It's a must for any business!

Go to http://peerspectives.org . Click on "Building and inspiring an organization" then click on negotiation". You will find here 6 quick reads. I recommend you "Art of smart negotiation". 

 1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


Lesson summary

Business life is a permanent negotiation with others people who are defending their own interests.

Any negotiation must be carefully planned: You have to know your files, to define you goals and to schedule a strategy.

There are two main strategic movements depending on the balance of power:

The balance of power weights in your favor: Attack and destabilize the opponent. You can get the deal closed in a short time!

The balance of power does not weight in your favor: Appease or attempt to convert. 

 1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


DO IT YOURSELF:

Just like for the programming communication, you have to find some opportunities to apply these principles in your daily life.

You can perform the following exercise: Read the survey about Ecology in "global leader" and meet a friend or a relative who is interested by this topic. (Today, many people are aware about ecological problems).

Ask your interlocutor what is his point of view about the global warming. Knowing it, try to defend the opposite point of view. Make your best for persuading him as if it was a real negotiation!

Then, repeat the same exercise with four successive interlocutors! Take notice of the progress you have made since the first discussion. Analyze your strengths and your weaknesses. This analyze is not related to the content of the case but to your ability in persuading!

Report these results on your log. Count about five hours to perform these five exercises. 

  1. General Principles 2. Preparation  3. Negotiating Techniques   4. Do It Yourself  5. Coaching


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