Practical Business Negotiation

Practical Business Negotiation introduces university students to business

negotiation as practiced in the globalized business world. There are no other
textbooks that take on this topic in depth with non-native English speakers
in mind. Current textbooks about negotiation tend to be dense, academic
and less than practical in content. Many are demotivating to students who
are not easily able to consume a few hundred pages of academic writing.
This textbook takes a step-by-step approach, providing bite-sized
presentations of negotiation concepts with practical exercises that include
linguistic as well as negotiation content. Explanations are reinforced with
practical questions and problem solving and recent examples drawn from a
business world that includes much more than North America and Europe.

William W. Baber is an Associate Professor at the Graduate School of

Management, Kyoto University, Japan, where he teaches business
negotiation, cross cultural management and communication. He was a
marketing strategist and business attraction specialist for the Maryland State
Department of Business and Economic Development, Baltimore, Maryland,
USA from 1998–2005. He has worked frequently with business decision-
makers from Europe, Asia and around the USA, and has accumulated rich
experience in practical business negotiation.

Chavi C-Y Fletcher-Chen is a Professor at IÉSEG School of Management,

Université Catholique de Lille, France, teaching practical negotiation skills,
interpersonal communication applied to negotiation and e-negotiation. She
has published case studies in the area of negotiation. Coming from an
international business background, she has extensive experience in
international marketing and conflict management through working for years
in international patent, trademark and commercial law firms in the Far East.
In addition, she has experience in training commercial managers in cross-
cultural communication. She specializes in information communication
technologies (ICTs), and has consulted for global companies.
Practical Business Negotiation

William W. Baber and Chavi C-Y Fletcher-Chen

First published 2015
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

and by Routledge
711 Third Avenue, New York, NY 10017

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2015 William W. Baber and Chavi C-Y Fletcher-Chen

The right of William W. Baber and Chavi C-Y Fletcher-Chen to be identified as authors of this work
has been asserted by them in accordance with the Copyright, Designs and Patent Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by
any electronic, mechanical, or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or retrieval system, without permission in
writing from the publishers.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are
used only for identification and explanation without intent to infringe.

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

Baber, William W.
Practical business negotiation / William W. Baber and Chavi C-Y Fletcher-
Chen. — 1 Edition.
pages cm
1. Negotiation in business. I. Fletcher-Chen, Chavi C.Y. II. Title.
HD58.6.B33 2015
658.4’052—dc23
2014044696
ISBN: 978-1-138-78147-4 (hbk)
ISBN: 978-1-138-78148-1 (pbk)
ISBN: 978-1-315-71407-3 (ebk)

Typeset in Bembo
by Apex CoVantage, LLC
Contents

List of figures
List of tables
List of cases
Acknowledgments

Introduction

1 What do you want to get from negotiations?

Distributive and integrative
Choosing the strategy
When not to negotiate at all

2 First connections
Gaining and giving information
Relationships
Empathy
Perspective taking
Impression management
Satisfaction

3 Core negotiation concepts

Anchoring effect
BATNA
Understanding and misunderstanding interests
Principle-based negotiation
4 Structure and planning
Building momentum
3D negotiation
Basic planning
Identifying interests
Backward mapping
Priority and outcome mapping
The sequence of talk at the table

5 Some cultural considerations

Top-down/bottom-up
Culture and negotiation
Weak/strong points of North American negotiators
Weak/strong points of Japanese negotiators
Weak/strong points of Chinese negotiators
Gender

6 Talking the talk

Designing offers and suggesting tradeoffs
Accepting and rejecting
Summarizing and clarifying
Practical verbal signals
Deadlock and breaking deadlock
Shutdown moves
Language choice
Visual communication
Remote electronic negotiations

7 Negotiation tactics
Tactics at the table
Persuasion approaches
Humor in the negotiation
Ethics
 Who should you not negotiate with?

8 Win at home before you go

Educating the boss and coworkers
Back table negotiations
Problem solving techniques
War gaming as preparation
Financial modeling

9 What kind of negotiator…

… are you?… are they?
Cognitive bias
Bias and decision making
Teamwork

10 Final phase
Robust agreements that can survive
Control mechanisms often found in negotiated agreements
When agreements don’t survive: outside support, mediation and
arbitration
Draft agreements

11 Review from a high altitude

Appendix I Glossary
Appendix II Case simulations
Appendix III Planning documents
Issue/reserve planning document, Brett
Planning document – clusters
Reserve line
Backward planning
Flowchart planning
Issues, steps, reserve, scorecard
Appendix IV Negotiation errors
 Error: how not to give a concession
Error: when to go slow
Error: watch your BATNA
Error: back table out of sync
Appendix V Cultural differences
Appendix VI Stakeholder analysis
References
Index
Notes
Figures

1.1 What are you trying to get?

1.2 Try to get more
1.3 Creating new value: gaps and overlaps
1.4 Where to find new value opportunities
1.5 Choosing a negotiation strategy
1.6 Compete or collaborate
1.7 Choosing negotiation strategies
1.8 Decision not to negotiate
2.1 The cycle of sharing
2.2 Impact of satisfaction on value sharing
2.3 Virtuous cycle of knowing
3.1 In too deep – decision tree
3.2 In too deep – flowchart
3.3 Interests – match v. mismatch
3.4 From Hard vs Soft to Principled
4.1 Strict ordering of issues
4.2 Flexible ordering of issues
4.3 Backward planning
5.1 Profile comparing two cultures
6.1 The messy reality of the negotiation progress
6.2 Rich and poor context media
6.3 Which medium fits best
7.1 The silent rejection tactic
7.2 Start sour or sweet?
7.3 Flow chart of the emotional client
7.4 How the roles changed
7.5 Honest Tea, Capri Sun, and Terracycle joint recycling solution
7.6 Ethics as a net gain
8.1 Sequence of analyses for problem solving
8.2 Ishikawa diagram, basic
8.3 Ishikawa diagram, high-speed train line
8.4 Five whys example
8.5 Five whys: roots not clear
8.6 Five whys: roots clear
8.7 From why to what
8.8 From what to how
9.1 Thomas-Kilmann Conflict Mode model
9.2 Emotional style questionnaire
9.3 Personal styles compared
9.4 Steps in Kepner-Tregoe model
11.1 Negotiation life cycle
11.2 Successful flow – leads to completion
11.3 Unsuccessful flow – distributive issues blocked without information
sharing
A2.1 Photo and poster
A2.2 Oil and gas price movements
A2.3 Newfoundland, Canada
A3.1 Cluster planning
A3.2 Cluster planning, blank
A3.3 Reserve line planning
A3.4 Reserve line planning, blank
A3.5 Backward planning
A3.6 Backward planning, blank
A3.7 Flowchart planning
A6.1 Central and peripheral stakeholders
A6.2 Power interest grid
Tables

1.1 Changeable factors surrounding a negotiation

1.2 How negotiation factors change
2.1 Constructive sharing of information
2.2 Impression management approaches
2.3 Creating satisfaction
3.1 Mistaken beliefs, Chinalco and Rio Tinto case
3.2 Real interests, Chinalco and Rio Tinto case
3.3 Soft v. hard
3.4 Value creation v. value sharing
4.1 Three dimensions of negotiation
4.2 HIT list
4.3 Expanded HIT list with steps
4.4 Simplified interest grid
4.5 Brett’s negotiation planning document
4.6 Sample Raiffa scorecard
4.7 Blank Raiffa scorecard
4.8 Sample Raiffa scorecard for evaluating results
5.1 Top-down, bottom-up
5.2 Corporate culture comparison
5.3 Awareness: some weak points of North American negotiators
5.4 Awareness: some strong points of North American negotiators
5.5 Awareness: some weak points of Japanese negotiators
5.6 Awareness: some strong points of Japanese negotiators
5.7 Awareness: some weak points of Chinese negotiators
5.8 Awareness: some strong points of Chinese negotiators
5.9 Gender-related strategies
6.1 Proposals that seem to benefit the other side
6.2 Compare the proposals
6.3 Best design of proposal
6.4 Agenda setting
6.5 Sample dialog for setting the agenda
6.6 Acceptable and unacceptable threats
6.7 Shutdown moves
6.8 Comparing visual media
6.9 Business email dos and don’ts
7.1 Playing the hard card first
7.2 Interests table for the case of the emotional client
7.3 Stakeholder analysis table for the case of the emotional client
7.4 Ethics in action
8.1 Tools for problem solving
8.2 War gaming sheet, Komsel’s Red Team representing Singcell
9.1 Types and impacts of cognitive bias
9.2 Framing and reframing
9.3 Decision making process and bias
9.4 Preferred team size and composition
A2.1 TouchPad, Wushi, Taakto
A2.2 Tang and Lee second-generation products
A2.3 Tang and Lee comparison
A2.4 Three party email negotiation: issues and initial planning
A2.5 Three party email negotiation: value claiming by party
A3.1 Brett planning sheet, blank
A3.2 Modified Raiffa scorecard
A3.3 Modified blank Raiffa scorecard
A4.1 Error: when to go slow
A5.1 Misunderstanding perceived value of time
A5.2 Improved conversation about time
A6.1 Stakeholder analysis, blank
Cases

Choosing the strategy

The incompetent translator
Professor’s patent
Help! We can’t stop!
ChinAlco and Rio Tinto – misunderstanding of interests
The right hotel, the right deal
EuroDisney
The very emotional client
Ethics makes money for Honest Tea and CapriSun
Fuji Seiko activity
War gaming example
The agreement that needed renegotiation
Inheritance far away
Three-way joint venture
OVD hosts a foreign investor and local business
AP and Shepard Fairey and HOPE
Shoe business coopetition
ZawaSoft and Pak-Ton
Recruit the best!
Sonde SA strikes a balance
Cultural IP anime
Toyota Tsusho and Encana – second round
Channel-Port aux Basques
Three party email negotiation – residential real estate
The very public offer
Not what the boss really wanted
Sensitive foreign investment
Acknowledgments

It is important to point out that this textbook owes a debt to a variety of

people who have guided the authors and contributed directly or indirectly to
its development.
Those people include Chavi C-Y Fletcher-Chen, the resourceful co-
author of this textbook, Peter Kesting and Remi Smolinski, both of Aarhus
University, who encouraged my interest in negotiation, and Helen Lam of
Athabasca University.
Additionally I want to acknowledge the many students from whom I have
learned over the years. In particular I would like to thank Sean Penn for the
use of the emotional client case, D. Zhang for his insistent and persistent
question-asking, L. Ipsen and S. Sepstrup for allowing me to quote select
data from their thesis, R. Lavoie for her Why-Why graphic, and of course
numerous MBA students in Kyoto and elsewhere.
Lastly I this project! acknowledge the patience and support of my wife
and children through
William W. Baber III

First of all I would like to thank William W. Baber for giving me the
opportunity to collaborate with him on this textbook. Appreciation to
IÉSEG School of Management for their resources and finally my husband
for his understanding and encouragement.
Chavi C-Y Fletcher-Chen
Introduction

The purpose of this textbook is to put the practical knowledge and tools
necessary to negotiate well in business in the hands of students.
The textbook seeks to answer practical questions like:

What is the overall process of negotiation?

How do you start?
What is the sequence?
What should you expect?
What phrases communicate the right intention?
How do you finish it up?
How do you learn more about it?

The textbook uses plain English, not difficult academic English. The
textbook uses many diagrams to help visually explain the processes.
Technical words (jargon) are explained so that you can use them properly to
communicate your plans and ideas to your team, your superiors and
companies you do business with.
The processes and ideas discussed in this textbook are based on the
standard practices of “Western business” institutions – practices we must
understand in order to function successfully in international business. The
learning points in this book will be useful in most kinds of business
interactions. However, local business practices and customs must be
respected and understood in order to achieve local and regional success.
This textbook will teach you basic ideas about business negotiation
through reading, discussing and doing. Each section of this textbook
contains one or two key points about planning, structuring, verbalizing or
understanding negotiation. Using the case studies included, you will learn
and practice phrases and jargon commonly used in negotiation.
Additionally, you will learn the importance of understanding the other side
as well as how to understand the other side.
Fundamentally, this textbook teaches that negotiation is an opportunity to
create value and business opportunities. Negotiation should not be a fight to
take value from another party. Negotiation should be a constructive
conversation in which all parties take home at least as much value as they
need. Some of that value may be distributed in a zero-sum way, but
additional value should be created to replace value conceded to other
parties.
By the end of this text you should be able to:

identify and use key negotiating strategies;

identify monetary and non-monetary interests of all parties;
use various methods to prepare properly, including understanding
your counterparts and organizing before negotiating;
use questions to understand the goals of counterparts;
provide and receive helpful information;
identify and improve a BATNA;
identify and avoid poor tactics and negotiating practices;
engage in a mutually successful negotiation in which all parties are
satisfied, and you have not unnecessarily given away value.

What kind of negotiation

The negotiation we will discuss and study in this textbook is business

negotiation. There are other areas of negotiation, for example political
negotiation, which we will not directly discuss. Business negotiation is
largely a transparent experience with both sides openly seeking money,
business opportunities and other forms of value. Political negotiation, on
the other hand, is much less open and often threatened by the actions of
individuals and groups who do not seek common benefit.

Process

As a practical textbook, you will learn useful “how to” processes. Here we
need to be a little cautious. Cognitive psychology shows that processes are
useful for simple tasks, but not for complex activities. For example, you can
easily learn to turn a car left or right, to start and to stop, but these do not
add up to the complicated activity of driving a car; however, after you learn
turning, starting, and stopping, you are able gain the experience necessary
to drive safely.
In the same way, business negotiation is a complicated procedure that
cannot be put into a cookbook recipe of easy steps. You need to know why
and how the process works in order to become an expert. The processes
included in this textbook are therefore useful as small steps and general
overall guidelines. They are not strict recipe cooking steps. Your first
driving lessons are probably on a safe course or parking lot, not a fast
highway. Similarly, this textbook contains exercises, examples and
simulations so that you can learn by doing, even if you are not at risk of
losing money or business.

Contents

Most of this text discusses approaches to resolving problems and difficulties

in negotiations, or “solving problems jointly,” as in the book 3D
Negotiation by Lax and Sebenius (2006) and other books broadly referred
to as the Harvard Method. Part of this text is devoted to useful words,
phrases, and practices that will help students become comfortable with the
process of negotiating. Practical steps for problem solving, researching and
designing agreements are included. A portion of this text is reserved for
tactics, mainly regarding avoiding and handling aggressive tactics.
1
What Do You Want to Get From
Negotiations?

Distributive and integrative

“What are you trying to get?” This is a key overall question to answer
before beginning the planning and talking.
Your answer is likely to be “as much as possible” or “best result for all”
or a combination of these two.
The following two concepts are fundamental to understanding
negotiation and how negotiators think.

Distributive perspective. Negotiators try to dominate the other party because they
believe they are in direct conflict with the other party over limited resources. Negotiators
fight hard for their positions (specific prices or amounts) because their loss is the other
side’s gain. The negotiators believe there will be a clear winner and loser, but not multiple
winners.
Adapted from Metcalf and Bird, 2004

Integrative perspective. Negotiators… believe that all parties can win through mutually
beneficial solutions. Consequently, integrative negotiators take a problem-solving
approach where the focus is on exchanging information in order to identify the underlying
issues and interests of both sides and to generate outcomes that benefit both parties.
Negotiators reach agreement by employing creative problem-solving approaches to
develop solutions that expand the size of benefits available to everyone.
 Adapted from Metcalf and Bird, 2004

FIGURE 1.1 What are you trying to get?

Distributive thinking is useful when you must get a certain amount of

limited resources for your side. In most real world business situations,
however, this kind of thinking will block you from creating and sharing
maximum mutual value.
Integrative thinking is useful in complex situations where you need to
connect many issues and when you want to maximize the opportunities for
value.

Q1: Which of these negotiations are probably distributive?

a. The rental price of an apartment

b. Deciding how Yumi, Ken and Jun will share the last piece
of cake
c. Starting a new training camp for a winning major league
baseball team in a rural area
d. A football star’s salary with their team

Q2: Ichiro is a Japanese baseball star. He is so famous everyone

recognizes him just by his first name! His main advertising contract
is with Kirin beer, one of the three large beer makers in Japan. Write
one short sentence about how Ichiro’s agent and negotiator will
probably interact with the Kirin beer company.

Q3: Which of these negotiations are probably “integrative”?

 a) Buying a car
b) Arranging a meal for your hiking club (40 people)
c) Buying a prepared lunch
d) Developing the annual financial budget of a city with two
million inhabitants

Q4: Write an example of a typically distributive negotiation:

___________________
Q5: Write an example of a typically integrative negotiation:
___________________
Q6: Your company is buying a division of Osaka based Kansai
Kogyou (KK). The agreement is complicated, but entirely based on
money. Is it distributive or integrative?
____________________________________________________

Once there were two little boys and one old broken bicycle. Each one
wanted the bicycle; they could not agree to share it. Eventually they
started talking, and they learned that one wanted the old tires to make
a catapult and the other wanted the body to make pipes. Integration of
their needs and interests made it possible to distribute everything
successfully.

FIGURE 1.2 Try to get more

Another basic way to think about negotiation is Creating and Claiming

Value. When you claim value, you are aiming for the left side of Figure 1.1
as a distributive negotiator. When you create value, you are aiming for the
right side of Figure 1.1, and beyond. Creating value is certainly integrative
– you must bring many issues together, even issues not planned for
negotiation, to create new value.

Example of creating new value

A manufacturer and a distributor were negotiating a typical limited

distribution agreement. After some discussions, they agreed to have the
distributor make a small change to the products sold in one region.
Therefore, the manufacturer sold more products and the distributor gained
value-added work. Both sides created new value together beyond their plans
for “typical distribution.”
It is a good habit to think about opportunities for creating new value from
the start of a negotiation, even during the early planning phases. Movius
and Susskind (2009, pp. 180–181) include a checklist for new value
creation, covering topics such as looking for variation in how the parties
value the same issue, the joint use of resources, differences in risk tolerance
and additional issues to add to the core transaction.
Following the ideas of Movius and Susskind, negotiators should look for
opportunities to create new value in the gaps where the parties cannot easily
match their abilities, viewpoints, values or resources. For example, a party
that sees no value in retail sales may be happy to let another party with
distribution skills handle some retail work.
Along the way, parties should look for new value opportunities where
skills, interests, viewpoints and abilities overlap. For example, if both
parties are good at an activity, they could bring their teams together to share
best practices and gain efficiency. Figure 1.3 illustrates gaps and overlaps.
Figure 1.4 provides additional practical ideas about where to search for
new value opportunities in typical contracts and agreements.

Section summary
 Most negotiations include sharing finite limited resources
(distributive) that are connected with more complex, tangible or
intangible issues (integrative).

FIGURE 1.3 Creating new value: gaps and overlaps

FIGURE 1.4 Where to find new value opportunities

Choosing the strategy

Five broad negotiation strategies – accommodate, collaborate, compromise,

avoid and compete – are described by Lewicki, Hiam and Olander (1996) in
Figure 1.5:
Negotiators use Figure 1.5 to decide which approach is best. The figure
only deals with two dimensions, importance of substantive outcome
(tangible and intangible gains that are at the center of a negotiation) and
importance of relationship. This is a useful starting point for considering the
whole negotiation and each issue within the negotiation. However, in
addition to relationship and substance, there are many other factors that
may have an impact on choosing the negotiation strategy.

FIGURE 1.5 Choosing a negotiation strategy

Source: Lewicki, Hiam and Olander (1996)
 The list of factors in Table 1.1 is adapted from Lewicki et al. (1996) as
well as Ware (1980). These should be taken into consideration when
choosing strategies. They include psychological, social, technical and
contextual factors. These additional factors are flexible and changeable, so
reassessing these factors as the negotiation develops will help you adjust
strategies to match the situation.
It is helpful to select a few of the previously mentioned factors to guide
your choice of strategy. Since the previously mentioned factors are relative
and not absolute, we can assess them as roughly high, low or medium.
Plotting the selected factors on a scale from 0–5 allows a visual
determination of the most suitable strategy. For this purpose time,
resources, relationship, power, trust, skills and complexity can provide an
overview of the negotiation. These factors are plotted for two different
negotiations in Figure 1.6.
A negotiation with high scores for many of the factors, such as the one
mapped by the solid line in Figure 1.6, matches well with a competitive
strategy. A negotiation with mostly low scores, such as mapped by the
dotted line, is best handled with a collaborative strategy.

TABLE 1.1 Changeable factors surrounding a negotiation

Among the Environment

Resources negotiating around the
parties negotiating parties

• Scarcity of time, money, manpower, • Mutual

• Complexity of
skills and other resources needed for respect among
issues;
execution of an agreement; the negotiators;
• political and
• personality of
• need to allocate resources precisely. regulatory
the negotiators;
environment;
 Among the Environment
Resources negotiating around the
parties negotiating parties

• empathy • importance of
among the maintaining a
negotiators; good relationship;
• team internal • relative power of
relationships; the parties;
• uncertainty
• trust among
surrounding
the negotiators;
issues;
• physical • pressure from
environment; stakeholders;
• procedural • limited time for
matters; negotiating;
• negotiator • importance of
skill level. outcomes.

FIGURE 1.6 Compete or collaborate

Urgency, stakes and relationship

Another way to choose a strategy is to consider urgency, stakes and

relationship. Urgency refers to the speed with which the organization hopes
to complete the negotiation. Stakes refer to the importance of the outcome;
for example, high stakes might mean survival or failure of the organization.
Low stakes, however, means little impact on the organization. Relationship
refers to the quality of the existing relationship.

FIGURE 1.7 Choosing negotiation strategies

To use Figure 1.7, consider the three categories in order from left to right
for each issue or for the overall negotiation. Follow the arrows based on
your evaluation of the urgency, stakes and relationship. For example, if the
urgency is low and stakes are low, there is no reason to immediately deal
with the issue. If there is enough time (low urgency), the issue is important
(high stakes) and the quality of the relationship is medium, look for
compromises.

Case: Choosing the strategy

 SamYeong, Co. and HoPha, Inc. are preparing a joint proposal for a
construction project. SamYeong is an engineering services company
with high skills in steel suspension design. HoPha specializes in
installation of complex support systems. Both firms are able to
organize the general construction work. There is a large amount of
money and potential profit in the general construction work. These
profits will improve the projected profits of the companies from
merely acceptable to a much higher level. The companies do not have
a history of cooperation, however they need to work together in order
to win the contract for this project – there are no alternative partners.
Somehow they will have to manage an agreement regarding the
general construction work. Fortunately the two companies have a lot
of time, as the bid will be submitted in 12 months.
Please evaluate the following:

Urgency: _____________
Stakes: _____________
Success chance: _____________
Relationship: _____________
Strategy: _____________

Changing your strategy appropriately – staying flexible

TABLE 1.2 How negotiation factors change

Factors Possible sources of change

Resources
Factors Possible sources of change

• Deadlines may become more

• Time, money, manpower, skills and
flexible;
other resources needed for execution
• labor costs decrease/increase;
of an agreement;
• highly skilled staff is recruited or
• need to allocate resources with
lost;
precision.
• scope and funding change.
Among the negotiating parties
•New staff;
•team dynamic improves or breaks
• Mutual respect among the
down;
negotiators;
•counterparties know each other
• personality of the negotiators;
better;
• empathy among the negotiators;
•skills improve;
• team internal relationships;
•new location/venue is agreed;
• trust among the negotiators;
•procedures become more
• physical environment;
comfortable/difficult;
• procedural matters;
•negotiators link or delink issues in
• negotiator skill level.
the negotiation to make them more
or less flexible.
Environment around the negotiating parties
Factors Possible sources of change

• Regulations become more friendly

• Complexity of issues; or more difficult;
• political and regulatory • political support or pressure from
environment; the back table increases/decreases;
• importance of maintaining a good • new technology simplifies or
relationship; complicates matters;
• relative power of the parties; • power changes;
• uncertainty surrounding issues; • knowledge and understanding
• Pressure from stakeholders; increase/decrease;
• limited time for negotiating; • time constraints expand or
• importance of outcomes. contract;
• stakes increase or decrease.

A negotiation might move from competitive to collaborative as the

parties interact more. For example, trust might increase, more time might
become available, the importance of the relationship might change and so
on. Because integrative, collaborative negotiations tend to create more
value for all parties, it is best to attempt to move a negotiation from
competitive to collaborative. The opposite is true as well – a collaborative
negotiation can break down into a competitive one as deadlines approach
and parties feel the pressure of time.
Many negotiations include issues demanding collaborative/integrative
approaches as well as ones that are more distributive. Therefore, it may be
useful or necessary to switch strategies. Ware (1980) suggests separating
the approaches in time and space with appropriate sequencing and
packaging.
Handling problem solving first in the overall sequencing of a
collaborative or mixed strategy negotiation is preferable, as discussed in
Chapter 4. Without an idea about the possible solutions before taking on the
competitive issue, the chance of confusing the negotiation partners and
souring the communication increases.

Power

There are three kinds of power in a business negotiation, BATNA power,

coercive power and perceived power. BATNA power is described in
Chapter 3, and it consists of the ability to walk away if a deal is not
attractive enough. Coercive power is rarely experienced in the business
world in countries with sound legal systems. Often this kind of power
comes from organizations or individuals in authority that can demand bribes
or threaten serious consequences with no danger to themselves. Coercive
power may also come from organizations that have a monopoly. Monopoly
or near-monopoly organizations have the unbeatable BATNA that
counterpar-ties cannot choose to walk away. An example would be a
government monopoly on a natural resource such as Precious Minerals
Marketing Corporation in Ghana, which has authority as the sole legal
purchaser of the output of small gold mines. There is no legal alternative to
compliance with their demands.
The last kind of power, perceived power, comes from the perception that
one side has a dominant position. One party may promote the idea that they
are powerful, but the “power” can only have impact if the other party
believes it and reacts to it. In other words, this kind of power is only real if
others believe it. Parties with this kind of power might include a company
that is dominant in its industry and so well respected that suppliers and
partners do not want to challenge it. An example can be found in the 2014
dispute between Amazon and some publishers (e.g. Hachette), in which
Amazon controls the retail market so well that they can make demands
without reacting to counteroffers.
In some parts of the world, major firms can successfully exercise
perceived power based on their size, history or position in the industry. The
smaller companies that supply and serve them may make statements like:
“We cannot resist the will of that company because they helped found the
country” or “We must agree with that company because they were founded
by the king’s brother decades ago.” However, it is of course possible to
resist such companies.
In order to fight back against any form of power, a company must show
how its product or services are necessary to the more powerful company, as
well as how they are different from and better than the competition.
Another way to fight back of course is to improve your BATNA so that you
create alternatives and escape the power of the other party. In the end, a
strong BATNA will be the most help in dealing with any kind of power
brought by a counterparty.

When not to negotiate at all

Some negotiations should not happen. These include for example

negotiations about issues where both sides have low interest, cost is high,
and there is no expected value in the relationship (see Figure 1.5). Consider
the following case.

Case: The incompetent translator

Some years ago, a new translation services company in the

Washington, DC area ordered a translation from English into Czech.
The translation was not long, and the cost was only about $500. The
translator provided the Czech text on time by email. There was only
one problem: the project manager who received the text immediately
recognized that it used none of the special characters from the Czech
alphabet.
 The Czech language uses the Latin alphabet plus several modified
characters for a total of 42 characters. For example, the language uses
“c” and “č”, and “a” as well as “á”. These special characters have
different pronunciations and carry important grammatical meaning.
The project manager asked the translator to put the characters in, but
he refused. “The text is understandable to a Czech,” he said. “It is
good enough.”
This was certainly true – the text was comprehensible to a Czech.
However, no Czech office manager or schoolteacher would accept any
writing lacking the special characters. Text of that sort would only be
usable in a very informal setting. It was not “good enough”. The
agreement with the translator had not specified any “normal” or
“special” purpose, setting or formality.
The project manager, feeling the situation was very clear, refused to
pay the translator. The translator insisted on payment and threatened
action in the California court system. At the same time, he lodged a
complaint with the American Association of Translators (AAT), of
which he was a member. AAT promptly sent a demand to the project
manager for payment, stating that they would blacklist the company
from their services not only in California but nationwide. They did not
respond to the project manager’s irritated letter claiming that the text
was unusable.
At this point the project manager faced a choice: try to negotiate,
fight a court case 4,000 kilometers away or give up.
FIGURE 1.8 Decision not to negotiate

Decision time

Negotiate: The other party in the negotiation, the translator, refused to talk.
The translator had successfully drawn in a powerful ally, AAT, and seemed
to have their full support.
Court: Assembling the evidence against the translator would be easy.
However, judges are specialists in law, not linguistics. An expert witness
would cost an additional $500–$1,000. Indeed, a single plane ticket would
cost at least $500. A lawyer’s services would cost $2,000–$3,000. Of
course the problem might not be resolved in just one visit. With experts and
AAT weighing in, the court case could have gone either way – a victory or a
loss.
Give up: Giving up would cost only $500 and take no time at all. There
would be no concern about losing the court case and paying the costs of the
other side.
The project manager’s choices could be drawn as in Figure 1.8.
After considering the situation described in Figure 1.8, the project
manager, with the agreement of the owner of the translation services
company, gave up. The fee was paid despite the fact that the product
delivered was worthless.
Do you think the project manager and owner made the right decision? Why?

Is this a distributive or an integrative negotiation? Please explain.

2
First Connections

Gaining and giving information

In the previous chapter, we encountered two basic approaches to

negotiation: distributive and integrative. Distributive negotiators do not
need to learn much about the other party – therefore, they typically ask only
a few questions with a narrow focus and share little information about
themselves. Integrative negotiators, on the other hand, ask many questions.
They share much (perhaps even all) information about their positions. This
section is about how queries for information may be asked and answered.
Table 2.1 provides an example: Tanba Agro is negotiating the sale and
delivery of eggs to Hyogo Cake’s factory.

Types of questions

Simon Hazeldine (2006), a UK business negotiator, writes that you will

need to use four kinds of questions: closed, probing, open-ended and
summarizing.

Closed questions
These simple questions seek specific answers to specific questions. You can
ask for yes/no answers (Hazeldine, 2006, p. 63).

Probing questions

In 3D Negotiation, Lax and Sebenius (2006) say, “If they don’t like the
concept, probe. Ask why? Why not X instead? What if Y? Then, listen
actively” (p. 77).

TABLE 2.1 Constructive sharing of information

Dialog Comment

Hyogo Cake: So “OK!” means B understands, not that B has

basically, we need 3,000 committed to anything. Tanba Agro knows they
eggs per day. cannot deliver the eggs all at once because of
Tanba Agro: OK! truck availability.
Tanba Agro:Your
Tanba Agro changes subject without showing the
factory has an
difficulty on their side by asking a general
interesting process – do
question about the factory, the process or another
you use all the eggs at
topic related to the cake business.
once?
Hyogo Cake: No, we Now Tanba Agro knows it might be possible to
have three baking deliver the eggs at two or three times during the
batches per day. Each workday. Tanba Agro also now knows that
time we need 1,000 Hyogo Cake might like to have the eggs arrive at
eggs. Batches start at 8 three times. Tanba Agro can use this information
AM, 11 AM and 2 PM. to save money …
Tanba Agro: I see. Is it
difficult to keep all those
eggs until you are
ready?
Dialog Comment

Hyogo Cake: Yes – it

takes a lot of space.
Hyogo Cake: However
the price is too high for
us. XYZ, Corp. can
deliver the eggs all at 8
or to offer Hyogo Cake a discount. Note that
AM and 3 percent
Tanba Agro’s discount does not have to be as big
cheaper.
as XYZ s because the delivery schedule is
Tanba Agro: If you can
convenient for Hyogo Cake.
take the eggs at 7:45
AM, 10:45 AM and 1:45
PM, we can decrease
our offer by 2 percent.

These are used to explore a point the other side has made. They allow
you to drill further into what has been said so that you can understand
it in more detail.
Examples include:
“What makes you say that?”
“In what way do you think…?”
“How do you mean?”
“Why do you bring that up?”

A useful probing technique is to use “echo questions”. An echo

question is where you use the last word or few words of what the
other party says as a probing question.
An example:
“We need a significant investment.”
“Significant investment?”
 In this example, you are probing further to discover how the other
party defines “significant investment.”

Source: Hazeldine, 2006, p. 64.

Why do you think that “echo questions” are effective?

What do both sides learn from an echo question?

In the following text, Hazeldine suggests also using broader questions

that invite general exchanges of information.

Open questions

These are broad, diagnositc questions that encourage the other paerty
to talk about their situation. Open questions usually start with words
such as what, when, why how, where, who and which, and usually
result in a multi-word or sentence answer.
Examples would include:
“What do you want to change about your current situation?”
“You have mentioned you have some concerns. What are they?”

Open questions are used to gather information and closed questions

are used to clarify what you discover and to get specific answers and
commitments.
Hazeldine, 2006, p. 64
 What is the benefit of asking open questions?

In which situation during a negotiation would you ask an open question?

a. At the beginning of negotiations

b. When you want specific facts
c. When you are unclear about a general idea
d. When you are just finishing up negotiations

What kind of question would you ask after hearing, “Our company can deliver 2,000 units”?

a. Closed
b. Open
c. Probing

Write the question you might ask:

Return to the negotiation between the egg supplier and the cake maker at the beginning of this
section. What additional questions should you ask? Develop two questions Tanba Agro could ask
Hyogo Cake.

When asking questions to identify problem points, use the inconsistency

trap to learn about the other side and their understanding of the issues. To
use the inconsistency trap, first ask, then listen, and then rephrase the
question and ask again. Compare the answers to each other and to your
sources of information to look for points that you do not understand. These
points may be difficult to understand because information is poorly
explained, the counterparties have hidden the information or because they
have not noticed the need for the missing information.

Summarizing

See the Verbal signals section of Chapter 6 for more on this.

Section terminology

Probe: to explore and push for deeper, specific information

Commit: agree to expend money, time and other resources with full
intent to
complete Diagnostic question: a question for learning general
information
Inconsistency: information that is not the same as it was when first
presented

Section summary

Ask questions to gain information and build your understanding.

Relationships

In the previous section, we saw how a negotiator can ask questions to learn
about the overall situation, the needs of the other party and to find ways to
improve an offer in order to increase the likelihood of agreeing. Asking
questions and answering questions can also help build a relationship.
Fundamentally, negotiations should lead to a successful business transaction
or avoidance of a bad one. But just completing one transaction is not the
greatest success. The negotiation partners could benefit from building a
relationship of confidence and mutual accessibility that leads to more
transactions in more areas of business – that is real success. We can arrive
at real success through relationships built on reciprocity, empathy and
perspective taking.
Reciprocity through getting and giving

When someone tells you something, shares information with you or gives
you something, you should give something in return. This is called
reciprocity. Returning information or some helpful action will build and
improve the relationship among the parties (Cellich and Jain, 2004).
Sharing information often helps build confidence and relationships while
providing the information necessary to create a good result.
Sharing information is the most common way of building relationships
through reciprocity when working with companies culturally rooted in the
Western world. Other parts of the world find reciprocity and build
relationships through giving gifts. The gift may be an item such as
expensive wine or a local specialty, or it may take the form of a favor for
the other parties. In business negotiations, it may be a concession given
early in the talks. Giving the gift or concession or doing the favor places a
burden on the other parties to respond similarly. Just as with shared
information, the pressure to respond appropriately is strong, and failing to
respond appropriately may damage the relationship. This kind of interaction
based on gifts and favors is part of the concept of guanxi in China, ongi and
kankei in Japan, and may be familiar to many cultures of East and Southeast
Asia in particular.
When dealing with a culture you are unfamiliar with, use very
knowledgeable local people to help you prepare for the kind of reciprocity
in that region. The following quote from Thams, Liu and von Glinow
(2013, p. 466) is on target: “… although there might be some universal
principles governing reciprocity, people in different cultures embrace
reciprocity differently”.

Reciprocity decreases tension

 An air of tension can also be created by unknown factors. For example, you may never
have met the people you will be negotiating with before, and this can lead to feelings of
uncertainty. You can reduce the tension by remembering that your key focus… is to find
out what the other party wants, and to communicate what you want.
Hazeldine, 2006, p. 60

However, if one party gives a small concession and expects a much better
concession in return, the relationship and the negotiation will deteriorate
(Cellich and Jain, 2004). If you have been given a small concession and feel
pressure to give a larger concession in return, you must either get another
concession or carefully consider the size and value of the concession you
might give. Positive reciprocity can help the constructive exchange of
information and ideas. Negative reciprocity (i.e. responding aggressively to
aggressive actions) results in unequal sharing, damaged relationships and
failed negotiations.

FIGURE 2.1 The cycle of sharing

How can you manage reciprocity in order to comfortably share information without losing
control or not receiving reciprocal information from the other party?
 Reciprocity, whether based on exchanging information or placing obligations on other parties,
works because it is a widely accepted norm. Under usual conditions, most people and
organizations will share information cautiously at first, and then more openly. The sharing is a
process that builds trust and confidence. Be a little cautious: it is possible for a negotiation
partner to abuse the reciprocity process. If the other side does not share, then you should
consider a different approach or a different partner. You must be sure that the other side is
sharing quality information and concessions. If you give too much too soon, you may learn
too late that your negotiation partner is not working with you constructively.

Let’s go beyond understanding needs to understanding interests. To do so

we need empathy – the ability to recognize the feelings and thinking of
others. We can use empathy to understand the reasons for the choices made
by counterparties.

Section summary

Reciprocity helps build relationships and make them deeper.

Relationships improve business outcomes.

Empathy

Tough or with feeling?

Many people feel that they must choose between being assertive and being empathic –
being “hard” or being “soft.” But that’s a false choice. Showing empathy about your
counterpart’s interests, perceptions, and constraints may make him or her more open to
providing you with useful information. The more empathically you understand your
counterpart, the more effectively you can design value-creating deals and the better
positioned you are to claim a full share of that value.
 3D Negotiation, Lax and Sebenius, p. 216

Empathy is a way to improve negotiation outcomes by:

understanding the negation partner’s values;

increasing mutual gains and satisfaction;
avoiding ethical errors.

Understanding leads to improved results, possibly for all sides. Your values
may be different from the values of the other sides in the negotiation. Using
empathy, you can identify the differences and perhaps more easily create
solutions that protect your values as well as theirs. If the other sides cannot
protect their values, they are more likely to leave the negotiation or seek
new partners for future projects.
Assertiveness is often an opposite behavior to empathy. Assertiveness
means putting pressure on the other sides to accept your position.
Assertiveness of this sort may damage a negotiation by limiting the
opportunities for other or all sides to make gains together. On the other
hand, assertiveness also means getting your ideas into the conversation.
Failing to get your ideas on the table will not benefit any parties.
As empathy and understanding increases, the negotiation partners will
have more opportunities to maximize mutual gains, not just their own gains.
As the gains of all sides increase, satisfaction is likely to increase.
Importantly, empathy can help you avoid ethical mistakes like improperly
explaining risks or value related to the negotiation or inappropriately taking
an asset that has particularly high value attached to it by one of the other
negotiation partners.
Empathy in some cultures may include additional generally positive
feelings. For example, in Japan, businesspeople are often sensitive to the
feeling of en ( ), also called wetto, a notion of compatibility, likability
and vague potential for good results (DeMente, 2004). This feeling can
impact business decisions including negotiations, contracts and follow up.
The feeling of en is part of Japanese empathy and therefore part of
relationship building in Japan. Sensitivity to creating and building culturally
specific kinds of empathy is important for intercultural negotiators.
There are many ways to build empathy, but negotiators must be careful to
do so in ways that match the expectations of the other sides. In any case, a
commonly used approach is to show that you share identities with the other
parties. Some identities that are widely shared include being parents, sports
interests, fields of study, employment history and so on.
In summary, it sounds like empathy is a great thing to develop. But it is
possible for empathy to create too much sympathy? After all, you might not
want to explain to your boss or your shareholders that you left resources
unclaimed out of sympathy. Research has found that empathy tends to
increase shared gains (Galinsky, Maddux, Gilin and White, 2008) but
statistically significant gains were made by another approach: perspective
taking.

Section summary
Empathy means understanding the interests and values of the other party. It helps create positive
value and improves the outcome of the negotiation. It is not appropriate, however, to become too
understanding.

Perspective taking

In this approach, negotiators try to understand the goals and difficulties in a

negotiation from the point of view of other sides. However, they
concentrate on the desired targets and goals more than the feelings of other
sides. Galinsky et al. (2008, p. 382) used the phrase, “Try to understand
what they [the other side] are thinking in their situation.” Perspective taking
resulted in greater joint gains and individual gains.
Case: Professor’s patent

Suppose that you are trying to negotiate the use of a patented process
for your startup company. You do not have much money, so you
prefer to pay a royalty as sales develop in the future instead of buying
the patent outright. On the other side of this negotiation is a professor
who is near retirement and currently working at a university in
Malaysia. What do you think might be the perspectives of that
professor? Taking his perspective, write down what he might be
thinking about this deal:

Compare your ideas with another student and be prepared to

discuss with the group.

Review of relationship building

Please talk to your partner(s) and try to answer these questions:

Why should you try to build relationships? How can you build positive relationships?

Situation: You are in South America working on an acquisition of intellectual property. How can
you build a relationship and empathy with the other party? Please write your ideas here:

But…
Do not expect all negotiations to result happily in future business
opportunities. Here are examples of negotiations that will probably not lead
to repeat business:

1. You buy a house you expect to live in for at least the coming 20
years.
2. You complain about poor products that your company will not
need again.
3. You disagree about the cost with a taxi driver in a foreign city.
4. You buy services for a one-time conference overseas that your
company will organize.

In the previous situations, is it sensible to spend time and energy to build

relationships? Explain your answers:

Why build relationships

Each side of the relationship should be developing plans that incorporate the other’s interests into
those plans. Without doing so, a long term relationship entails the disadvantage of closing off
options, without accruing the benefits of the longer term commitment.
(Sheppard, 2003, p. 268)

Which sentence best summarizes the previous paragraph?

a. Long term relationships must be carefully limited to avoid

troubles.
 b. Help the other side make their plans successful so that you can
keep useful options available in the future.
c. Be sure to think long term so you can negotiate more in the future.

Sheppard (2003) also wrote, “Without mutual development, long-term

relationships have no value.” Do you agree? Please explain:

The other party tells you … You reciprocate with …

they have new machinery but it may not work
_____________________
well for the first month.
they are worried about getting enough workers
_____________________
in time.
they can speed up delivery to meet your tough
_____________________
schedule.

Lax and Sebenius (2006, p. 216) also say, “You are empathic when you
try to understand the interests and motivations of the other side. You are
assertive when you make your interests and demands clearly known to the
other side.” Is it ever useful to be assertive? Why or why not?

Section summary

Considering a situation from the perspective of other parties is less

about emotional insight than about their material interests, goals and
strategies.
Impression management

At the start of your relationship with the other parties in a negotiation, and
at later times, you may want to manage or control your relationship. You
can manage the impression that you make in a variety of ways. You
communicate your image on three levels: to the organization (macro), to
other teams (meso), and to other individuals (micro). It is of course possible
to communicate a different image on each level, and to change your
approach as the relationship develops. Some general approaches to
impression management at the team and individual levels are discussed
further.

TABLE 2.2 Impression management approaches

Approach Advantages Disadvantages

Other parties may react with

similar tough behavior,
leading the negotiations
Other parties may decrease their
Tough directly into deadlock or
expectations from the start.
poor outcomes. See the
section “Playing the hard
card first” in Chapter 7.
Interactions start with a positive May lead the aggressive
tone. Positive moves tend to be parties to increase their
Nice
rewarded with positive demands if they perceive
responses. your image as soft
If the other parties are not
Shows a willingness to consider
strong on technology, they
Technical technical issues and complex
may become less
solutions.
comfortable with your side.
Approach Advantages Disadvantages

Other parties may share their

information more confidently. A
Counterparties may attempt
better information flow may help
Trusting to take advantage of
you make strategies and
perceived naivete.
decisions. It may also lead to
better relationships.
Other parties may not share
information or may not
Other sides may be cautious
Cautious make matching concessions
about making high demands.
if they feel you are too
cautious.
Some parties present
A highly professional attitude themselves as anti-
Corporate may make others feel confident establishment and may feel
in your abilities. threatened by a strongly
corporate look.
If you use negotiating
terminology like BATNA, Untrained parties may
reserves and so on, other trained misunderstand your
Professional negotiators will identify you as a terminology or feel
negotiator trained negotiator. Shared uncomfortable. The result
vocabulary will make may be poor
communication easier and more communication.
successful.
Being flexible signals that you It may also signal that you
Flexible are willing to solve problems are indecisive and can be
creatively. bullied.
Approach Advantages Disadvantages

Other parties may not

propose creative ideas if
Inflexible No clear advantage.
they expect you to reject
them.

Presenting yourself and your organization to other organizations, at the

macro level, is generally the task of the marketing and public relations
specialists in your organization. If you do not have these people on your
staff, carefully coordinate your macro level image management with top
managers and partners. In addition to managing the impression you make
on other parties, you will need to analyze the way your negotiation partners
present themselves.

Section summary

Be aware of impressions and perceptions to manage how others feel

toward you.

Satisfaction

In this section, we will be discussing satisfaction as a feeling or emotion

that a negotiator has received a suitable deal, not just the minimal tangible
satisfaction of their requirements. No sensible party will agree to outcomes
that are poor or unsatisfying. However, intangible satisfaction can range
from high to low, or even negative (dissatisfaction).
 Do you think that satisfaction goes up or down in sync with tangible
outcomes of the negotiation – that is, is satisfaction high if a high money
goal is achieved?

What is the value of satisfaction? If we can show that a negotiator can be

satisfied with a deal that has less value than a perfect deal, it means that the
negotiator will trade tangible value for his or her own intangible
satisfaction. Therefore, a skillful negotiator will seek to build intangible
satisfaction while keeping some extra tangible value. Clearly we can only
manage this in integrative negotiations, but not in purely distributive
negotiations. Here is how it works:

FIGURE 2.2 Impact of satisfaction on value sharing

What is the future after satisfaction comes into a deal? According to

Curhan, Elfenbein and Xu, (2006), individuals who were very satisfied just
after a negotiation were more likely later to intend to continue the business
relationship. Objective measures (such as tangible outcomes) had no impact
on plans to continue a business relationship or not! Therefore, the benefit of
making the other sides feel satisfied is not only (possibly) increased
tangible gain, but also a greater chance of future deals. The value of future
deals? Possibly unlimited! Curhan et al. (2006) described four ways to view
the development of satisfaction in a negotiation:

how the negotiation made us feel about ourselves;

whether the negotiation process seemed fair;
whether we’ve developed a productive working relationship with
our counterparts;
measurable gains and losses.

The first three in the previous list can only be described as feelings – these
are subjective. Because they are subjective and difficult to measure, a
skillful negotiator can actively influence those feelings. What can you do to
develop satisfaction in the other negotiating parties?

TABLE 2.3 Creating satisfaction

Write out some practical ideas for creating

Category feelings of satisfaction in each of the four
categories from Curhan et al.

How the other parties feel

about themselves during the
negotiation process
How fair the negotiation
process seems to the other
parties
How the other parties feel
about the relationship with
you and your team
Measurable issues in the
negotiation
 Regarding the last item Table 2.3, measurable issues, it may be necessary
to show that these have been distributed appropriately among the
negotiating parties. Be prepared to demonstrate fairness. However, humans
tend to attach emotional value even to things that are concretely measurable
and countable, so it may be possible to influence feelings about these
“facts” despite demonstrating the actual breakdown.

Section summary

Try to build satisfaction into the negotiating process because it is

more likely to lead to future business opportunities than simply
exchanging concessions. Work on relationships as much or more than
tangible outcomes to build satisfaction in all parties.

Relationship building at the table

At the beginning of this section, we read Lax and Sebenius’ idea that
empathy is almost necessary for creating new value and successful
negotiation. Do you and your partners agree? Specifically what can we do
at the negotiating table? Someday you may have the experience of suddenly
going into a negotiation situation with counterparts you do not know. In that
case, be friendly:

smile, but show earnest intent (smiling is not appropriate in all

business cultures);
make small talk (choose appropriate topics);
listen carefully to their small talk (show respect);
learn about them (listen carefully, build empathy, take their
perspective);
 ask them questions (listen to the answers and learn);
share information (start the reciprocity process, communicate
visually and verbally).

Swaab, Postmes, Neijens, Kiers and Dumay (2002) found in their

research that using visualizations (e.g. graphics, diagrams and animations)
increased satisfaction among negotiating parties; therefore, communicate
using graphic images.
Active listening is the term widely used for good listening skills. Active
listening requires showing that you are listening by reacting with
appropriate verbal and body language signals. In some cultures, this might
mean the correct use of interjections, for example ah, uh huh, mm, so and
similar words when suitable. Body language response might include
nodding, leaning forward, eye contact, etc. However these signals of active
listening are a little different around the world. Try to use learn the correct
ones for the people you are interacting with.
To summarize, negotiators need to listen and ask and listen again in order
to build relationships. That process can happen away from the negotiating
table and outside the office experience, before and after the actual
negotiating. Never hesitate to talk to a person and listen to them. With most
Europeans, North and South Americans, and people from many other
cultures, you can walk directly to a person, greet them and talk. In other
parts of the world where behavior is more formal, adjust your approach to
the standard local behaviors.

Game theory

In the well-known prisoner’s dilemma game, there are two strategies:

cooperate or defect. If the game is repeated, both sides easily see the value
of cooperating. Cooperation leads to greater value for all parties. The same
is true in negotiation – if one side shares information and the other side
shares information, both will find that sharing information is rewarding.
The rewards include the creation of knowledge and trust as well as
increased opportunities to create new value.

FIGURE 2.3 Virtuous cycle of knowing

Trust is the expectation that other parties will not defect. Developing trust
means an evolution of events that lead to trust. That evolution can happen
in the pattern illustrated in the following graphic.
Figure 2.3 has no beginning or end. It repeats with better results from
greater repetitions.

Section summary

Actively build relationships because it will help the negotiation and

information exchange flow smoothly.
3
Core Negotiation Concepts

Anchoring effect

Lax and Sebenius explain the anchoring effect in 3D Negotiation (2006, pp.
187–190). They found that experienced professionals receiving the same
information, except for price, would suggest prices close to the first offer
from the other party, even if their previous price information were very
different. Therefore, Lax and Sebenius conclude that the first party to
suggest a price gains an advantage. The authors also say that the price
proposed must seem reasonable to the other parties because an excessive
price would make the proposer seem foolish. Additionally, providing a clear
compact reason for the price at the time you propose it may strengthen the
anchoring effect.
A practical conclusion would be to try to be the first party to propose a
price; however, the price should not be outrageous and should include some
reason or explanation. Lax and Sebenius (2006, p. 187) say, “… make an
offer just above the most they’d be willing to pay.” Then, you can move
down without losing much of the potential total value.

Example

One of the authors used to work for a business research company that
specialized in Russian (then Soviet) business in 1989–1992. We had to
negotiate prices for market research and information. If we were expecting
a price between $5,000 and $8,000, we were shocked to hear an offer of
$14,000. The offering party seemed foolish to us and we would look for
another provider. In time, we learned to start the conversation with a low,
but reasonable, price.
Q: What if you cannot anchor the price conversation?
A: Anchoring has its biggest effect on negotiators who are not aware of
it. If you are aware of the anchor, you can re-anchor with your preferred
price range. You can try to re-anchor immediately or later. You can do it
bluntly or by linking issues that explain why your new anchor is sensible.
Q: What if both sides know about anchoring and try to anchor early?

Section summary

Try to name the price first. This point is not important if the price
range is limited or if price is a low priority issue.

Batna

The abbreviation BATNA means “best alternative to negotiated agreement”

and is also called a “No-Deal Option”. BATNA is what you will/must do
because of failing to negotiate an agreement. Before you start negotiating, it
is important to know what will happen if the negotiation collapses:

Will you go bankrupt? Will the other side go bankrupt?

Will you get fired? Will the other party get fired?
Do you have another possible Do they have another possible
partner? partner?
Do you have time to find a new Do they have time to find a new
partner? partner?

Can either party do the work/create the product alone?

Before the negotiation starts, prepare to understand what the negotiation

choices are so you can have the best possible BATNA. A typical (good)
BATNA could be having an alternative company to negotiate with.
Example: Company X makes electronic toys and wants a faster chip, but company Y only sells
faster chips for an extremely high price. In this case, X must walk away. Also, Y must walk away.
This is clearly a failure for both! We hope that X had already started talking with another chip-
maker. We hope that Y had already started talking with another electronics maker.

Sometimes there may be more than one possible alternative to

negotiating. In that case, it makes sense to consider which alternatives are
better or worse. Identifying your worst alternative to negotiated agreement
(WATNA) may be helpful in avoiding that result and assessing the
importance of negotiating; another approach is thinking about the most
likely alternative to negotiated agreement (MLATNA) (Fisher, Ury and
Patton, 1991). The “most likely” result is more specific than the general
notion of BATNA and can help you eliminate “best” results from your
planning that might really be unlikely.

Balance

In any negotiation, you and the other parties involved face a

fundamental and ongoing choice: between staying and walking…
 This is the deal/no-deal balance. On one side of the balance you have the proposed deal;
on the other, you have your “walk away option”… or BATNA.
3D Negotiation, Lax and Sebenius, p. 27

It is extremely important to know (or estimate) the BATNA of the other

negotiator(s). Is their BATNA so strong that they can walk away from the
negotiating table? Is it very weak? If they have a weak BATNA, you should
be able to improve your negotiating results. The following short case is
about a Japanese company that was planning to buy a division (not all) of
an American company.

Case: Help! We can’t stop!

During a two-year process, negotiations to buy a part of a US

company stopped several times as the Japanese company rebuilt and
strengthened consensus inside their company. When a European firm
unexpectedly made a bid on the entire American business, the
Japanese firm suddenly had to choose to complete the transaction or
quit.
At the last moment, [the American company started to] think again
about the Japanese side’s no-deal option. They quickly reviewed other
options open to the Japanese firm and confirmed their undesirability.
Having worked through a grueling consensus process, virtually
everyone at the Japanese company… was deeply committed to doing
this deal.
Now, rather than face the extreme organizational costs of “losing,” the Japanese firm
agreed to pay an extraordinarily high amount for the firm.

Adapted from 3D Negotiation, Lax and Sebenius, pp. 89–90

Questions

1. In the previous section, do you think the Japanese company had a

good BATNA?
2. Compare the BATNA of the US company before and after the
Europeans made an offer. How did the US BATNA change?
3. How would you try to improve the BATNA of the Japanese
company?
4. Write, in less than 20 words, the key error of the Japanese side.

5. Should you tell your BATNA? Why or why not?

Consider Figure 3.1. Did the Japanese firm in the previous case make this
kind of error?
Figure 3.2 shows another way of understanding this error.
FIGURE 3.1 In too deep – decision tree

Do you agree?

Yoshiaki Fujimori, President and CEI of JS Group Corp was quoted in

Bloom-berg news in January 2015 on negotiating:
Fujimori said he almost pulled out of early negotiations to buy Grohe after disagreeing on
price and will always keep the option of walking away from an acquisition.
“… don’t put yourself in a position that you must make a deal no matter what,” he said.

Sato and Urabe, 2015. p. 1.

Your reaction to this statement:

The notion of not being able to exit a project that is developing poorly is
described in the Japanese context by DeMente (2004, pp. 21–22).
According to DeMente, an organization may find quitting to be too
upsetting, and therefore they feel forced to commit resources even after
failure has become obvious.
For more about strategic negotiation errors, see Appendix IV.
FIGURE 3.2 In too deep – flowchart

Section summary

Develop a strong BATNA so that you can leave a negotiation that is

not going well.
Understanding and misunderstanding interests

Be sure your ideas about the counterparties match the facts about their real
interests. In Figure 3.3, we can see the obvious problem when ideas about
the counter-party are incorrect.

FIGURE 3.3 Interests – match v. mismatch

Source: Adapted from Raiffa, 2002.

Case: Chinalco and Rio Tinto – misunderstanding of interests

Chinalco and Rio Tinto, 2009: A Chinese/Australian business deal

that could have seen the creation of a stable, diverse, multinational
mining and metals company failed because the parties misunderstood
some of the interests.
With strong reserves of ore in Australia and a strong market in
China, the deal seemed sensible from a business viewpoint. Moreover,
Rio Tinto was looking for opportunities to get cash in order to
 decrease its debt. Chinalco, the Chinese aluminum processor, already
owned 9 percent of Rio Tinto and was willing to pay for more.
Chinalco attempted to gain another 9 percent by quickly buying
shares. They did this discreetly, buying on Friday in European
markets. With the larger share, Chinalco would have placed two
directors on Rio Tinto’s board.
But the deal collapsed. In the end it was the Australian government,
not Rio Tinto, regulators or shareholders, which blocked the deal for
political reasons.

Beliefs about interests

TABLE 3.1 Mistaken beliefs, Chinalco and Rio Tinto case

Chinalco was incorrectly thinking Australian Government was

that … incorrectly thinking that …

• The Australian government is not • Chinalco wanted to direct Rio

important in this process; Tinto’s resources only into China;
• The Australian government will not
• The Chinese government made the
be worried about our breaking the 15
decision to gain more shares of Rio
percent share limit for foreign
Tinto;
ownership;
• The Australian government will not
• The quick move to gain shares was
see a threat in the presence of two
the start of a longer campaign to gain
directors picked by a Chinese
more shares and power;
partner;
• ChinaAlco’s shares would make it
• The Australian government will not
impossible for Rio Tinto to develop
care that Chinalco is majority owned
as a globalized leading Australian
by the Chinese government;
company.
Chinalco was incorrectly thinking Australian Government was
that … incorrectly thinking that …

• Rio Tinto can influence the

government enough to protect the
deal;
• If we do it quietly but inform them
quickly, there will be no problem.

TABLE 3.2 Real interests, Chinalco and Rio Tinto case

Chinalco Australian

• Diversification of • Strong interest in sticking to the 15% foreign

Chinalco; ownership limit;
• Gain experience with a
• Strong interest in developing a powerful
respected foreign
Australian company;
business;
• Gain some control (but • Felt it was necessary to discuss such
not dominant) over developments in the public media (the political
supplies from Australia. leaders were very upset by the “secret” attack);
• Summary: Wanted to
• Very sensitive to ownership by a foreign
diversify Chinalco from
government.
aluminum.
• Summary: Would not consider the deal without
extensive public discussion.

Exercise

1. As the Australian or Chinese side, propose some ways that this can
become a Win/Win situation considering the real interests of both
 sides.
2. Now try to include some ideas that are more than Win/Win, ideas
that increase the potential benefits to both sides, again considering
the real interests of both sides.
3. Propose your ideas to your counterparts from the other country.

Section terminology

Probe: to explore and push for deeper, specific information

Section summary

Learn what you and the other negotiators really want and try to satisfy
those needs.

Principle-based negotiation

Principle-based negotiation is an approach described by Fisher, Ury and

Patton (1991) in their book Getting to Yes. The approach proposes that all
parties focus on principle (what they generally need and want), not on
positions (specific points that can or cannot be given away).
Because specific positions are essentially Win/Lose, they result in
imperfect negotiations and imperfect results. Compare the left side of Table
3.3 (positional, old-style thinking) to principle-based thinking. Fisher, Ury
and Patton show us out-of-date thinking with only two choices, neither of
which is suitable, see Table 3.3.
 Fisher, Ury and Patton then show the way handle this Soft/Hard approach
to negotiating, see Figure 3.4.
Fisher, Ury and Patton (1991) see a negotiation as a discussion about
something important to those people and a chance to solve problems. This
view is a positive starting point for progress. The opposite view (which we
will avoid) is to see a negotiation only as a chance to get something. Also
Fisher, Ury and Patton highlight two points that we have read about
already:

understanding the interests of the parties;

Interests include all sorts of things: money, reputation, future

opportunities, relationships, respect, lowering risk, personal
feelings, and so on.

increasing the potential benefits beyond expectations at the start of

negotiations.

Finding a new activity that increases the benefits to all

parties: a new area of business, blocking a competitor,
developing new resources, creating a new product and so on.

TABLE 3.3 Soft v. hard

Problem: Bargaining based on positions: which approach?

Soft Hard

Friends Opponents
Seek agreement Seek victory
Demand concessions in order to start
Make concessions for relationship
relationship
Be soft on the problem and people Be hard on the problem and people
Problem: Bargaining based on positions: which approach?

Soft Hard

Trust others Distrust others

Change your position easily Hold tight to your position
React to threats Make threats
Disclose your bottom line Lie about your bottom line
Accepted one-sided losses to reach Demand one-sided gains as the price
agreement of agreement
Search for answers they will accept Search for your best and only answer
Insist on agreeing Insist on your position
Avoid contests of will Try to win contests of will
Give in to pressure Apply pressure
Source: Fisher, Ury and Patton, 1991, p. 13
FIGURE 3.4 From Hard v. Soft to Principled
Source: Fisher, Ury and Patton, 1991, p. 13

Additionally, they tell us to:

separate the people from the problem;

focus on interests not positions;
invent options for mutual gain;
insist on using objective criteria.

Game theory

If you like thinking about game theory, you will enjoy this following
discussion. You can see that Win/Lose and Win/Win negotiating are similar
to the prisoner’s dilemma game.
Win/Lose negotiating is “imperfect” with poor results for one or all parties, but Win/Win
negotiating is also not perfect. Why not? Write your ideas here.

Examine Table 3.4. Is “pretty good” the best we can hope for?
It is sometimes possible to improve “pretty good” through synergy and
creat ing new value. Synergy opportunities allow negotiation parties to get
new benefits together that they could not manage alone.
If Win/Win is not perfect, is Win/Win with new value creation a better way? Is it perfect?

See http://money.howstuffworks.com/personal-
finance/budgeting/negotiation5.htm for another explanation of this problem.

• common interests; • fair sharing of value creation;

• mutual value creation; • synergy.
TABLE 3.4 Value creation v. value sharing

Thus you need to look for:

Synergy sounds nice, but what is it? Synergy (syn = together; ergon = work)
means working together in a way that could not be done alone. Try to think
of examples of possible synergy in negotiations that have been discussed
previously in this textbook, such as the ChinAlco case.

Section summary

Negotiate about key goals and principles; do not fight hard for
specific positions because these may lead to dead ends and limited
value sharing.
4
Structure and Planning

Building momentum

Building up speed toward success

Sometimes negotiations are successful because the parties develop

confidence about dealing with each other. Even negotiators on the opposite
sides of difficult issues can develop trust, confidence and empathy over
time. Having successful agreements helps to build confidence among all
parties. But how can you develop confidence the first time you negotiate a
deal?
One way is to arrange the parts of the negotiation so that agreement can
be reached on some easy parts early in the process. With early successes, all
parties may feel more comfortable with difficult issues later. However, it
could be a serious error to manage all the easy parts first: all your work
could be lost if the last points in a negotiation cannot be resolved.
Disadvantages: Each part can cause all parts to fail.
Advantages: You can integrate issues and link them together. By the end,
both sides are committed to agreeing, as “no-deal” becomes increasingly
less appealing. However, be careful to avoid the error of being “in too deep”
as previously discussed.
Another approach is to treat some or all issues separately. You might be
satisfied to resolve some but not all of the issues.
 Disadvantages: One side may walk away early leaving unresolved issues.
Agreement on key issues may fail. All issues may not be integrated as well
as possible.
Advantages: Each success creates good feeling and helps the entire
project; Flexibility in adapting to the other parties.

FIGURE 4.1 Strict ordering of issues

FIGURE 4.2 Flexible ordering of issues

To discuss with your partner – the best order

Easy Helps build momentum, but the last items may be too tough,
issues and the process may collapse. You may lose opportunities to
first? integrate.
Easy You may resolve deepest problems early, but there is no chance
things to build momentum, confidence and successes in advance.
last?
Your ___________________________________________
comments: ___________________________________________

Is this the best way?

Put some but not all the easy items in the beginning.
Link some issues or groups of issues to allow good integrative
negotiating.
Even if you separate some issues, you should generally integrate
issues where possible – do not allow all issues to become separate.
Be flexible; choose the way most suited to that negotiation.
Be flexible, unlink and relink issues if necessary.
Agree to a rough approach (road map) with the other party.

Your comments: ____________________________________

Useful hint: You can of course agree with your counterparts about the
order in which to accomplish the negotiation tasks. Discussing the order
and the reasons for it will help build the relationship.

Section summary

Small successes can help build relationships and confidence. Also,

after many successes and time, all sides may be less willing to give up
and use their BATNA.
3D negotiation

Preplanning is a key teaching of this textbook. No person or team can

manage a business negotiation without planning – lots of planning!
You know that 3D means three dimensions. The idea of 3D negotiation is
for negotiators to think on three levels about any negotiation. The three
dimensions are described in Table 4.1.
In which sequence should you execute the dimensions?

Start with: ________________________________

Do next: ________________________________
Last: ________________________________

Tasks to be done in the setup phase

Determine the participants in the negotiation

TABLE 4.1 Three dimensions of negotiation

Tactics Deal design Setup

At the table On the drawing board Away from the table

People and process Value, substance and outcomes Architecture
Determine
Build trust, handle Create agreements that
participants,
hardball approaches, maximize value for both sides,
BATNA, overall
bridge intercultural improve on goals, are more
sequence, choices
gaps … sustainable …
…
Source: Lax and Sehenius, 2006, p. 19
 Decide on the best team members for your side. Decide who will lead the
team – an engineer, a sales and marketing person, a high level manager, or
another person? What skills and personalities do you want to have in your
team? How many people should be on your team?
Be sure to consider the expectations of the other side as well as the issues
in the negotiation as you make these decisions. At this point, a basic
stakeholder analysis is necessary. List the key people and organizations and
their main interests. Later, complete a more thorough analysis of all
stakeholders and their interests. A thorough stakeholder analysis will be
helpful for understanding the immediate surface issues as well as deeper
issues. See Appendix VI for more on this.
In addition to your own personnel, you may be able to pick the people on
the other sides that you will talk with. For example, you may want to
approach a key figure in your organization in order to avoid a person with a
bad reputation. You may prefer to deal with someone you already know,
someone who is respected in the industry, someone with a reputation for
negotiating well, a high ranking person, a very skilled engineer or other
individuals for other reasons. In a very complex negotiation, you may want
to have technical information presented by an expert individual or
organization that is neutral to the negotiating parties in order to increase the
knowledge of all parties. You may be able to include or exclude some
organizations or individuals in advance by setting rules that other
negotiation partners must agree to if they want to participate.

Determine your BATNA

Thoroughly investigate your alternatives to the negotiation. The stronger

your BATNA, the more negotiating room and comfort you will have. As
you investigate your BATNA, try to make it stronger. Even if making your
BATNA stronger requires a lot of time, start the process.
Suppose that strengthening your BATNA will take more time than the
planned length of your negotiation. Explain why it is a good idea to do it:
Determine the BATNAs of all parties
It is not enough to know your own BATNA. As discussed in the BATNA section, you will need
to know the BATNA of the other side. Now is the time to learn about it and to weaken it. Why
should you try (or not try) to weaken the BATNA of the other sides?
___________________________

How might you be able to weaken the BATNA of another negotiation partner?

Overall sequence

During the early planning, you should check to see if there are any issues
that must be resolved before other issues. For example, it might be
necessary to determine a rough timeline before agreeing to milestones for
portions of a project.
Your early planning and checking might identify some issues to be done
in sequence; however, once the negotiation starts, it generally best not to
stick to a rigid plan. A good negotiator reacts flexibly as new information
appears.

Approximate timing and timescale of the negotiation

Consider the timing of the start and finish of the negotiation. Some points to
include in the planning:

When:
 calendar year (major holidays or vacation periods to avoid);
national holidays in your country and the countries of other
negotiation partners;
fiscal year (the very end of the fiscal year is usually extremely
busy);
business seasons (avoid times of year that are very busy for the
other organizations).

How long:

planning period on your side;

estimated number of days, weeks, months, or years to talk;
time constraints due to availability of resources;
time expectations of the back table.

The back table

There is a hidden partner in almost every negotiation: the “back table”. This
refers to a boss, coworkers or another group that the negotiators will report
to. Even the CEO reports to someone: the board! The back table (people or
groups) is sometimes called a constituent group (Ware, 1980). The early
phase of planning is the time to be sure that you and your back table are in
close understanding about all expectations, limitations and issues related to
the negotiation.
One of the limitations you must agree about with the back table is time.
Often, people who are not part of the negotiation have the expectation that
everything will be resolved quickly. The truth, however, is often very
different. In fact, the higher the quality of communication in the
negotiations, the more likely that questions will arise requiring more
research time. Good negotiation usually means good solutions. Good
solutions, of course, require time to develop. The lesson is clear: you will
need lots of time, maybe more than your peers and bosses expect. Be sure
to change their expectations.
See Chapter 8 for more discussion about the back table.

Research to do list

Develop a list steps for your research and a list specific things to learn
about. Your research to-do list will increase in size as you go on. But the list
should start by fulfilling the phrase, “Know the facts, know the people.”
View the video of Dr. Kurt Biedenkopf at http://bit.ly/1riIzdN for comments
from this experienced negotiator. If the link does not work, visit the
YouTube channel for “The Negotiation Challenge” and look for the video
titled “Kurt Biedenkopf on negotiations” there. His summary in the first 25
seconds packs tremendous insight and power.
This simple phrase, “know the facts, know the people,” is a directive to
learn in detail about the negotiation issues and the people and organizations
related to them. This means knowing something about the personalities of
the negotiators on the other teams. It may be possible to learn about them in
advance, as well as to learn about them through interactions during the
negotiations.
As for the facts, it is up to you to search every possible source, online or
not, for relevant facts and information. Sources you might include:

recent newspaper articles;

old newspaper archives;
specialist industry periodicals;
court records;
network of business acquaintances, friends and family;
government contracts;
and so on.
Checklist

Develop a checklist of the basics that you need to achieve during

negotiation. See the next section for more information.

Section summary

Most of the work in negotiating happens before the negotiation. Use

multiple planning methods to prepare.

Basic planning

When preparing for a negotiation you need to prepare your negotiation shopping list. This
is a list of the things you want to get out of the negotiation.
Bare Knuckle Negotiating, Hazeldine, p. 35

Prepare a list of what you want to get from your current negotiation.

The simplest form of planning is the shopping list previously mentioned,

a checklist of things you reasonably hope to accomplish. A checklist is a
good starting point, but we can expand a checklist easily to make it more
useful.
 First, make a list of results that you have to get. These necessary items
are ones that you must accomplish if the negotiation is to be better than
your BATNA. Second, list the results that you would like to get additionally
but that are not absolutely necessary. Third, list the things that you can
reasonably trade away in order to get what you must have and want. Use
these three categories to create a HIT list (LaFond, Vine and Welch, 2010):

H – Have to get
I – Intend to get
T – Trade in order to get H and I items

Read this short case and create a HIT list for the things you need.

Case: The right hotel, the right deal

You are seeking a large hotel to host a convention in Singapore. There

are many hotels and the convention will start year after next, so you
have much time and several choices. Before you talk to the hotel you
prefer most, you must think about your needs.
You expect to have about 1,000 attendees over three days. The
hotel has only 290 rooms, so you hope to reserve all or most of them
for your attendees until a little before the event. It would be best to
block them until two weeks before the event, but really the attendees
should plan and reserve four to eight weeks in advance. The retail cost
of a hotel room is $250 (about 2000 HKD), and this is certainly too
expensive for most of your attendees, so you feel it is necessary to
lower the price to at most $190 per night. You could guarantee some
of those rooms will be filled, but you are nervous about guaranteeing
all of them, of course. Breakfasts at the hotel are quite expensive in
addition to the hotel room, so you would like to secure free breakfasts
 for your ten staff members and a 20–50 percent discount for all
conference attendees. You know that the hotel usually offers free
access to the swimming pool, but you have heard the pool is small and
crowded, so it might not really be useful for your attendees. The
fitness room, however, is supposed to be quite good but is not free.
Now consider the items you need to get, would like to get and
could trade. List them appropriately in Table 4.2.
Use Table 4.2 for your HIT list.

TABLE 4.2 HIT list

Intend to
Have to get Tradable
get

* Note that “have to get” includes “have to get rid

of”

TABLE 4.3 Expanded HIT list with steps

Have to get Steps

Price at or below
Start by asking for $145;
$200/night
accept $155 if free wireless;
accept $175 if free wireless and gym, pool and 50
percent breakfast discount;
accept $190–$200 if the hotel has all of the above and
additional suitable services to offer.

The HIT list in Table 4.2 is easy to manage and useful, but it is only a
starting point. We can improve on it. One of the improvements will be
adding steps between your starting point and your acceptable minimum
reserve point.
The expanded HIT list, Table 4.3, is a simplified version of the Raiffa
scorecard discussed later in this chapter. The Raiffa scorecard is more
powerful and useful, but first we will discuss backward mapping as a way
to structure and plan the negotiation.

Identifying interests

In this section, we will go much deeper into the process of negotiation

planning. Understanding the interests of the parties is a vital step in
planning. Your notes should include your interests and what you guess or
know about the other parties’ interests and goals.
… what are valid interests to include?
… all sides (you and them)

Please choose some interests that could be included in your notes:

—your time restrictions —their time restrictions

—your maximum price —their minimum price
—your most and least important —relationships among their
issues negotiators
—your long-term hopes —recent trend of their stock price
—your_______________________ —their priorities

How to determine interests

Do not take your boss’s list of preferred outcomes as the final list of your
own interests – investigate all interests of all parties thoroughly. Most
business negotiations involve money, but there may be many more issues
and interests. Start with the ones in the interest grid in Table 4.4 and add to
the categories.
To dig deeper into interests, Lax and Sebenius suggest these steps in 3D
Negotiation (2006, p. 76):
Four practices that help you get interests right:

1. ask, listen, probe;

2. use public sources to map interests;
3. get insight from internal sources;
4. get insight from knowledgeable advisers.

We have already discussed the first one, asking and listening. The third one
we can understand as asking people you know in your network or in your
company who might have some insight or information about the other party.
The fourth one we can understand as asking professionals and consultants
beyond your coworkers. Let’s consider the second one: public sources.
Public sources means looking widely at newspaper articles, special
industry journals, newsletters, internet chat rooms, speeches, YouTube
videos, books, blogs, comments by experts, SEC filings, tax information
and all other sources that are legally and publicly available.

TABLE 4.4 Simplified interest grid

Interest Our understanding of this Their understanding of this

Category issue issue
Financial
Reputational
Personal
Staffing
Capacity
Business cycle
Regulatory
Timing
Interest Our understanding of this Their understanding of this
Category issue issue

Note that it is also possible to get information through unethical methods:

mis-representing yourself to people familiar with the other parties and the
planning, stealing data, paying another person to steal data, etc. None of
these methods are acceptable in the real world of business. These methods
will damage or destroy business relationships with negotiating partners and
others when discovered. Moreover, they may result in legal troubles.
Exercise: Discuss with your partners how you will use public sources to
learn about interests for the final team negotiation. Write down some
sources and what you expect to find in them:

Generally, you should consider all possible interests when planning for
the negotiation. In the end, you should try to make a final list with notes.
You can carry a list like this to the negotiating table with you. See Appendix
III for a planning sheet based on Brett’s planning document.

Backward mapping

In their book 3D Negotiation, Lax and Sebenius (2006) suggest “mapping

backward” as a process for crafting the agreement and the negotiating
strategy. First, determine what your final agreement should look like. Next,
go backward toward the starting point by understanding the barriers to
agreeing. As you identify and understand each barrier to the agreement, you
can prepare positions and offers that will make a final agreement possible.

Deal breakers

The processes of investigation, research, planning, and especially backward

planning, should help you identify problems that are so difficult that they
cannot be overcome. These may be deal breakers. It is important to identify
possible deal breakers and confirm whether or not they are unresolvable
early in the process of the negotiation. If the deal breakers cannot be
resolved, they will stop the negotiation.

TABLE 4.5 Brett’s negotiation planning document

FIGURE 4.3 Backward planning

Leaving them until the end of the talks will result in the complete loss of
time and effort invested.
Deal breakers often are items that one side requires with no options for
adjusting or avoiding. In the Chinalco and Rio Tinto case described in the
previous chapter, 18 percent ownership by a foreign company was a deal
breaker in the eyes of one stakeholder, the Australian government.

Game theory

Consider your expectations as you develop the deal you want.

Howard Raiffa (2002) writes that even experienced negotiators
generally expect better results than they really get. Therefore, be sure
that the deal you want is really acceptable to the counterparty.
 You may recognize this backward mapping approach from game theory:
backward induction. Game theory shows how powerful a tool this is for
choosing the right path to the outcome you want. The process is the same:
identify the possible outcomes; select the best one you can reasonably
attain; and understand the steps necessary to reach that outcome by working
backward through the interests, needs and positions of the other parties.
In the process of mapping backwards, points in the deal you want must
not appear in either the unacceptable to the other side or the not agreeing
sections. Compare these carefully to see if there are conflicts you must
resolve before the negotiations start. You can find blanks prepared for
backward mapping in Appendix III. Appendix III contains various planning
documents. Use all of them or only the ones you feel comfortable with.
Now consider the next negotiation in this class. Please consider the final
goal of your side and your counterparts. Draw a full-page map
approximately following backward mapping from Lax and Sebenius.

Section summary

Backward mapping is a good tool for planning. To use this or any

other planning tool, you must know the interests of all the parties in
the negotiation.

Priority and outcome mapping

It can be confusing to track all issues and the possible outcomes. Howard
Raiffa (2002), in his book Negotiation Analysis: The Art and Science of
Negotiating, offers a practical way to manage priorities and possible
outcomes. He suggests Table 4.6 to organize interests and outcomes, and he
suggests using points that add up to 100 to evaluate importance of issues
and the benefits of the outcomes.
A blank scorecard can be found in Appendix VIII of this booklet.

TABLE 4.6 Sample Raiffa scorecard

Issue Outcome
Issue Outcome
value value
a. over $15 mil 15
1 Cost 15 b. $15 mil 12
c. $10 mill (reserve) 7
a. $3 mil and shared staff input 10
b. $3 mil 7
2 investment 10
c. $1 mil 4
d. none (reserve) 0
a. retain all with full control 20
3 intangible b. retain key portions 17
20
property c. retain less important items 15
d. sell all (reserve) 10
a. projects Alpha, Beta, and
4 joint 30
30 Gamma
development
b. only project Alpha 15
a. share IT and R&D staff and
25
skills
5 joint access to b. share IT staff and skills 20
25
staff c. share administrative tasks and
10
skills
d. none 2
Total=100
100 Total of selected outcomes
maximum
Source: Raiffa, 2002, p. 217

How to make and manage a Raiffa scorecard

This scorecard is a helpful way to simplify the issues in a negotiation and

easily understand the choices you might pursue or trade.

Step 1: write down the key issues;

Step 2: weigh the issues by importance with points adding up to 100;
Step 3: write down alternative possible outcomes for each issue;
Step 4: set points for each possible outcome, up to the maximum for
that issue;
Step 5: consider all the points, you can now see priorities and
preferences – use this information to structure your negotiation and
decide what you can trade or abandon in order to get something
more valuable.
Step 6: As you negotiate, track the outcomes that you agree to. Of
course, you must remain flexible and adjust to new value
possibilities that you may discover during the negotiation.

Practice: Fill out the scorecard in Table 4.7 for one of the cases in this
course.

Evaluating success

The Raiffa scorecard can also help evaluate success. After a complex
negotiation, it is often difficult to know if you did well or not so well. A
glance at the scorecard in Table 4.8 would show quickly the overall results.
The shaded lines in Table 4.8 are the agreed outcomes, so we can see that
the negotiators got 66 out of 100 points for getting 1b, 2c, 3d, 4b and 5a.
Maybe they should have provided better reasoning for issues 3 and 4! On
the other hand, they were successful with 5d, and that was a very important
issue and the best outcome. Perhaps if Project Alpha goes well, they can
renegotiate in order to extend the agreement to include Beta and Gamma.

TABLE 4.7 Blank Raiffa scorecard

Issue Issue value Outcome Outcome value

Total=100 maximum 100 Total of selected outcomes

TABLE 4.8 Sample Raiffa scorecard for evaluating results

Issue Outcome
Issue Outcome
value value

a. over $15 mil 15

1 Cost 15 b. $15 mil 12
c. $10 mill (reserve) 7
a. $3 mil and shared staff input 10
b. $3 mil 7
2 investment 10
c. $1 mil 4
d. none (reserve) 0
3 intangible 20 a. retain all with full control 20
property b. retain key portions 17
 Issue Outcome
Issue Outcome
value value

c. retain less important items 15

d. sell all (reserve) 10
a. projects Alpha, Beta and
4 joint 30
30 Gamma
development
b. only project Alpha 15
a. share IT and R&D staff and
25
skills
5 joint access to b. share IT staff and skills 20
25
staff c. share administrative tasks and
10
skills
d. none 2
Total=100
100 Total of selected outcomes 66
maximum

Section summary

Outcome mapping is a good tool for planning. To use this or any other
planning tool, you must know the interests of all the parties in the
negotiation.

The sequence of talk at the table

After considering the setup and planning that must occur before talks start,
we still need to understand the best sequence of events at the table. What to
discuss first? Is there anything that should be done early on? Or avoided?
Consider the following elements of negotiation. Write a number before
each one to indicate what should come first, second, third, and so on.

__Major issues, get to the point __Small talk

__Company history __Rules and protocol
__Problem solving __Agenda
__Information sharing __Introductions and personal experience

Please write your reason for the item that you chose as #1.
_______________

Let’s consider the pros and cons of starting with each point.

Agenda: Agreeing to the agenda is an important process that may be

quite complicated. Each party may have reasons for starting with
certain issues. Because it is complex, and possibly divisive, it is
better not to start with this.
Company history: Each company has its own history that helps
define what it is and how it works. This information is important to
understanding interests and motivation. However, it may be useful
to first understand the people.
Information sharing: The process and degree of information sharing
develop with interaction. It cannot be pushed into a first activity at a
first meeting. It should instead occur over many meetings.
Introductions and personal experience: This activity is a good way
to start any meeting, especially when participants are new to each
other. This activity and small talk can mix easily together. Some
 individuals and cultures will make this longer or shorter based, for
example, on preference, rank and comfort level.
Major issues, get to the point: It is best not to start here, as parties
are likely to come directly to a conflict or deadlock. It is important
to first understand people, interests, organizations and details in
order to solve possible problems.
Problem solving: This activity requires time and much information.
It cannot be completed successfully in a first meeting.
Rules and protocol: This topic is important to establish early in the
relationship in order to avoid unintended false steps, insults and
bruised egos. Usually this is best placed after introductions and
small talk.
Small talk: A good way to start any meeting. It helps to create a
positive atmosphere and starts the flow of information sharing.
Some individuals and cultures will prefer more or less small talk.
Prepare accordingly with suitable casual topics.

Section summary

Start face-to-face interactions with introductions and possibly gift

exchanges and small talk. Use these interactions to build rapport and
to start the flow of information.
5
Some Cultural Considerations

Top-down/bottom-up

Please read about the two approaches in Table 5.1 – which feels most
comfortable to you?

TABLE 5.1 Top-down, bottom-up

Top-down Bottom-up

This means dealing with

This means getting the global “large
specifics before coming to a
picture” goals in order before dealing
global conclusion. As the
with details and specific issues. As the
specifics are discussed and
overall picture becomes clear, the logical
agreed, they build the larger,
path to achieving it also becomes clear.
final picture.

Example: negotiating the details

Example: generally including or of an agreement (order volume,
excluding some areas of activity before delivery time, unit price,
working out details. services, etc.) before coming to
broader issues.
Top-down Bottom-up

Does it start from an agreement on principles and proceed to

general down) or does it begin with an specific items (top-n specifics,
agreement o uct quality, the sum total of such as price, delivery date and
which becomes Source: Salacuse, 2004 prod-the contract (bottom-up)?

Neither approach is perfect or “correct”. Be flexible and work with your

counterparts and team members to view negotiations from both
perspectives. Your counterparts may not even realize that they like to
progress top-down or bottom-up.
Design your negotiation approach(es) in advance. A good negotiator
learns to design the negotiation before starting the actual negotiation
meetings. Before means long before, because time is necessary to consider,
learn and redesign. If you can, agree with the other party in advance about
which approach to use in order to avoid misunderstandings.

Top-down, bottom-up and culture

This dimension [top down / bottom up] captures whether negotiators build agreement by
negotiating specifics, such as product characteristics, price, and terms of delivery, or whether they
start from general principles and then proceed to specific items.
(Salacuse, 2003, p. 338)

Finnish respondents strongly preferred a top down approach, with 85% positioned on that end of
the continuum (…). Indian responses stood in sharp contrast with more than 50% preferring a
bottom-up approach, although once again a sizeable portion (27%) located at the top-down end.
The Turkish response pattern leaned toward a top down approach, while Mexican and US
patterns reflected no strong preference.
(Metcalf et al., 2006, p. 388)

Cultural issues: If possible, establish the mutual starting point (top or

bottom) before you arrive at the negotiating table. In the real world, you
may come to know what to expect from certain people, companies or within
a country or region. Do people from the western part of your country prefer
to start top-down while people from the eastern part of your country prefer
to start bottom-up? What about people from different parts of China? Or
Australia? What about companies? Does Mitsubishi (Japan) work top-
down? Does SingTech (Singapore) work bottom-up? Always try to check
first by talking to the other side or talking to people with experience.
As previously mentioned, expectations may vary from country to country
or company to company. Metcalf et al. (2006) have this to say:

build momentum with Indians by negotiating agreement on smaller

issues;
build rapport with Finns by laying out the general themes and
principles behind the negotiations.

Note: Metcalf et al. make it clear that not all Finns, Indians, Mexicans, etc.
react or think the same way. Never stereotype regarding country and
culture! Be flexible and react to the clues you learn about your
counterparties as you research and as you talk to them. Check about the
individuals in advance if possible. If you cannot check in advance, discover
their preferred approaches at the first encounter.

Review

Which is better, top-down or bottom-up? Neither one is objectively better.

However, it is generally a good idea first to explore some global issues (top-
down) before getting into details (bottom-up). You might start by generally
agreeing on the overall goal, then turn to groups of issues or individual
issues.
In your planning phase, long before you talk, you must consider top-
down, global issues. If you know the global picture, you may be able to
more successfully link details and integrate issues.
Your comments:
Section summary

Before the negotiations, plan starting with the big picture (top-down)
and again starting with the details (bottom-up). Adapt flexibly to the
approach the other side uses.

Culture and negotiation

In the previous section, we learned from Salacuse and Metcalf et al. that
negotiators from some countries have preferences in how they negotiate.
What preferences do people in your country or region have for negotiating?
_

Interview: Ask three people in this class all of the following questions, noting their home country
or region. When you answer other students, avoid answers like “both”.

Which do you think is more important for a successful negotiation team?

Highly skilled members (e.g. High level figure as a member (e.g.

engineers) CEO)
1
2
3
 Should a negotiator represent an organization or his/her own self?

Only self – show your quality as Only the organization – your prestige
a negotiator has no importance
1
2
3

Which is better for you?

It is much easier and less

It is good to mix all the issues together
confusing to handle issues one by
and get all the opinions at once.
one.
1
2
3

How do you prefer business negotiations to proceed – casually or quite

formally?

Casual is best – we can discuss in Formal arrangements are best – we

conference rooms or at dinner, no can easily know when we are
one should feel pressure about “talking business” or relaxing and
position and roles. know other persons’ roles.
1
2
3

How do you prefer business negotiations to proceed – quickly or at a

slower speed?
Fast is best – we should come to a conclusion Slower is best – we should
quickly in order to decrease the cost of use time to learn about
negotiation and so we can get on to other the projects and
business. opportunities.
1
2
3

What do you think is the point of negotiation?

The overall purpose is to discuss The point is to complete a

business issues. suitable deal.
1
2
3

Which idea about contracts feels best to you?

A contract is a fixed document that A contract is a starting point for

you must follow exactly. immediate and future business.
1
2
3

The previously mentioned questions are not easy because the answers are
limited and you may not propose your own ideas. The questions and
answers are designed to help you understand that people might think in
ways that are very different, approaching the same problem from different
directions. Knowing that approaches might be very different helps you
adjust constructively instead of being surprised and upset.
Expectations

Culture is deeply connected to, even defined by, people’s expectations of

each other. With experience, a negotiator from one cultural background can
learn the expectations of another cultural group. With that knowledge, the
negotiator can adjust behavior to come closer to the expectations of the
other side. A 2013 interview with an American business negotiator showed
that Japanese business people, in his experience, were more formal than
Americans, and he adjusted his behavior appropriately for them.

Interviewer: How do you usually, ehm, how do you usually address

your [Japanese] negotiating counterpart?
Very formally or informally?
Interviewee: Yes, yes, very formally. To me it just comes naturally
that you need to be formal.
Interviewer: mhmm, what about the Americans?
Interviewee: They don’t give a flip, haha.
Negotiations between Japan and the United States,
Sepstrup and Ipsen, p. 76

The negotiator in the example expects to behave more formally with

Japanese businesspeople because of his ideas about Japan and his
experience there. However, Japanese businesspeople might be even more
formal with each other or with other East Asians than with Americans.
Japanese businesspeople generally consider Americans to be more casual,
and they prepare themselves to act accordingly toward Americans. The
difference this author has seen in various encounters involving North
Americans and Japanese is striking: in meetings, Japanese individuals may
smoothly transition between friendly smiles and handshakes for North
Americans, and formal bows and strict greeting formulas appropriate to the
relative age and rank of other Japanese businesspeople.
The example from Sepstrup and Ipsen shows Americans adjusting to
their ideas about Japanese people and Japanese people adjusting to their
ideas about Americans. It seems that all sides in intercultural encounters
often mutually adjust to the behaviors they think the others prefer.
In the end, expectations, cultural behaviors and actions of real people in
real situations are very fluid.
Consider a country or region that you know well. What kind of negotiation behavior can you
expect in that country? Would it be the same in the east and west? North and south?

What kind of behavior can you expect from an individual, maybe someone named Paul
Tomlinson, from San Francisco, California, US?

Write your very brief conclusion about culture and negotiation:

Culture and stereotyping – not a reliable approach

… individuals and groups within cultures may be united on some dimensions (Indians on direct
communication), deeply divided or split on others (Indians on attitudes), and uncommitted on
others (Finns on risk-taking). It is no longer acceptable nor is it accurate or useful – if it ever was
– for, say, an American negotiator to expect a Mexican counterpart to be relationship-oriented or
an American compatriot to be contract-oriented. Our findings point to the inherent inaccuracy of
what Osland and Bird (2000) have referred to as “sophisticated stereotyping.”
(Metcalf et al., 2006, p. 393)

Short version

People from one country may have some similarities, or maybe not. You
can learn about general styles and cultural preferences from regional
business guidebooks. These guidebooks can help you learn practical
information about gifts, general behaviors and values. But you cannot
safely apply that general information to individuals. Do not stereotype!
What to do: Learn about the individuals and their companies in addition
to learning the general behaviors of the appropriate cultural groups.

Culture and language

When you are negotiating with a group from another country with a different language, you will
probably interact in English. In this situation, is it a good idea for you to speak in your own
native language with your negotiation team? Y N
Please explain your answer:

Browaeys and Price (2011) in their textbook Understanding Cross-Cultural

Management compare cultural approaches to common management issues.
They compare five areas of management: planning, organizing, staffing,
directing and controlling to eight dimensions of culture. The dimensions are
relative scales of how strongly a culture may prefer behaviors. The relative
positions of a person, a group or company on the dimensions highlights
areas where people may work well together or not, in part because their
expectations are met or not.
The eight dimensions of culture they discuss include:

high versus low-context;

doing versus being;
polychronic versus monochromic;
future versus past orientation;
hierarchic versus equality;
public versus private;
collectivist versus individualistic;
competitive versus cooperative.
Mapping one’s own expectations to those of teammates or counterparties
may show how you can cooperate or where you might conflict. If conflict is
on the horizon, planning and learning and adjusting may help to avoid the
conflict or even create opportunities to craft a new and mutually agreeable
approach. A comparison of cultures might look like Figure 5.1 from
Browaeys and Price (2011, p. 137).
In Figure 5.1, we can see large differences between ideas about time
scheduling (polychronic), competitiveness, individualism, hierarchy and
public space. On the other hand, both sides may have similar ideas about
future planning. With these points in mind, the sides can prepare to learn
about the differences in detail, looking for ways that they can complement
each other or resolve conflicts. Even if only one side conducts this kind of
cultural mapping and comparison, they can prepare appropriately and
communicate their findings and concerns to the other parties.

FIGURE 5.1 Profile comparing two cultures

In the end, negotiations across cultures may be more time consuming

than comparable negotiations within the same culture. Brett and Okumura
(1998) showed that mutual gains were significantly lower when negotiating
teams were from different cultural backgrounds.
See Appendix V for more insights on culture and negotiating.

Corporate culture

You must also learn about the culture and beliefs of the businesses you will
interact with. Some business sectors have a corporate culture that sets them
apart from other areas. For example, the world of IT is known for late
nights, flexible hours, casual clothing and working intensively as projects
come to a head. On the other hand, the world of banking is better known for
regular hours, working at a reasonable pace and sticking closely to the rules
of banking imposed by government or international standards.
However, inside a business sector, not all the organizations and
companies may share a culture. For example, within Japan’s finance sector,
Mitsui Sumitomo Bank and MUFJ have very different corporate cultures
with different levels of power and flexibility given to workers. In Korea,
Samsung and Lucky Gold have very different cultures, despite being in the
same industry.

TABLE 5.2 Corporate culture comparison

Samsung Lucky Gold

Emphasizes individual merit and Emphasizes team success over

personal skills over the team. The individual ability. Harmony is
person is number one. number one.
Requires individuals to work
Empowers individuals to work fast. within the system and company
hierarchy.
Large portion of pay is based on
Personal bonuses are not usual.
personal performance (bonus).
Samsung Lucky Gold

Product development and marketing are Product development and

highly integrated. marketing are more independent.

Section summary

Be aware of cultural preferences and behaviors in teams from other

regions or countries, but never expect specific behavior – always be
flexible and sensitive towards your counterparties.

Weak/strong points of North American

negotiators

Understanding some common failings or strong points among a group of

people might help you avoid communication errors, deadlock and failed
negotiations. In addition to gaining some insight into another group, Tables
5.3 and 5.4 may help describe yourself and your coworkers and
counterparties within your culture. After reading about the cultures broadly
described, try listing some strong and weak points of your cultural
background with appropriate comments that will help you and others work
together.
Broadly, it is possible to list some common strengths and weaknesses of
negotiators from a culture. But do not apply this data to all people from
those places! That sort of stereotyping will most likely lead a negotiator
into errors. However, it is possible to set your general expectations using
this data. The next step is to compare your expectations to the reality of the
people you interact with to determine if they are as described in Tables 5.3
and 5.4 or as described in other sources. You can only cautiously apply the
ideas about weaknesses and strengths once you understand the people
involved. As discussed elsewhere in this textbook, know the people, know
the facts!

TABLE 5.3 Awareness: some weak points of North American negotiators

Typical
Advice for North American negotiators
weak points

• Increase travel time and travel flexibility – deals outside of

North America often require significantly more time for
Impatience
interruptions, relationship building and back table
negotiations.
• Let the other sides know you are not under time pressure
and can continue the discussion remotely or on another visit.
• Propose that the finalizing meetings be held in North
America to decrease the time pressure on your side.
• Train your boss – if your organization is not aware of the
extensive time commitment necessary in many cases, you
will have to train key staff regarding reasonable expectations.
Outcome • Use the negotiation process to build the relationship and
over process create new opportunities.
• Laser focus on a single driving deal or issue is not
appreciated in much of the world, although it is appreciated
in some places.
Poor • Learn to identify key parties, including those not directly
sensitivity involved in the negotiation. Be aware that a government
regarding agency or senior industry partner may be standing in the
relationships wings with significant power over decisions.
Typical
Advice for North American negotiators
weak points

• Identify patterns in context that reveal background

information. This is sometimes called high or low context.
Low context cultures need all details spelled out explicitly;
high context cultures quickly see relationships that seem
invisible to others.
• North America is usually rated middle/low context. People
from this background may be uncomfortable with the
bluntness of North Europeans and the indirect
communications of East Asians.
Profit over • Learn to accept lower profit if it means making your
process supplier/ partner stronger and more valuable in the long term.
• Your partners may not appreciate the low cost and speed of
Overuse of
telephone, email, videoconference and other media. Face-to-
remote
face work may be necessary, at least until the relationship has
media
developed.
Short term • Trapped by budgets and quarterly reports, North American
thinking negotiators may feel they have to agree and move on.
• Train your organization to expect delayed paydays in
comparison to dealing with local organizations.
Detail • North Americans tend to place great value on detail in
orientation negotiations and contracts. Some parts of the world may view
in contracts this as wasteful and indicative of an untrustworthy partner.
• It may be necessary to let some details go entirely, or move
them from the main document to addenda and follow-up
documents.
Typical
Advice for North American negotiators
weak points

• Countries with strict legal systems tend to see contracts as

Contract is
fixed documents with little room for interpretation. Other
written in
parts of the world expect the contract to serve as a starting
stone
point for serious details and discussions.
• It may be necessary to accept a "loose contract" as a first
step to concrete work and as an invitation to work out
specifics.
• Most North Americans are sensitive to their own loss of
face, but not to protecting the face or building up the face of
Face
others. North Americans should try to learn how to better
manage face in negotiations.
Source: Used with permission from the Athabasca University Faculty of Business.

TABLE 5.4 Awareness: some strong points of North American negotiators

Typical
strong Comments on North American negotiators
points

• North American organizations, especially for-profit

businesses, tend to have quick decision making. They can
Agility change approaches and accept new ideas speedily.This helps
them adjust to changing business environments, technologies
and partners.
• North American businesses tend to deliver products quickly
Speed with short turnaround time, and often with the willingness and
ability to assign additional resources.
Typical
strong Comments on North American negotiators
points

• A healthy can-do attitude often helps overcome social and

Attitude political barriers that may seem impossibly difficult in more
traditional societies.
• Affective refers to the degree to which emotions are
expressed. North Americans tend to be in the middle of the
Moderately
scale, neither extremely poker-faced nor extremely expressive.
affective
This allows them some ability to react appropriately to more or
less affective counterparts.
• Research in advance about what is appropriate and expected
will benefit the negotiator.
• Detailed contracts seem to be a hallmark of litigious North
American thinking. The potential benefit is that proper
Contract
management of contingencies written in the contract can
writing
benefit both sides if explained and developed satisfactorily to
both sides.
Source: Used with permission from the Athabasca University Faculty of Business.

Section summary

North American negotiators generally are direct and result oriented.

They are usually meticulous about contract contents. Adjust carefully
to the style of the North American individuals and groups you work
with.
Weak/strong points of Japanese negotiators

Common behaviors

It is also wise to look for current behaviors and expectations among

negotiators from a certain culture. Research done during the writing of this
textbook by the authors shows that a large percentage (77 percent) of
experienced business negotiators in Japan rarely or never experience
haggling with other Japanese negotiators. Therefore, you might want to
avoid haggling in order not to disturb a positive relationship. Other findings
regarding Japanese-Japanese business negotiations (data gathered in 2013
and 2014):

large teams are common, i.e. four or more members (87 percent);
common to develop new value during the negotiations (80 percent);

TABLE 5.5 Awareness: some weak points of Japanese negotiators

Typical weak
Advice for Japanese negotiators
points

• Other parties may misunderstand patience as a failure to

understand the proposals or external pressures such as time
Excessively limitations. Be sure to exhibit active listening in a way that
patient your counterparties can understand. It is best to show your
listening skills by frequently summarizing and
paraphrasing.
• Build up communication skills not only in speaking but
Poor
also in graphical representation. Learn to collaboratively
communicators
develop a joint image of a project.
Typical weak
Advice for Japanese negotiators
points

• Learn to share information and give information at a

Develop trust
similar rate and scale to information received from other
slowly
parties.
Slow decision • Accelerate internal team communication, communication
making with the back table and decentralize decision making.
• Learn to quickly consider and offer ideas without taking
time for detailed development.
Bound to
Japanese • Clarify to other parties those periods (e.g. the end of the
business fiscal year) when you cannot work on the negotiation.
calendar
Prefer detailed
resolution of • Consider proposals at a general level without detailed
plans and analysis of all inputs and outcomes. Complex proposals
outcomes in can be broken into chunks that can be accepted or rejected
high detail without detailing all issues.
(bottom-up)
• Often Japanese teams prefer formal processes such as
using a junior team member as spokesperson, setting
Formal
seating arrangements and so on. These steps may be
processes
comforting to the Japanese side, but alienating or
confusing for counterparties.
• When rejecting a proposal, explain why it is being
Intransigence rejected, how it could be made acceptable and alternatives
that correct the problem.
• Negotiators from other cultures may not know when the
Japanese side is embarrassed or concerned about protecting
face. Explain to those counterparties how to help save face.
Typical weak
Advice for Japanese negotiators
points

• Major decisions are often not made by the negotiators,

but by corporate headquarters (back table). Work to make
Major this process move quickly with frequent communications
decisions not and well-designed recommendations to the back table. One
made at the experienced Japanese negotiator explained that he brought
table his boss to the negotiation table physically when the deal
was very close to complete (last meeting) in order to speed
the closing steps.

TABLE 5.6 Awareness: some strong points of Japanese negotiators

Typical strong
Comments on Japanese negotiators
points

• A benefit to all parties – however, counterparties may

not know the Japanese parties are patient because of poor
Patient
use of active listening skills appropriate for the other
language and culture.
• Let the other side know early in the process about the
Long term
timescale regarding agreement terms, ROI, breakeven,
thinking
renegotiation, etc.
Prefer detailed
resolution of • The final result of preference for high detail is a well
plans and designed product or process.The time required, however,
outcomes in may harm the negotiation process. Learn to move quickly
high detail through details.
(bottom-up)
Typical strong
Comments on Japanese negotiators
points

Good at
• Let the other side know that you are considering how
understanding
they interact with their shareholders. In some cases, you
relationships to
may understand their relationships better than they do!
stakeholders
• This close synchronization and understanding saves
Very closely
time and trouble for all parties. However, the
synchronized
counterparties may not understand that major decisions
with the back
will not be made by the negotiation team, but at
table
headquarters. Be sure to make the process move quickly.
Willing to take
time for site • Increases understanding of the aspects of a complex
visits, research negotiation. Cost and time are not considered "wasted".
and preparation
• Japanese teams tend to be good at whole-picture
intuitive thinking, but it does not happen quickly –
Insightful
intuition does not come in leaps, but rather it comes in
small, steady steps.

positive emotions are clearly demonstrated (82 percent);

progress is often made outside of the normal, formal work
environment (62 percent);
indirect logic, rather than direct logic, is normal (100 percent);
often a rush to complete before the end of the fiscal year (61
percent);
threats are rarely or never made (100 percent);
great care is given to the seating of the participants based on their
relative rank (90 percent).
Part of your preparation before dealing with people from another culture
should be to look for information similar to the previous points by reading,
talking to experienced people and communicating with people from the
other culture.

Section summary

Japanese negotiators may be indirect in communication, seeking to

understand layers of issues before coming to specifics. They are often
highly patient in negotiation and well informed about issues. Adjust
carefully to the style of the Japanese individuals and groups you work
with.

Weak/strong points of Chinese negotiators

Section summary

Chinese negotiators tend to value exchanges of favors, which are

flexible acts of mutual benefit and lead to relationship building and
flexibility in negotiation. Exchanging information may not lead to
good relationships. Adjust carefully to the style of the Chinese
individuals and groups you work with.

TABLE 5.7 Awareness: some weak points of Chinese negotiators

Typical weak
Advice for Chinese negotiators
points

Prefer to
conform to • Show your foreign partners how other organizations
existing conform to conventions and how this will benefit them.
conventions
• However, as non-Chinese partners become increasingly
sensitive to price, prepare to allow some flexibility
regarding wage rates, other costs and procedures.
• Chinese teams may sometimes rate relationship as more
Overinvesting
important than pursuing value. They must be careful not to
in amicable
exchange too much value for relationships – the strongest
relationships
relationships are based on mutual problem solving.
• Complex disputes may arise or the partners, especially
Disputes foreign partners, may not be able to participate in creating
resolved solutions. Therefore, Chinese organizations should include
informally mutually agreeable language in the initial agreement to help
resolve disagreements
Very
dependent on • Chinese teams generally feel they have to obey their
a superior superior staff– even if that person makes a snap decision.
figure
• To counteract this, Chinese teams should agree in advance
that major decisions will not be made without consultation
within the team that includes input from specialists.
Typical weak
Advice for Chinese negotiators
points

Paying
insufficient • Negotiating teams, especially in state owned enterprises,
attention to may have different staff than the executing team, giving rise
detailed and to problems that are difficult to solve. Negotiation teams
specialized should include key staff members who will execute the
contract work, not only business and sales specialists.
clauses
• Chinese organizations are not immune to time pressure,
especially where negotiations are complex and have taken a
Time pressure
long time. Time pressure may not be seen so much as a rush
in complex
to complete an agreement as much as in a rush to approve it.
negotiations
Therefore, neither the negotiation team nor top management
should hurry the governance of contracts.
• Non-Chinese teams, especially from Europe and North
One-sided
America, build relationships through sharing information.
information
The Chinese team should share its information and insights,
sharing
not limit itself to gathering information only.
• Foreign teams may not be sensitive to face-saving issues,
such as the exact decision-making power of a negotiator or
Face saving personalities behind the negotiation. Chinese teams should
see these issues as problems to be explained and mutually
resolved.

TABLE 5.8 Awareness: some strong points of Chinese negotiators

Typical strong
Comments on Chinese negotiators
points
Typical strong
Comments on Chinese negotiators
points

• The Chinese side may offer small concessions or

Establish favors early in the negotiation to build the relationship.
relationships with Foreign partners should respond appropriately, but care
favors/concessions must be given not to give too much or too little in
response.
• Allows low-cost joint problem solving while
improving the relationship. Non-Chinese may not be
Disputes resolved comfortable with this process or may not have the
informally language and culture skills to join. They should
develop the skills and staff necessary to join in the
process.
• Chinese partners may be willing to commit resources
in order to satisfy a need not covered explicitly in the
contract in order to complete a project amicably.
• Chinese negotiating teams generally do not have a
standoffish nature. It is not too difficult to build up
Easy to establish professional and personal connections. Doing so is
good relationships likely to ease the negotiations in general and to support
the kind of informal problem solving that is usual in
China.
• Generally, Chinese teams will prefer to work with
Lasting known companies. Thus, once a successful, satisfying
relationships relationship is in place, it may create much more value
in coming years.
• May work through repeated lines of questions to
sound out the bottom line of the other sides. With time,
In depth review teams are able to gather significant insights into the
business questions of the negotiation and use this to
their advantage.
Typical strong
Comments on Chinese negotiators
points

• Chinese teams have a reputation of being tough on

price. However, this is not always to the joint benefit of
Tough on price all parties. The non-Chinese sides should point out how
avoiding minimal profit margins can benefit all parties
in the long term.

Choose a partner from your culture to work with. Take some time to
write down some strong and weak points that you see among negotiators in
your culture. Then write out comments about the strong points and advice
regarding the weak points.

Some strong points of negotiators from your culture_____________

Typical strong points Comments on__________

Some weak points of negotiators from your culture_____________

Typical strong points Advice for “us”__________

Gender
Women may find themselves in a different position than men in a business
negotiation. In some cultures, women are not taken seriously, and in some
places, they may be excluded from casual business events, especially those
involving alcohol. Women interviewed in the course of developing this
textbook had various strategies for participating in business negotiation.
Some of these are included in Table 5.9:

TABLE 5.9 Gender-related strategies

Strategy How it works

• Start communication with technical issue or a philosophical

issue to establish your credibility. The owner of JBond in
Start with
Tokyo, Ms. Saito, used this approach instead of the usual small
a serious
talk when she was starting in the business world. This way, she
issue
could signal to upper level managers that she was a serious part
of the process.
Start with
• Show that you are not soft and easy to deal with. Do not,
a display
however, start with an aggressive or negative style (see the
of
section "Playing the hard card first" in Chapter 7).
toughness
Schedule • Avoid late nights and distasteful entertainments by scheduling
casual the events and locations. If you allow others to choose the
events in restaurant or club, you may find they have picked unpleasant
advance places.
• Avoid extra drinking of alcohol by choosing juices or other
non-alcohol cocktails as much as possible. Make a habit of
immediately asking the waiter for something you like without
alcohol (good advice for male and female negotiators!)
Strategy How it works

• Some older managers may not take women, especially

younger women, seriously. A good approach is to try
Persistence repeatedly to get your ideas and information out. This may
mean carefully stepping into the conversation or following up
after a meeting with email, written documents or phone calls.
• Maintain a highly professional profile using language and
gestures to create an atmosphere of respect.You can dress
formally (but not fancily) and use formal posture and gesture.
Be careful, however, not to create a barrier of formal behavior
Formal
– it is also important to be appropriately accessible for
stance
information sharing and joint problem solving. Deputy US
Trade Representative in Japan, Wendy Cutler, says, "Women
must present themselves as firm yet pleasant" (Handover, 2014,
p. 23).
Name your
strategy • Explain how it works here:
here:
Name your
strategy • Explain how it works here:
here:

Section summary

Gender may play itself out in a negotiation in many ways that are
continuously evolving. Female and male negotiators should remain
sensitive to current thinking and constantly learn about changes in
current thinking on these issues.
6
Talking the Talk

The phrases you will use as you negotiate in business will be mainly related
to the functions listed. Generally you will do more relationship building at
the beginning, clarifying and summarizing throughout the talks and more
information sharing before and during problem solving. Accepting,
agreeing, proposing and rejecting will occur in smaller bursts at various
times.
Functions include:

relationship building;
problem solving;
accepting, agreeing, proposing and rejecting offers;
summarizing and clarifying;
breaking deadlock;
sharing information.

The first of these, relationship building, is discussed in Chapter 2, and

problem solving is discussed in Chapter 8. Setting the agenda, offers,
summarizing, clarifying and sharing information are discussed in this
chapter. Additionally, some practical items like setting the agenda, sharing
information, handling threats and rude language are discussed in the section
“Practical verbal signals”.
Designing offers and suggesting tradeoffs

Regarding negotiating with Chinese people and organizations, we learn

from various authorities including Irl Davis of Global One that you should
“… try to form your negotiations with the Chinese in terms of social
benefits to the Chinese” (Davis, n.d.).

TABLE 6.1 Proposals that seem to benefit the other side

Example of how
Tomo: Hey, give me 1000 yen!
not to do it …
Hiro: No!

Tomo: SuperMiniPizzas are three for 1000 yen, but nine

A better way … for 2000 yen, today only! If you give me 1000 yen, I will
run to the shop and get a lot!
Hiro: OK! I love SMPs! Here, take my money!

Or even better, Tomo: SuperMiniPizzas are three for 1000 yen, but nine
Tomo can try to for 2000 yen, today only! I see you are busy with your
get a little more special project. If you give me 1000 yen, I will get them,
for himself… but I’ll keep the ninth SMP.
Hiro: Sure, four instead of three is a great deal. And I
can save time and get my project done before class. I am
happy to give you the ninth one.

This idea may be generally true regarding China and Chinese people due
to their feelings about their country and culture, sometimes called guanxi.
However, the idea is not important to only Chinese people. Let’s expand it:
always show how your offer is good for the other negotiators and their
interests. You do not always need to show what is good for a whole city or
country, but with any counterparty, you must demonstrate that your
proposal is good for the individuals, good for the organization they
represent and good for their interests.
Make your offers appealing – give the other side an incentive to accept
your offer.

Now it’s your turn – work in pairs

First, student A

Student A: You have already agreed that Student B will buy 10,000 units
from you for $10,000, including delivery and labels. Now try to get a higher
price for changing the label to include B’s photograph – it will cost you
$500, so try to get more than a five percent increase in total price.
Make an offer using a sentence that shows it is good for student B.

Now, student B

Student B: You just learned you can deliver the 10,000 units efficiently for
only $1,000, and you know that delivery will cost A $1,500. Try to get a
discount from student A of at least $1,000 on the existing $10,000
agreement.
Make an offer using a sentence that shows it is good for student A.
Offer design: ask for specific things, offer less specific things in
exchange

Keep your flexibility when you make an offer. Ask the other side to do
something clearly so you can be sure of what you are getting. But make
your concession less clear so you can change a little.
Even better – show what is good for OtsuTech and ask them for a specific
point leaving some flexibility for yourself.

TABLE 6.2 Compare the proposals

Version A Version B

Tomo: SuperMiniPizzas are three Tomo: SuperMiniPizzas are three for

for 1000 yen, but nine for 2000 yen, 1000 yen, but nine for 2000 yen,
today only! If you give me 1000 today only! If you give me 1000 yen, I
yen, I will run to the shop and get a will run to the shop and bring half for
lot! you!
Hiro: OK! I love SMPs! Here, take Hiro: OK! I love SMPs! Here, take
my money! my money!
Which offer is better designed for
Tomo? Why?

TABLE 6.3 Best design of proposal

Version A Version B
Version A Version B

XinFab:We can decrease the XinFab:We could decrease the price by a

price by 5 percent if you would few percentage points if you let us deliver
consider improving our delivery after 10 March instead of at the end of
schedule. February.
OtsuTech:That sounds OK. We
can let you deliver at the start of
OtsuTech:That sounds OK.
March instead of the end of
February.
Which offer is better designed for XinFab? Why? Write your ideas here.

XinFab: We can save you some money! We will decrease the price a
few percentage points if you let us deliver after 12 March instead of at
the end of February.
OtsuTech: That sounds OK.
XinFab: How about 2.5 percent?

Core language of offers

If you give us (specific thing), we will consider giving you (not very
specific thing).
Note: This is a review of the same points regarding language that you can
find in the section on counteroffers.
Write a sentence or two making offers that are a little better for
you, but acceptable for the other side

1. Offer your hotel event services at a price 5 percent higher than

normal to the conference planning committee of IBM Japan.

2. Offer a power conversion technology for 5 percent more than the

usual price for such technology.

Offers and counteroffers

“How about …”
“We can do it for $6,000 per month.”
“We can’t do it for less than $6,000 per month.”
“We’d like to suggest …”
“Would you be interested in …”
“We propose …”

A good counteroffer includes an idea about changes or exchanges, but not a

detailed exchange. Let the details develop as you learn more about what
you can give and receive.

Good

If you agree to grant us exclusive rights for the United Kingdom, then we
will rethink our promotional calendar for the forthcoming year.
Bad

We will give your product lead feature every month in our promotional
calendar for the next year if you give us exclusive rights for the United
Kingdom.
Adapted from Bare Knuckle Negotiating (Hazeldine, 2006, pp. 77–78).

Try to do it like this

If you give us __(specific thing)__, we will consider giving you

___(less specific thing)__
If your side is willing to provide the product 2 percent cheaper on
the last day of the month, we might be able to increase our total order.
Is that possible for your side?
Examples:

“If you _____, I will rethink …”

“If you _____, we will reconsider …”
“If you _____, I can look at …”
“If you _____, I can rethink …”
“If you _____, we can explore …”

In the previous example, notice that the “good” version allows the offerer
to give more (and receive more). The “bad” version allows no chance for
expansion because something specific is being confirmed with no future
opportunity for developing, sharing or retaining that specific point.

Package and repackage your offers

As you make offers, bring together parts of the whole deal in different
ways. This effort at packaging and repackaging will help you and your
counterparties to find the best fitting deal. This process is very important in
complicated integrative deals. Talking through the choices and scenarios is
likely to increase trust, satisfaction and value.

Section summary

1) Help the other parties understand why your proposal is good.

2) Ask for something specific but carefully offer something less
specific, then continue negotiating.

Accepting and rejecting

Firm acceptance

“Sounds good!”
“We agree.”
“That looks like a fine idea.”
“Let’s do it.”
“We have no problem with that.”
“That’s a green light.”
“That works for us.”
“I can do that.”
“I’ll go for that.”
“Good idea.”
 “I can manage that.”

Tentative acceptance

“That may be alright … we will have to check with headquarters.”

“That sounds like it is in the right range, but let’s talk about it
more.”
“That’s a starting point …”
“We may be able to agree with …”
“Now we are in the ballpark.” (The price is close to the target.)

Firm rejection

When you hear these, you should carefully get more information but be
prepared for no agreement on the issue. Notice that some of these seem
tentative, but are firm.

“That’s not possible for us.”

“No way.”
“No can do.”
“That would be a deal breaker.”
“That’s a show stopper from our point of view.”
“The cost is much too high.”
“I don’t think so.”
“That’s not quite what I was thinking.”

Referring to causes outside the company usually shows that there can be
no change or discussion about a topic.
Examples:

“The end users have made it clear they will not buy a product this
color.”
 “The government has recently changed the regulations and all our
products will have to be 10cm wider.”

A firm rejection may show the “reserve” position of that topic. Probe a
little more to be sure.

Poorly designed rejection

Notice that this following rejection is much weaker because the rules are
inside the company:
“… we’ve got a problem with these because our [internal] rules have changed again since …”
(Vuorela, 2005, p. 54)

This is a weak rejection because it is almost certainly possible to suggest

that the negotiators return to their company for permission to change the
situation. They could even make a phone call right away. If they refuse, it
might be that they were faking and do not have any rules about this. Or they
might make the rejection more firm (and more clearly real). A weak
rejection might mean that they are playing for time because they need to
discuss or rethink their position. If this seems to be the case, propose taking
a break.

Tentative rejection

When you hear these, you should explore more ideas, get more information
and hope for an agreement.

“We would like to consider that and discuss it more at our next
meeting.”
“The cost is a little higher than we were expecting …”
“We’ll have to ask headquarters about it.”
“Our budget really can’t handle that.”
 “I don’t think my boss will like it.”
“We will have to look into it …”
“I think there might be room to maneuver on that …”
“I will have to check with my boss …”
“My idea is a little different.”

These tentative rejections usually suggest that you will be able to agree
with more discussion, understanding and maybe concessions.

Summarizing and clarifying

Summarizing/confirming

In Bare Knuckle Negotiating, Hazeldine (2006) says “summarize

frequently” so that all parties are clear about the details and what they agree
and disagree about. Frequent summarizing helps all parties maintain a good
relationship and clear ideas about the process.
Here are some examples:
So that’s $5,000 for each delivery, payable five business days in advance by electronic transfer,
right?
If I got it right, you mean shipping to on the last day of the month and paying by the fifth
business day of the month, right?
To review, our idea so far is to decrease by 9 percent during the first three months in three
equal steps … is that right?
I gather that your position is a little different from ours, so if we increased by 5% you would
not be satisfied.

Summarizing, confirming and reviewing means that a negotiation usually

goes in circles and loops. It does not usually move forward on a straight
line. Figure 6.1 gives a reasonable view of the messy real world of
negotiation.
Clarification
Do I understand that …?
What do you mean?
Could you explain that in more detail?

FIGURE 6.1 The messy reality of the negotiation progress

How would that work with the other product?

So this plan is indeed technically feasible; is that correct?
I don’t know if I understood that correctly, could you rephrase the idea?

Practical verbal signals

How do you know if the other side is interested in knowing more or has no
more interest in agreeing? Understanding the meaning of certain words and
phrases may help. This section includes examples of words and phrases that
signal feelings. Earlier in this chapter, we saw how to make offers using
words and phrases that are positive-sounding and flexible. In this section,
we see that careful verbal signals can show that either you or the other side
is willing to negotiate a point.

It is important to structure your signal so that the hint of movement on

your part is conditional on the other party responding positively… .
You imply a willingness to negotiate, but only if the other party
reciprocates.
“Our normal price is X.” this could be a signal that although the
normal price is X, under certain circumstances, the possibility of a
different price exists.
Bare Knuckle Negotiating, Hazeldine, p. 66

“It would be incredibly difficult for us to accept an agreement of less

than five years in duration.” This signals the possibility of movement.
You are indicating that there is the possibility of flexibility. You are
not saying that you will agree to an agreement of less than five years –
you are signaling that you are prepared to discuss it. The use of the
word “difficult” implies that the other party will need to provide some
incentive for you to make some movement… . You are inviting the
other party to move the negotiation forward.
… encourage them to expand … “Under what circumstances would
you be able to alter the specification?”
“How could I make it easier for you to agree to the proposed fee?”
Bare Knuckle Negotiating, Hazeldine, p. 72

To summarize, the best signals invite a concession from the other side
before you have made a clear offer.
Playing for time

These phrases are useful when you need a little time to think.
“I see.”
“Could you explain that to me in a little more detail?”
“Could you repeat the first part of that idea?”
“It sounds like an interesting idea, could you run through the main points for me again?”
“Let’s take a break.”
“I’d like to sleep on that.”

The most useful phrase for getting time, of course, is, “We’d like to
discuss that internally – how about if we take a break?”

Too expensive
“This is above our budget.”
“Our expectations about cost were very different.”
“We are feeling some sticker shock.”

Better than we expected

Immediate agreement to a price usually indicates that the other side was
worried about a worse price. It may be difficult to improve the price (from
your point of view) after an answer like this.

We are interested in this issue

Echo questions (see Chapter 2) usually indicate strong interest or a desire to

learn more about that topic.

Setting the agenda

Negotiators must agree about the first general topic and its subtopics when
they begin to talk. They must agree to an agenda. This can be done face-to-
face or in the days ahead by phone, email or other method. Follow Table 6.4
to see how agenda setting works after the greeting.
This conversation could go a different way – Red could push a little more
and get their topics on the agenda first.

TABLE 6.4 Agenda setting

Action Say Comment

I’d like to talk about GB

Agree to what you will start with.
Joint Venture.
Set the Be flexible – if they want to start
We think the joint venture
general with a different issue, it is OK
is a good starting point to
topic unless the sequence is very
make some positive
illogical.
agreements, is that alright?
In that case, let’s discuss
Briefly agree regarding what you
Specify the ownership structure,
will include in this conversation
topics the decision making
(subtopics).
balance and …
Also quickly start the price
We think the price
conversation (high side if selling,
State of____should be
low side if buying). Always give a
position(s) about____because … (it is
reason with a price – a reason that
good for you)
sounds and feels good for them.
That sounds good, but we
If you do not want to include a
Link or would like to talk about
particular point, suggest handling it
delink the third one,____. later
later.
because____. Is that OK?
Action Say Comment

Talk openly and freely. Listen

Discuss We agree about___, but we
closely to understand what they
positions think____.
want. Work on details.
So if I understand right,
we all think the price Summarize frequently and finally
Summarize
should be____and agree.
include____,____and____.
Move to
Let’s move on to____.
next topic
Repeat all
of above

TABLE 6.5 Sample dialog for setting the agenda

Greeting
Blue: Hello – we are glad to meet again regarding our
(Blue even
successful JV! We have some fresh ideas about making our
sets the topic
cooperation even better.
here)
Red:Yes, glad to see you all again. Greeting
Blue: We would like to talk first about the JV - that is a set Topic,
of issues we can easily manage together. Let’s include subtopics
restructuring ownership, decision making and expanding the (Blue sets the
JV. Is that alright? topic/agenda)
Red:Yes, but what about the decision making, we don’t see
Subtopics
how that is a question …
Blue: We will explain – it’s a small issue that fits well with Subtopics
everything. First we understand that Red will benefit from a (confirmed
60/40 ownership ratio.That will save you a lot of taxes, and a with reason)
little for us too. Basically, we agree! But because we don’t
want a simple “technology transfer” operation (we want a
real JV), we would like to share decision making power
50/50.
Red: That is a little unusual. Can you explain what you are Question for
thinking? information
Explanation,
Blue: Sure, we … (explains)
discussion
Red: I see. We can agree to that, though it is a little difficult Counter offer
and will generate some legal costs, so we propose $350,000. with reason
Blue: We can agree to a reasonable discount for the trouble. Back to high
But we admit our initial price was high – for a reason. The price and
reason is that … explanation

Moving to a new topic

Let’s turn to Issue 3, please. The topic here is whether or not to continue …
(Page 120 of arbitration transcript, Ohio State)

I see. And I’m not really an expert on this subject, so we’ll move on.
(Page 144 of arbitration transcript, Ohio State)

Responding to threats

In a negotiation, you may hear a range of threats to your position. Some are
acceptable and some are unacceptable.
Note: the best way to react to a threat is to respond directly with facts. A
direct response will show clearly that you can react and continue the
conversation instead of giving in to the demand. Alternatively, you can
respond with silence while waiting for the threat-making side to make the
next move. When you respond with silence, your silence is a signal that you
are not satisfied with the offer or threat.
 Your counterparts probably do not really want to end the negotiation, so
you do not have to give in to threats in order to save the deal. If the other
side really wants to end the negotiation, let them end it; remember, their
BATNA must be good enough that they can walk away. If your BATNA is
strong enough, you can walk away and find a new negotiation partner that
does not make threats.
For more on tactics and responding to negative tactics, see Chapter 7.

Making threats

Don’t make unacceptable threats at all. Even acceptable threats should be

kept to a minimum by companies engaged in productive talks that will lead
to greater future cooperation. Acceptable threats are not good tools for
building relationships.

TABLE 6.6 Acceptable and unacceptable threats

Acceptable Unacceptable

“If you don’t agree to this, we

“We will have to compare your offer to will go directly to your
your competitors.” competitor and you will never
survive in this business.”
“Your timing does not suit us.We might “We’ll damage your relationship
give that part of the contract to XY with your main customer if you
Corp.” don’t agree to this.”
Comment
Acceptable threats do not suggest any Unacceptable threats reach
significant danger to the business or beyond the immediate business
personal trouble to the other party. These talks and suggest serious
are acceptable and within the range of damage, even personal damage,
normal business. to the other party.
Rude, vulgar, taboo

These words may be used casually and can even help to relax a formal or
tense atmosphere. However, generally you should avoid words that are
considered rude, vulgar and taboo. This is especially good advice for non-
native speakers of English who may not be able to use the words correctly.
If your counterparties use these words, try to determine if they are
intentionally being casual or if they are genuinely upset. If they are truly
upset, look for ways to decrease the tension.

Deadlock and breaking deadlock

Sometimes parties in a negotiation cannot agree. This situation is called

deadlock. If deadlock happens to you, you have a few possible actions:

1. Leave the topic temporarily and come back to it later;

2. Cut the issue out of the negotiation permanently;
3. Link the topic creatively to another topic, action or concession;
4. Make a new try with other contacts (different people at the
counterparty’s organization, different staff on the negotiation
teams, removing yourself from the team, etc.);
5. Develop a backchannel contact – a person in the organization who
is not directly related to the topic matter (note: this may be seen as
underhanded or tricky, especially in business);
6. Agree to an independent fact finder who can decide on a specific
problem, such as a price evaluation;
7. Agree to a set of rules that can be used impartially by all sides;
8. Consider alternative dispute resolution (ADR) methods such as
mediation or arbitration. See Chapter 10 for more on the subject of
ADR.
 Of course, if the deadlock cannot be broken and the issue cannot be
abandoned, you or the other side may have to use your BATNA.

What to say when deadlock occurs

I think we are becoming stuck on this topic, let’s move on to …

Seems like we are stuck, how about a break before we continue with
another issue?
It seems like we can’t agree about this, so let’s talk about another
topic and come back to this later. Is that OK?
After two hours we still disagree, how about removing this from the
negotiations and asking an independent party to decide?
We clearly disagree about who made the mistake, so let’s find a
judge who can decide clearly about it. In the meantime, let’s
continue talking about …
We frankly cannot pay more than $12,500 for the equipment.
However, we could pay a little more for the installation if you allow
us to select the work team … what do you think?
Is it possible to do that work under some limited or special
conditions?

Another approach – consider the points in the problem issue that

you can understand

Fisher and Shapiro (2005) suggest that a negotiator take a neutral position
temporarily while communicating with the other parties about a
troublesome issue. If there are points in the issue that you can understand, it
may help the other side to appreciate your points after you have
demonstrated that you understand their points.
Deadlock 1

Think about the following deadlock situation and suggest how the
negotiators could manage. Write out the sentences they could use.
Company A wants to sell Company B’s motorcycle tires, but not their accessories. Company B
strongly wants A to sell both tires and accessories. After 20 minutes, they are deadlocked.

Deadlock 2

Recall the case of the incompetent translator in Chapter 1. What could the
project manager have done to bring the translator into a negotiation? Would
it be worth the time and cost?

Section summary

Creative ideas and links to other issues are best for breaking
deadlocks, but it is not always possible. Identifying unresolvable deal-
breaking deadlock issues in advance will save time and cost.

Shutdown moves

How can you bring a negotiation to an end at the right time?

 In his book Negotiauctions, Subramanian (2010) of Harvard Business
School describes shutdown moves as a way to prevent the other side(s)
from finding better deals with competitors. Subramanian also points out that
timing is important – shutdown moves must appear when the other side is
close to accepting and delay would result in their reconsideration of
alternatives.
You may have to make these more moves than once – Subramanian tells
us that only 20 percent of attempts are immediately successful.

TABLE 6.7 Shutdown moves

Move Language example Comment

If we agree today, we
Conditional can speed delivery These shutdown moves can create
agreements time by 10 percent for value and convenience for all parties.
no cost.
If we agree now, we
will release you from
Appealing It is possible to make these too
the agreement if oil
release restrictive and therefore unappealing.
prices rise 5 percent
terms Design these moves carefully.
more than expected
this year.
You can break the
Acceptable
agreement by paying a
penalty
5 percent fee any time
clauses
in the first four weeks.
It looks like we have
If the parties are basically satisfied,
Direct covered all the issues
this move can bring a close to the deal
appeal well, can you agree
with no more time lost.
with the deal as it is?
Move Language example Comment

Let’s review the

This move appeals to negotiators who
proposal in detail.
appreciate rights and fairness. If a
Compare (List the benefits to all
party has a Win/Lose mindset,
benefits parties in detail,
emphasize the “better” value they are
possibly in spreadsheet
getting.
format.)
If you agree now, we
Extra This kind of shutdown move is
can deliver these
strong unreasonable. Do not rush into an
medicines
moral agreement. Avoid using this kind of
immediately and help
position shutdown move.
those people!
This move catches tired negotiators
We have come so far, who may have lost track of where the
Split the
how about we meet in “middle” really is. Instead, share
difference
the middle? resources or repackage until both sides
have satisfying benefits.
A late small concession that is highly
If we sign off now, I
visible can sometimes bring the
will make sure that
A spoonful negotiations to a close. However, if the
your logo is at the
of sugar deal does not close, the concession
entrance all week – for
may be forfeited and lose its special
free.
appeal.
Our offer is only open
until the stock market
These are ultimatums. Do not accept,
Time starts on Monday
just coolly reevaluate. See the section
restrictions morning – we must
on tactics.
have an agreement by
then.
Agree now or we will
Ultimatums Avoid using these.
withdraw the offer!
Section summary

Time your shutdown moves carefully to complete phases of a

negotiation or the whole thing. Polite persistence may be necessary.

Language choice

Choice of language in negotiation

This textbook is in English and provides practical advice about choice of

words and phrases in English. But much of the advice will be useful in
situations that use only a little English or no English at all. In business
negotiations with more than one culture, the participants may pick a
common language that some or all know well and they may mix one or
more other languages with the common one.
Negotiators can choose the language to match the agenda. Interviews
quoting cross-functional team members from a multinational enterprise in
the IT industry (Chen, 2008) show the process.

Huang, a Chinese native language speaker in Vancouver, Canada, uses

English as a foreign … and as a corporate language within her firm.
She describes the dilemma of using languages while managing tasks
and social-relations.
 International companies rely on multilingual speakers to find the best solution for both
parties … language is not a big problem when we only talk about logistic issues … but
when a work problem becomes personal, using a foreign language to deal with relational
problem becomes a major issue.
(Huang, personal communication, 2013)

Two points are of interest. First, multilingual negotiators choose between

a native and a foreign language to negotiate with the same native language
speakers. Second, the choice of language impacts the message receiver’s
own perception. The choice of language can be a tool for maintaining or
removing old divisions or for creating new ones during collective actions.

Use of multiple languages in negotiation

Negotiating with those who share the same native languages

Multilingual negotiators from the same native language background should

concern the effects of language choices when prioritizing task-based
negotiation or relational-orientation negotiation. When negotiators are
grounded in a common environment (e.g., nation, culture, institution), their
language options can include local and corporate languages (or native and
foreign languages).
The examples that follow show how this happens in day-to-day work.

Kao, a Chinese native language speaker, uses her corporate

language, English, as a foreign common language in a firm
based in Taipei, Taiwan where the local languages include
Mandarin and Taiwanese. She describes how negotiators use
language socially while coordinating tasks. Her statement
 shows how negotiators use their native language and how they
react to a foreign LF.
I use Chinglish, it is a mixture of Chinese and English… . I like to add ‘ah, la,
oh’ these kind of sound in English … to be more expressive. When my
Taiwanese counterparts speak in English only, it occasionally makes me feel
they have some kind of attitude, snobbish or demanding … maybe distant.
(Kao, personal communication, 2013)

Ma, a Chinese native language speaker in Vancouver, Canada,

uses a foreign language – English. He describes how common
native language speakers use a foreign language to conceal
cognitive implication and present appropriate social actions in
negotiation. He describes how language choice is a trade-off.
It’s hard to use a foreign language to show feelings with my fellows … no
emotion exchange, it’s easier to make progress when I make a point about
company policy, but things may become personal and damage relationships …
for a long-term work project, bad relationship makes our team loose … whole
project would be jeopardized.
(Ma, personal communication, 2013)

Switching between different languages to create a multilingual context

can be a negotiation strategy. Negotiators choose languages to develop
aspects of the negotiation such as relationships and joint understanding.

Negotiations when there is no shared native language

Negotiators from various countries may or may not share a common native
language. Yet, in a single-language environment, a foreign common
language requires greater demands than using a native language. The sole
use of a foreign language causes difficulties in sharing information and
impacts relationship processes by adding complexity (Salk and Brannen,
2000).
 Liang, a Chinese native language speaker in Vancouver, Canada, uses
a foreign language, English. He describes how he uses it to negotiate
with Canadians and how the choice of a foreign language can
influence value-claiming.
My Canadian counterparts know that I am Chinese and English is not my mother tongue.
The good thing of negotiating in English is that English native language speakers will be
more tolerant of my directness. Sometimes I can be rude and strongly express my opinion.
They could simply interpret my style or attitude is more like a cultural barrier. So, they
are more likely to focus on how to get the work done.
(Liang, personal communication, 2013)

Multiple language choices give negotiators strategic alternatives.

Negotiators may select, switch and mix languages to transfer information,
build relationships or show their intentions.

Lin (in Xiamen, China) explains how multilingual negotiators utilize a

foreign common language even when they communicate with their
counterparts who speak the same native language to prioritize task-
oriented issues.
In negotiation, we manage different conflicts, such as issues relating task or issues
jeopardizing relationship. English is like a tool to focus on work, such as a firm’s policies,
task requirements, subject titles, as well as a way to detach my personal feelings to be
assertive.
(Lin, personal communication, 2013)

The quote suggests that multilingual actors are sensitive to the choice of
language in a negotiation. When negotiators choose a foreign language over
their common native language to express their feelings, they may
experience difficulty.
In the following example, a native English and a native Chinese speaker
switch between the languages. They use Chinese and English to build up
the relationship, but mainly English for the technical issues, except for one
offer.

Both Go-si and Grant work in different firms. Go-si is Chinese, based
in Beijing, China and Grant is Canadian, based in Shenzhen, China.
They both switch between native and foreign languages – Chinese and
English.
Go-si: Grant! I need to discuss something with you. Are you available
now?
Grant: She me shi? (Translation: What to discuss?)
Go-si: You know that we need to quickly despatch our products to
your sides, however, due to the budget issues, we would like to
change to courier delivery instead of using flight cargo. Is it okay? I
will despatch the products two days earlier, but it will be four days
late if that is okay with your side?
Grant: Hmm … let me check… . I am not sure about it. We have other
deadline to catch here. What’s the problem?
Go-si: We had some problems on one of our operational lines. So, we
need to redo some work. However, if we can change the delivery
method, we may be able to reduce extra financial costs. Anything you
can suggest?
Grant: Yi ban huo chen yi ban kung yun? What do you think?
(Translation: Half delivery by courier, and half by flight cargo?)
Go-si: Great! Xie le :D (Translation: Thanks for that!)
Grant: Bu ke qi  (Translation: You are welcome.)
(Go-si and Grant, personal communication, 2013)
 The Canadian (Grant) uses his counterpart’s native language (Chinese) to
benefit his counterpart. This approach indicates a clear intention to deepen
social relations with the other businessperson. Even though the Chinese
native language speaker (Go-si) prefers the foreign language to actually
process the task, he responds to Grant by switching to Chinese. In this way,
Go-si recognizes his counterpart’s attempt to deepen their social bond. A
negotiator can uses his/her counterpart’s native language in order to socially
connect and develop a closer bond.

Section summary

When negotiation participants are from different language

backgrounds, or even the same language background but operating in
a foreign environment, choice of different languages will have
important impact.

Visual communication

It is not necessary to communicate by speaking and writing only. A

business negotiation can be an opportunity for very broad communication,
especially during problem-solving discussions. Using visual communication
can support the ability of the parties to communicate and create solutions.
Q. What is visual communication?
A. Using pictures, diagrams, sketches, models, skits, charts, etc. to share
ideas and solve problems. These things can be casual or professional,
prepared in advance or created on the spot. They can be made by one
person or all parties.
 Q. Why should we bother with visual communication? After all,
speaking works well, and drawing bad pictures does not seem very
professional.
A. Visual communication improves on spoken communication in three
aspects of negotiation according to Swaab, Postmes, Neijens, Kiers and
Dumay (2002):

understanding;
relationship;
satisfaction.

Further, joint creation of images can lead to joint problem solving, which
also supports understanding, relationship and satisfaction.
Q. Which do you think is better for a face-to-face negotiation: a
whiteboard or a computer and projector?
A. Your answer:
____________________________________________________

Presentations

Presentations are for delivering information in one direction. Negotiations,

however, combine input from all parties. Therefore, a presentation is
usually not appropriate for a negotiation. If you feel an introductory
presentation is useful, keep it short and simple. The slides should be
uncluttered, but not black and white. Use animations, images, diagrams,
maps, video, graphs and tables more than words. Note: animations must be
simple, not complicated, not distracting and not overly cute. In any case,
bring the presentation on paper in case of technical problems.

Handouts
Handouts are much more suitable for a business negotiation than
presentations.
Handouts can be reviewed in any order, at any time, by all parties. All
parties can contribute their ideas to the handout simply by writing on it.
Each handout can focus on a single point. More information can be
delivered and developed by use of handouts than through presentations.

How to make useful drawings and diagrams on paper or

whiteboard

Dan Roam (2010) in The Back of the Napkin suggests that you consider five
dimensions when you want to visually communicate. These dimensions are:

Simple v. Elaborate
Quality v. Quantity
Vision v. Execution
Individual v. Compare
Change v. As-is

The Back of the Napkin, Roam, 2010

Understanding these five issues will help you quickly decide what kind
of image to draw, what the focus of your communication should be and how
to draw it.

Use a simple picture to communicate only about that object, but

draw an elaborate picture to show the object in its context (use,
origin, users, transportation, etc.)
Draw a quality picture to discuss a detailed characteristic of an
object. Quantity pictures include graphs, charts, and numbers.
 If your idea is about the final outcome of a new business activity,
draw a vision picture that shows things as they will be. A vision
picture might show customers using the product and how it solves
their problems. If your idea is about the processes necessary to
create a new business activity, draw an execution picture showing
the steps. An execution picture might be a process diagram or flow
chart with lines and arrows.
Individual pictures show one object, but in order to compare, you
should draw more than one object. With several drawings, you can
point out individual differences, for example, the meaning of quality
in apples (size, shape, bites, bruises, etc.)
Your drawing might show a change or the as-is situation. As-is
pictures show the object or idea as it works (or does not work) now.
The change picture shows how the system would be in the future.

Summary: choose the picture or short series of pictures that will be the
most useful for you. Make simple drawings because they are quick and
effective. You will improve your communication ability with practice, but
the goal is not to draw nice pictures, just to communicate!
As an answer to the earlier question about whether a whiteboard or
computer is better suited for a situation, consider Table 6.8.

TABLE 6.8 Comparing visual media

Whiteboard Computer

Many can access it

Only one person at a time
simultaneously
Easily used and modified May not be easy to draw complex ideas
Slow typing or weak graphics skills will
Skills widely available
harm the process
Promotes co-creation Blocks joint use
Whiteboard Computer

Tends toward struggles for control of

Builds relationship
machine
Not hard to save (photograph and
Easy to save and distribute
process later)

With only one plus point on the computer side, the advantages are
heavily in favor of doing the work by hand. Advice to co-create with
counterparties:

share the paper and pens;

use a whiteboard;
stick figures and non-beautiful drawings are OK;
bring a few colored pencils/markers (too many colors will lead to
confusion);
keep it simple and short (KISS).

Practice a little to improve your skills, but don’t worry too much!

Conclusion

Use whiteboards, prepared graphics and diagrams, photos, video,

animations, sticky notes, notepaper on the table or even paper napkins.
Visual communication supports problem solving, idea sharing and
relationship building.

Remote and electronic negotiations

Not all negotiations are face-to-face. Email and teleconferencing may make
it impossible to share the use of a whiteboard or paper. In that case, it is
possible to encourage joint problem solving by sharing documents through
collaboration software. See the next section in this chapter for more
information on remote negotiations.

Section summary

Use visualizations of all sorts to facilitate communication of ideas in

negotiation – these support the verbal negotiation and are generally
accepted as serious.

Remote electronic negotiations

Increasingly the business world negotiates partly or entirely by remote

media: video, phone and email. These tools are convenient and accessible –
a smart phone might be enough for all of these. The advantages of remote
electronic talks include convenience and speed. The disadvantages include
having less context around the talk: facial expressions, voice tone, gestures
and so on. These clues are minimized or cut out completely in remote
negotiations, and it becomes easier to miscommunicate. We can describe
media on a scale between rich (lots of context and information) to poor
(little information other than the core message), as in Figure 6.2.
Use rich media for complex discussions, emotional content and new
relationships. Use poor media for simpler content with established
relationships. Figure 6.3 suggests which form of communication to choose
depending on the relationship and the complexity of the issues.
FIGURE 6.2 Rich and poor context media

FIGURE 6.3 Which medium fits best

Email advantages

According to Figure 6.2 and 6.3, email and text messaging are the media
that carry the least context information. Email, unlike text messaging, does
not even tell the users if a person is available or not. With so little context,
there are some advantages to be exploited:

No instant response needed (asynchronous)

Email does not require an immediate response – it can wait for
minutes or days at your convenience. After opening an email,
 you can take time to gather information and consider alternatives
before answering.

Language skills
If the negotiating parties do not share the same native language,
email allows for slow responses with time to create and revise in
the foreign language. This slow process is much more
comfortable (and more grammatically accurate) than the
immediate give and take of live communication. Language
learners benefit from email’s low-pressure format.

Low barrier
Some people feel more comfortable proposing an idea when it is not
face-to-face or using live media. Email provides the feeling of
insulation from a poorly promoted proposal (author research,
Chen, 2008).
Additionally, low power individuals may communicate more and
more successfully using email or messaging (Thompson, 2012).

Manage emotions
Email does not necessarily show emotions, especially if you take
time creating and revising it. You can manage your display of
emotions to make the recipient think you are happy, angry,
satisfied, etc. On the other hand, it is easy for email to be
misread by recipients who project their own emotions or worries
onto the email. Therefore, extra care in writing, careful use of
emoticons and follow up calls and visits may be wise.

Define a clear purpose for your email

If your email’s purpose remains uncertain, the message may be

misunderstood or even remain unread. Therefore, the person responsible for
writing the email needs to explicitly and clearly address the key points
during the introduction to motivate the recipient(s) to carry on reading and
get the point. However, if the introduction is overly long or unclear, the
reader may lose focus or skip passages of text and miss or overlook one or
more key points. Therefore, an informative subject line and brief
introduction are the best combination.
Don’t waste your time writing something that won’t get read. Make it
easy for your recipient(s) to know what you require and expect from them.
A clear and concise introduction, respectfully phrased, can help an email
recipient understand the key points.

Types of email

Five kinds of email can be generalized. The type should be stated as early in
the email as possible to help the reader(s) quickly identify the nature of the
text and whether it is of interest. The five types of email are:

Information sharing: conveys information without the need for a

response, such as sales advertisements, reminders, etc. Avoid
lengthy, excessive texts. Be explicit – help the reader understand
who, what, where, when, etc. Identify the topic clearly and share the
information concisely.
Inquiries: requests advice or provides answers to questions.
Responding to inquiries helps the sender gather information that
may be advantageous to all parties. Number the questions and
encourage a thorough response. Do not ask many questions in one
email. Limit or avoid open-ended and vague questions.
Required actions: communicates that taking action toward an issue
is required to move an agenda forward. Actions include forwarding
an email, linking to a webpage, receiving/checking attached files,
etc.
Open-ended discussion: opens a dialogue to keep communication
active for the purpose of a mutual benefit or a future interaction.
 Discussions include brainstorming, project development, etc.
Advice: If a sender requests advice on a problem, replying with a
vague or an irrelevant comment (e.g. complaints) is likely to delay
matters. It is important to offer concise suggestions. Generally it is a
good practice to include links to supporting sources. Because
advising and problem solving is a complex process, it is good to
propose a phone call or face-to-face conversation.

Structure of successful email

1. Subject line – never send an email without an informative subject

line. Six or fewer words is best. The topic and your general feeling
or opinion should be clear.
2. Greeting – always start with the name(s) of the intended
recipient(s). For example: “Dear Bob,” or “Bob,” or for a group,
“Bob, Tom, and Susan,”. You can also start “Dear Team,” “Dear
All,” etc.
3. Lead to the next communication – In successful business, one
activity leads to another. Finish up with phrases like “… please
send me your response… .”
4. “… let me know your opinion about …” “… I will call tomorrow
to talk about the details …” “… please review the attached
document and send it …” or “… I’ll be in your district on
Thursday, let’s discuss this further over a coffee… .” Assertively
and politely stating the date and/or time when a response needed is
most likely to result in a timely reply.
5. Closing – close with a polite ending. “Best regards, Tom” is a good
general- purpose ending or “Thank you, Tom”. Avoid “Sincerely,
Tom” or overly warm closings. “Thanks” is acceptable for an
internal email in an established business relationship. After your
name, a business email should include a few lines (about four) with
your organization and contact information.
TABLE 6.9 Business email dos and don’ts

Content Do Don’t

Use only business abbreviations Do not use casual

Abbreviations known to your readers. Explain new ones like “CUL8er”
abbreviations as necessary. (see you later)
Animation Never. Especially, do not use animated emoticons.
Do not send
Attachments Yes, if format is important. attachments that are
not
directly related to the
Yes, if the communication is long.
topic.
Do not include
company logos as
Yes, if you need to send attachments – put
graphics/images, etc. them in the body of
the email if required
only.
Clipart Avoid.
Complex Make a phone call or a face-to-face Do not use email for
issues visit. complex issues.
Emoticons Use sparingly. Use emoticons only to No animated
show an upbeat feeling, a concern or emoticons.
other very clear, simple feeling. No unusual
These are generally OK in an emoticons.
established business relationship: No emoticons for
complicated nuanced
feelings
Content Do Don’t

Be careful, as the
following are
common in East Asia
but are not yet
common elsewhere in
business:
☺ :-) :)
☹ :-( :( > < (^o^)
Do not show off your
Grammar Keep it simple.
grammar skills.
Humor Avoid.
Irony Do not use.
Good email is short, 5–20 lines if Do not fail to provide
Length
possible. Keep it short and simple. enough context.
Try to include only two support
points. Generally, one point gets Don’t make it long
Persuasion
through and two points might get and bothersome.
through, but more rarely get through.
Rude/taboo
Never.
words
Sarcasm Do not use.

Completeness – help the reader understand who, what, where, when,

etc. In face-to-face communication or in other situations, it is easy to
gather related information to the core message. However, email
lacks this additional context and may be read much later when the
surrounding details are no longer fresh. Therefore, identify yourself
and the topic clearly. When responding to an email, keep any
previous email(s) in your response.
 Clarity – avoid complicated grammar. Keep it simple.
Simplicity – avoid complicated and delicately nuanced ideas. Keep
it simple. If you have much to communicate, do it face-to-face, by
phone or in a longer attached document with supporting
information.
Only one main subject – discuss only one main topic in one email.
Send a new email for any new topic.
Try to include only two or three support points, if possible. Why?
The reader may not have the time or focus to manage more. The
authors’ experience is that “one point gets through, two might get
through, more rarely get through.” This is especially true for high-
level managers who often simply do not have time for more than
minimal and clear communications.
Length – keep it short.

Casual abbreviations

As a rule, do not use casual abbreviations, even in casual email. These

change frequently and therefore may easily be misunderstood. Some are
funny, but some are quite rude. Never use a rude one in your emails or other
writing. From the following list, ASAP, COB and FYI are widely used in
business. You must recognize some of these, but avoid them in general.

ASAP – as soon as possible

COB – close of business (usually means 5 pm) FYI – for your
information
LOL – laugh out loud
OMG – oh my god
ROFL – roll on floor laughing
W84it – wait for it
IMHO – in my honest opinion
IIRC – if I recall correctly
 FUBAR – damaged beyond all repair

Some last points of email etiquette

Use common business acronyms and jargon with other professionals

who know them – it will show that you are also professional.
Do not use slang and local abbreviations in business email at all.
If you are forwarding or reposting a message you’ve received, do
not change the wording. You may shorten the message and quote
only relevant parts, but be sure to properly identify the source.
In order to ensure that people know who you are, be sure to include
a line or two at the end of your message with contact information.
Keep it short – no more than four lines.
A single address may go to a group, even though the address looks
like it is just one person. Know to whom you are sending!
Be careful about cc’s when replying. Do not accidentally exclude
people. Also, do not continue to include extra people if the messages
have become a two-way conversation.
Do not write with all capital letters. IT LOOKS AS IF YOU’RE
SHOUTING ANGRILY. This is true for email and all writing. Do
not use all capitals for brand names like TOYOTA.
Never write anything in an email that you would not write in a letter
or memo. Foolish words may return to you!

Adapted from Hambridge (1995)

Section summary

Select the means of communication based on the contents and choose

the best method for the level of expression and complexity. Carefully
design your email from the subject line to the closing to get the right
content to your audience in the right way.
7
Negotiation Tactics

Tactics at the table

This chapter contains a few points about tactics used at the negotiating
table. Tactics refers to actions you take during negotiation.

False concessions

It is not uncommon to offer a false concession, allowing the other party to

struggle to get something that you would give them anyway. Your HIT list,
discussed in Chapter 4, includes things you have to get. It might also
include things you have to get rid of. If your “have to get” list includes
something you must get rid of, it might be possible to trade it for a
concession, as if you wanted to keep it. See the following example of a
false concession (sometimes these are called “padded concessions”).

Let’s say that in the course of negotiations, Mr. A [of AMPO] demands in no uncertain
terms that Commissioner Daniels be dismissed. Ms. C [of City] protests equally
strenuously that her side will never agree to such a move. This is a strategic
misrepresentation: City indeed wants to get rid of Daniels, but AMPO doesn’t know it.
Ms. C later “reluctantly” backs down … and gets Mr. A to make some concessions in
addition.
The Art and Science of Negotiation, Raiffa, p. 142
 Comment:
Please notice that “strategic misrepresentation” is a polite way to
say “lie”. This tactic is usually only effective in gaining small
improvements and may damage the overall relationship. It is best not
to lie, but it is also important not to give something for nothing. In this
example, Ms. C perhaps could have openly given away the
Commissioner and gained improved relationship without
misrepresenting her position.

False concessions are not uncommon, so you should be aware of them.

Avoid giving something for a false concession. Make false concessions
carefully. If you offer a false concession, you must never reveal that you
were planning to give it anyway!

Higher authority

Sometimes a negotiator will refuse to agree to a proposal that is entirely

possible. In order to get more concessions, the negotiator might insist on
getting approval from the boss. This negotiator may go out of the room and
pretend to call the boss, hoping it will seem like it is not possible to give a
small concession. In this situation, it is best to wait.

Trading information

The other side seeks information about your business activities and plans
while asking about theirs. Allow the counterparties to lead the conversation
if they want to. When asked, you should provide information as long as it is
not sensitive or secret. The ideas about trading information are included in
more detail in the section on reciprocity.
What information is too sensitive to share? That depends on your
opinion. You may decide that it is OK to reveal all details (FOTE or Full
Open and Truthful Exchange) or that some details should be kept secret,
such as your reserve price (POTE or Partial Open and Truthful Exchange).

Silence

With some individuals, and even some cultures, silence feels uncomfortable
at the negotiating table. If one side feels uncomfortable with silence, it may
be possible to get a concession simply by looking thoughtful. Example:
“How about $10,000?” (no answer) “Well, then $9,000?” In this example,
the silent party does not need to give a concession in order to get a
concession. While it may be effective, it is not a helpful tactic for building
relationships and trust.
Experienced negotiators will not drop their price; instead, they will wait
or ask questions in order to understand what the silent party can agree to.

FIGURE 7.1 The silent rejection tactic

Stalling

It is quite common to create a little extra time for your own thinking during
a negotiation by asking for details or explanations that might not be really
necessary. This kind of delay is called stalling. Generally negotiators
understand and are comfortable with a little bit of stalling as one party or
another thinks and plans. However, it is not considered acceptable to
intentionally expend large amounts of time hoping to pressure another party
into acting unwisely at the last moment.
 If the counterparty stalls a lot, you should be prepared for them to give
you sudden, complex offers shortly before the deadline for finishing the
negotiation. You should be prepared to say no, to extend your negotiating
time and to use your BATNA. You can use the time in which the other side
is stalling to learn about them through questioning and other research
methods. As time runs out, you should resist the pressure to agree. Instead,
it may be possible to ask to work with another negotiator, possibly even
moving up the hierarchy to work with the boss of the negotiator.
Another response is to move your schedule forward and inform the other
team that you have very little time remaining, thus putting the same
pressure on them. This is a hardball approach and not advised, just as
extreme stalling is not advised. Last-minute decisions and agreements may
contain significant errors and result in agreements that are poor for one or
all parties, or that lead to expensive renegotiation or collapse.
In the past, US businesses, seeking to quickly close a deal, have been
easy victims of stalling and have agreed to unfavorable terms shortly before
leaving to the airport. However, smart US businesses are ready to quickly
change partners or to allow much extra time for concluding negotiations.
If you choose to stall, you should be aware that the other side might use
its BATNA and break off negotiations.

Last-minute demands

Some negotiators will make a request for a concession very late in the
process, even as documents are prepared for signing. This tactic intends to
catch the other side off guard or off balance, with the hope of getting an
easy concession. The best reaction is not to agree immediately, but instead
to make it clear that you have the time and willingness to renegotiate the
entire package and all the related linked issues. Some negotiators will ask
for a concession even after signing. The best reaction is not to agree
immediately, but instead to make it clear that you have the time and
willingness to renegotiate the entire package and all the related linked
issues. You may, however, grant the extra concession. Why? Because it
could help to build a relationship. In some regions, including Japan, a
negotiation party may expect to give or expect to request “a little” in the
comfortable belief that business partners can do a little extra if they are
serious about the relationship.

Playing the hard card first

Some negotiators like to start with an aggressive stance even though they
plan to be flexible and even soft during the negotiations. This is sometimes
called playing the hard card. This tactic is a kind of impression management
(see previous discussion in Chapter 2).
Why would a negotiator do this? Write what you think are the advantages of playing the hard
card first.

What kind of negotiators would be most likely to play the hard card when
starting negotiations?

1. Male 6. From a little known company

2. Female 7. From a dominant culture
3. Experienced 8. From a subordinate culture
4. Inexperienced 9. Respected
5. From a well known company 10. With no reputation

If you chose the even numbered selections from the previous list, you
would usually be right. These negotiators may feel it necessary to start with
an aggressive approach because of their own insecurity. Handle these
individuals by listening carefully and working through their concerns while
showing respect for them and their offers. If a person fitting the odd
numbered selections plays the hard card first, you may be wise to consider
finding a different partner, whether in that company or in a competitor
company. Switching to a person who uses more constructive and synergistic
approaches may lead to improved mutual gains.

TABLE 7.1 Playing the hard card first

Party A: First of all, I want to let you

Comment: Party A tries to show
know that we have cancelled several
that they are tough negotiators.
contracts similar to your proposal
They hope to decrease Party B’s
because they were not profitable
expectations about results.
enough.
Possible response from Party B: I see.
Here, Party B seems to be
Maybe we should improve our offer to
impacted by this approach.
accommodate you.
Possible response from Party B: I see. In this response, Party B shows
Well, we have a great product and offer, no impact and changes the focus
so let’s talk about how we are better than of the aggressive opening to good
those other companies. qualities of the offer.

Why might a negotiator not play the hard card first? Write what you think are the disadvantages
of playing the hard card first.

Negative or aggressive starts

A very aggressive or negative start may immediately lead to a similar

negative response. As we know from the prisoner’s dilemma game
mentioned in Chapter 2, it is most common (and wise) to punish aggressive
or other negative behavior by returning the same. The most likely series of
events are shown in Figure 7.2.
 In short, a negative move provides no incentive for a positive response.
Therefore, it is generally best to avoid negative behavior throughout a
negotiation.

Retracting an offer

Many people consider it unreasonable or even unethical to retract an offer

after making it. But is it so bad? An offer is not an agreement. And a whole
agreement is not finished until all the parts have been completed and
formalized. On the other hand, if people generally do not expect offers to be
retracted, someone who does it regularly may be socially ill – pathological.
However, behaviors that seem very wrong among one group of people may
seem quite acceptable in another group.
How would you feel if an offer was retracted a day or two after having agreed to it during
negotiations?
FIGURE 7.2 Start sour or sweet?

One person famous for retracting offers and other aggressive negotiation
tactics was Steve Jobs, founder and sometime CEO of Apple. A Sony
executive commenting in W. Isaacson’s 2011 biography of Steve Jobs had
this to say about Jobs:
‘“In classic Steve fashion, he would agree to something, but it would never happen,” said Lack.
“He would set you up and then pull it off the table. He’s pathological, which can be useful in
negotiations.”
(Isaacson, 2011, p. 401)

Job’s success at business negotiation and his belligerent behavior are well
known. Does that make it a best practice for Apple? For all companies?
Write your thoughts here:
____________________________________________________________
 What are some reasons not to retract an offer after it has been made?

What are some reasons to retract an offer after it has been made?

The result for Jobs and Sony was that they did agree to a deal, but only
after much time and with fewer of the joint benefits than they might have
received. Jobs’ behavior alienated and upset his counterparty. The
negotiations almost broke down. If another party had revealed similar
technology, Apple might have lost the chance to get the Sony music.

Disinformation stratagem

The following quote is from Howard Raiffa’s 2002 book on negotiation. He

describes a disinformation tactic that he punished, but which is of course in
use in the real world:
One student, let me call him X, playing against Y, excused himself to go to the bathroom and left
behind his written confidential instructions. Y couldn’t resist noticing X’s confidential RV and
took advantage of X. Or so Y thought. Y did not know that X … put in a false number. Y lost
mightily and X was triumphant. Y complained to the instructor of the unfair practices of X. The
instructor docked points from both.
(Raiffa, 2002, p. 271)

Of course, in a real world negotiation, there is no professor to enforce

fairness or ethical behavior. Clearly it is ethically unacceptable to trick a
business negotiation partner. In fact, if the result is very bad for one side,
they may be able in some legal systems to annul the resulting contract
legally if the trick is discovered. Even if there is no court proceeding,
discovery of the tactic will probably damage the reputation of the party that
managed the trickery. In addition, there may be the cost of lost time and
money, as a contract broken or terminated must be replaced using other
partners.

Ultimatums

An ultimatum is an aggressive offer usually like this one: “Accept the offer
by 1 PM, or we are finished.” An ultimatum usually damages the
relationship and the negotiations in general. Avoid making ultimatums.
Avoid reacting quickly to ultimatums.

Case: EuroDisney

In a widely discussed business case, Disney started an amusement

park in France near Paris. The park had a disappointing start with low
visitors and numerous difficulties. After some years, Disney found
itself in severe financial trouble. They needed to renegotiate and
restructure their debt burden, but the banks were not interested in
negotiating.
Boldly, Disney informed the banks that they would have to
negotiate or Disney would default and abandon the park, leaving the
banks with a huge, unpaid, expensive and nearly useless property. The
banks came to the table. Eventually all sides agreed to easier
repayment terms, the Disney operation is still in business and the bank
loans were paid.

Based on the case study, was Disney’s ultimatum successful?

 What did Disney’s ultimatum demand?

Explain why it was or was not an acceptable hardball tactic.

How to manage an ultimatum

If another party gives you an ultimatum, please follow these guidelines:

do not react quickly, even though there is pressure to react quickly;

play for a little time (see Chapter 6 for useful phrases);
coolly compare the ultimatum to your BATNA;
… walk away from the negotiation if necessary.

Play for longer time:

propose value creating ideas;

make counteroffers;
link existing ideas and goals to the ultimatum.

Trashing the product (buyer tactic)

Sometimes a buyer will attack the product that is at the heart of a sale. The
purpose is to show that the buyer is only barely willing to accept the
product and therefore the price must come down to their estimation. The
process of trashing the product can be quite long and thorough, particularly
in negotiations with Chinese teams. An individual famous for starting
negotiations with extensive trashing of the other parties’ products was Steve
Jobs, the founder and CEO of Apple.
Less experienced teams, especially from Western cultures, have found
themselves shocked, upset, bored and irritated after listening to this process
for hours or days. However, the best response to this process is to quietly
listen, learn if possible how to better satisfy the customer and not give more
than a symbolic concession. Therefore, you should have some symbolic
concession prepared in advance. The worst way to react is to get upset or
lower the price significantly.

Detecting lies and reacting to lies

It is generally wise to check for lies and deception, though without showing
mistrust for the other parties. Cellich and Jain (2004) suggest following
these three strategies to catch a lie.

1. Test the consistency of the other party’s statements by comparing

statements and by asking questions to confirm accurate
information. This process is also called the “inconsistency trap”.
However, an inconsistent negotiator may not be trying to deceive.
The negotiator may not be aware of the inconsistency – in such
cases the “inconsistency trap” can help to clarify logical errors to
the benefit of all parties.
2. Communicate in several ways (speaking, writing, email, fax, etc.)
because it is harder to lie consistently in numerous formats. When
speaking face-to-face, look for non-verbal cues such as gestures
and eye and facial movements that reveal nervousness and possible
deception.
3. Ask for tangible proof of issues that are in question (regulations,
legal agreements, previous contracts).

If you think the other party is lying, you can follow one of these
strategies.

React with silence until the other side clarifies the issues (not
helpful if the other party does not understand why you are silent).
 Express concern politely about the possible lie and wait for the other
party to clarify it suitably.
Review your BATNA and decide if you should end the negotiation –
it is unwise to work with a party that might lie.
Increase your efforts to learn about the other party and their
interests.

Why you should not lie

You should not lie because:

if discovered, the relationship will be badly damaged;

a contract made based on a lie (or other fraud) can be voided in
many legal systems including UNIDROIT, an international contract
law accepted and enforced in many countries. After voiding the
contract due to a mistake based
on a lie, the liar may have to pay damages according to UNIDROIT
(Art.
2(2), UNIDROIT Principles, 2010);
• your reputation among other businesses may decline.

What to do if the other party …

… wants a price too high or low for you: ask questions about the
specific points they expect. Break down the costs item by item. See
if you can add or remove expensive or unnecessary items.
… delivers a final demand or request (an ultimatum) that you dislike
such as “this is my last offer”: don’t accept or reject it immediately.
Gain time and information by asking more detailed questions about
the offer. If this is a fixed BATNA position, you may have to choose
to agree or to leave the negotiation. If it is not a fixed point, the
other side will eventually allow some concessions or cooperation.
 … offers a great price at the beginning: do not immediately accept
it, even if it is good. Learn more about it so that you can either
improve the price or develop a more complex and valuable business
relationship with the other party.
… uses a “sad song” to play on emotions: this tactic makes a
heartfelt request for significant concessions. In North America or
Europe, a sad song might come at the beginning or middle of
negotiations – pay no attention to it. In some parts of the world, the
sad song may require some sympathetic reaction including perhaps
minor concessions. However, do not give large concessions for it. In
Japan this tactic (called naniwabushi) is sometimes used
successfully against non-Japanese companies that do not expect or
understand it, though research done for this textbook suggests it is
less common than in the past. Ignoring the sad song and giving
nothing may damage the relationship – it may be part of cementing
the relationship for some organizations in some cultures.

Discuss with your partners: which of the previous tactics are hardball?
Which are soft? Medium? Do you think people from different countries
might have different answers?

Avoiding unethical negotiation tactics

Please review this useful article by Roger Dawson on identifying and

avoiding unethical tactics:
http://reiclub.com/articles/real%20estate%20negotiating.

Defense against the dark arts: age and experience

With time, you will learn to quickly identify aggressive tactics as they
happen. You will simply become more sensitive to tactics. When you
identify the tactic, you will know how best to react. Generally, the best
reactions combine further communication and managing the relationship.
But do not change your position because of the tactic – only change your
position based on negotiated concessions and joint problem solving.
In many cases, your most powerful defense against aggressive
negotiation tactics will be time. The more time you have, the more flexibly,
carefully and constructively you can react during the negotiation. Make it
clear to all parties (your boss, the other negotiation parties, your co-workers
and other important stakeholders) that you need and will use as much time
as necessary to get a result that maximizes gains for all sides.

Section summary

Use all tactics carefully – these are essentially not frank negotiation
approaches. Avoid hardball negotiation tactics and the people who use
them.
The key defense against all negative tactics is to keep a cool head
and work patiently forward based on the mutual interests of the
parties.

Case: The very emotional client

Real life is a complicated and messy thing. Your plans may not last long
after making contact with the other sides in a negotiation. Flexibility is the
answer! In the following case, we will see how a negotiation party acted
and reacted to the behavior of another party at the table. This example, from
the experience of a construction industry manager in Alberta, Canada,
shows how one party reconsidered and redesigned its goals, strategy and
tactics as the interaction progressed. At the same time, another party in the
negotiation redefined their role radically. The third party in the negotiation
did not react flexibly and had to collapse in the end.

Background

This project was difficult from the beginning. It was a hard-bid, small
TI project in a shopping mall with a very short schedule. We (the
construction company) ended up with some poor suppliers and had to
work long hours and nights to meet the schedule. The client also made
some changes during the course of our work. With ten days to go, we
realized we were going to miss the deadline by four days. Our
management and consulting team were made aware of this, and the
client planned accordingly. Meanwhile, the millworker was put on
notice and was to be held accountable for costs incurred as he was at
fault for the delays.

Issue

After the client moved in, he made us aware that he was going to
charge us for lost earnings for the four days. We disagreed with him,
as there was no penalty clause in the contract and he had made the
changes that delayed the project. Because we worked with the
consultant a lot (high importance of relationship) and the millworker
was responsible for the costs, we wanted to try to negotiate a
compromise. We asked the client for a written claim of damages;
however, the client avoided us and delayed providing the costs.
Normally, we would have placed a lien against the project, but we
couldn’t due to the fact that it was in a mall. After 46 days, we
received a claim from the client in the amount exactly equal to the
holdback fee (10 percent of the agreed project fee), including notice
that he had no intention of releasing the holdback.

First negotiation

Our walk-away was 3 percent, as this is what the millworker offered

us to make this problem go away. So this was offered to the client to
avoid further negotiations or legal options. It was rejected. The client
had no interest in budging on his Win/Lose perspective. Our
compromise strategy changed to a competition tactic due to the
negotiation style of the client (“competition”).

Our position

Our new target was zero percent loss, as we were quite protected by
the contract. We were aware that the client and his agent (the
consultant) did not communicate well, and that the consultant was
sloppy at reviewing paperwork.

Second negotiation

The client started the meeting very emotionally, stating that by

opening four days late, we ruined his reputation and cost him
exorbitant profit. Our team was well prepared and did not get personal
or emotional. Our first question was “Please provide documentation
supporting your claim.” He refused, stating that he didn’t have to
provide this because his gut told him this was the correct amount, and
he came to this number from all his years of experience. We disagreed
and explained that he needed to prove his number or we would move
to legal options, as his “gut” would not be supported by the court (we
were confident to use a threat as our tactic, because our
documentation exceeded his). He got very frustrated and aggressive.
The consultant called for a quick break to advise their client. After the
break, the client agreed to provide supporting documentation.
We thanked him for changing his position. At that point, we asked
the client why we were meeting – from our review of all
documentation, we were not late but actually one month early. This
stopped all conversation for a minute or so. The consultant spoke up,
asking us to clarify this because we missed the contract date by four
days. We responded by pointing out that there were numerous changes
to the project, we added time to each change order and the consultant
signed them. There was conversation between the consultant and the
client. They produced four approved change orders, totaling a three-
day extension. The client then argued that all of his losses happened
on the fourth day, and that if we had completed the project within the
three days, he would not be looking for damages.
We then reminded the client that we had another change order
approved that added 30 days to the contract. This caused lots of
commotion as the consultant could not find the change order. The PM
produced the signed paperwork proving our claim. The client was
raging at us and his consultant, specifically when he realized that the
change order was approved a couple of days before the original
contract completion date. We responded by stating that contract law
supported us, and we expected to be paid in full. The client sat in his
chair with a very defeated look on his face, and the consultant called
for a break. After the break, the consultant stated that they were
willing to negotiate and accept our original offer of 3 percent. We
declined and stated that we would seek an alternate dispute resolution
 (ADR) or legal means to collect all outstanding monies. We agreed to
park the issue and end the meeting.
We soon received a call from the consultant stating that the client
agreed with our position, mostly. It was made clear that the client
needed a token to release payment, or he would find other ways to
drag out payment including the legitimacy of the approved change
orders. Satisfied that a small token would end this and we would
receive payment, we offered 1 percent to the client and it was
accepted. We then got an agreement with the millworker to cover this
cost, which he was glad to do as it was less than his first offer (3
percent). We were quickly paid by the client, just 24 hours later.
Source: Used with permission, Penn, 2013.

Questions for discussion

Was the negotiator able to strengthen their BATNA against the Emotional
Client?

What role did the Consultant play in this negotiation?

What were some of the errors of the Emotional Client?

How well did the negotiator know the Consultant?

FIGURE 7.3 Flow chart of the emotional client

TABLE 7.2 Interests table for the case of the emotional client

Party Issue 1 Issue 2 Issue 3

Client
Constructor
Consultant

TABLE 7.3 Stakeholder analysis table for the case of the emotional client
 In Figure 7.4, we can see that the first round of the negotiation put the
client and consultant in a position against the constructor. As the
negotiation moved into the second round, the consultant stopped supporting
the client and moved to a position where he could support both sides
somewhat in order to mediate the conflict toward a successful end. The
consultant showed insight and flexibility in changing position.

FIGURE 7.4 How the roles changed

Persuasion approaches

Negotiators can use several approaches to influence the thinking of the

other sides. Li and Sadler (2011) summarize nine varieties of influence
strategies, several of which we will discuss here.

Legitimating

This approach may be effective with parties that place high importance on
relative rank and prestige of individuals and organizations. The legitimating
approach links proposals to respected people and institutions to increase the
respect for the proposal. For example, the proposing side may point out that
the proposal is similar to the work of a famous person familiar to the other
parties. Suggesting that your proposal has been accepted in the past by a
business leader such as Bill Gates might influence the other side to accept
it. To be effective, the choice of legitimating person or organization must
match well with the knowledge and thinking of the other parties.

Rational persuasion

This approach relies on thinking that seems logical and sensible to the other
parties. Presenting data about industry standards or the expectations of
people in a certain region may help a party agree to a proposal that is in line
with that data. One example could be offering salaries that are 5 percent
better than the local standard instead of paying each individual according to
their specific merits. This approach may be most effective with negotiators
who are rational in style as described in Chapter 9.

Inspirational appeals

This approach relies on transmitting emotional involvement and

commitment to the other parties. Showing how a proposal would benefit a
large number of people or a specific group might make the proposal more
appealing. For example, a member of an ethnic minority may be swayed by
a proposal that benefits other members of that community. This approach
may be effective with parties that have a strong sense of community and
collective action (see the comment on guanxi in Chapter 6).

Ingratiation

This approach is a way to build relationships; however, it is insincere.

Flattery may be effective in the short term, however long term relationships
are best when built on mutual success and satisfaction. Ingratiation is a
process to urge the other sides into positive thinking before asking for high
demands that they might not otherwise accept.

Strategic exchange

This approach refers back to previous interactions when one side has made
concessions and would now like the other parties to make concessions. This
persuasive tactic can only work where there is a strong relationship that has
survived several transactions and will probably continue to survive for
many more. If the party receiving the strategic exchange proposal does not
foresee a long-term positive relationship, it will have no motivation to
agree.
Other approaches described by Li and Sadler include coercive threats
(discussed in Chapter 6 of this textbook), as well as jointly consulting to
solve problems (discussed in several places in this textbook).

Section summary

Use various approaches to persuasion depending on the nature of the

situation and what you know about the counterparty.
Humor in the negotiation

Appropriate humor has at least three useful functions in a negotiation:

to decrease tension;
to build rapport;
to devalue a proposal.

In a negotiation, you can use humor carefully to relax the groups. At the
same time, humor builds rapport and positive feeling among the negotiating
parties and can be used systematically to manage the relationship (Vuorela,
2005). Humor therefore has a similar positive effect and value as small talk.
Humor requires the participation of all parties to be successful, so it is
fundamentally cooperative (Vuorela, 2005). Any jokes should be easy to
understand, simple and only gently distracting. Jokes that distract too much
from the atmosphere and the topic will seem unprofessional and will not
build rapport.

Devaluing a proposal

Read the example and give your reaction to the question:

His negotiation partner had suggested a much higher dollar allocation for sand. The first
negotiator responded:
“Yeah, we need to get some sand, but we’re not trying to build Malibu Beach here, man.”
(Halpern and McLean, 1993, p. 62)

What do you think the second negotiator felt when hearing this response?

Used this way, humor is a tactic that can make a proposal you want to
reject seem bad to all parties. Careful and gentle use of humor like this can
make a proposal seem weak without damaging the relationship. Slightly
stronger use of such humor may seem mocking and will probably damage
the relationship. Here is an example of devaluing humor and the result as
reported in an academic journal.
As an example, one of the male participants did not want to spend a lot of
money on sand for ground cover. His negotiation partner had suggested a
much higher dollar allocation for sand. The first negotiator responded:
“Yeah, we need to get some sand, but we’re not trying to build Malibu
Beach here, man.”
With this joke, he made the other negotiator’s request for more sand look
ridiculous.
They ordered less sand.
Halpern and McLean, 1993, p. 62.

Inappropriate humor will damage the relationship, and the joke-making

side can lose status and seem foolish. Generally speaking, inappropriate
humor includes complicated jokes (including satiric and ironic content),
jokes on taboo or sensitive subjects and anything that could seem insulting.
Of course, please do not tell jokes as if a comedian had joined the
negotiating team!

Revealing issues through humor

In her work on humor in negotiation, Joan Emerson (1969) found that a

joking reference to a difficult or even taboo problem could help identify and
address an issue to other parties. Because an issue might be unacceptable in
a serious conversation, it might be acceptable in a joking context. That in
turn could allow the topic to be handled seriously.
Example of poorly executed humor:

Party A: You know, In this example Party B has not even identified the
this reminds me of statement as a joke. This means that Party A has tried
the time I was in a the joke at the wrong time or has not introduced it
bar and doctor and a properly. As a result, Party B may consider the other
horse walked in. person to be foolish or wasteful of time.
Party B: A horse?
Party A: Yeah, and
the horse says,
“Give me a beer and
a gallon of water.”
Party: Who said
that?
Party A: Well, it is a
joke, you see …
Party B: Oh. Let’s
consider the cost in
your proposal …

Example of well executed humor to decrease tension:

Reprinted with permission, Vuorela, 2005, p. 112

Vuorela holds that this humor-based approach strengthens feelings of

joint purpose in some negotiations.
Section summary

Humor is a useful tool to build relationships and send signals about

offers. However, it must be used carefully with sensitivity toward
language skills and face saving issues.

Ethics

Do no harm

Your negotiating should always focus on building value for your company
and your projects. At the same time, you should actively try to not hurt the
other side when sharing existing or future value. Actively means that you
review the agreements and the processes before completing the
negotiations. This is quite different than passively allowing the other parties
to make mistakes that are part of (or not part of) the business being
negotiated.
Q: Why should I spend the time and effort to check that the other side is
OK?
A: Because being part of a negotiation with a bad outcome for the
counterparties will directly harm them and indirectly harm you. In the same
way that you would help a person avoid an accident on the street, as a
businessperson, you are expected to help others avoid damaging errors.
Of course, if your negotiating partner comes to harm, others may suspect
you of harming them and the result may be damage to your reputation.
Whether you are or are not guilty of harming the other party, damage to
your reputation may occur – therefore, it is best for you to actively prevent
damage to your reputation by helping your negotiation partners avoid
damaging errors.
Additionally, if your negotiating results are too hard for the other parties
to manage, they may:

go out of business;
feel forced to break an agreement;
refuse to do business with you in the future;
try to renegotiate the agreement.

Any of these results means additional cost and lost time to you.

Example

Company A managed a hard bargain against company B to supply memory

chips. Company B agreed to a very low price, just a little more than their
costs. Suddenly, a new regulation caused one of their inputs to become
more expensive, and they were forced into bankruptcy. Company A
suddenly found itself with no supplier, as well as an urgent need to find a
new partner and make a new agreement. In the months spent searching and
negotiating, they lost market share, income and the faith of their customers.

Help others build value

You should help the other parties in a negotiation build value in activities
you are not interested in.
Q: Why should I help some company make money when it does not
include my company, especially if it is not even my business area?
A1: Because you will benefit from the improved relationship between the two companies.
A2: Directing the other parties towards good business ideas will not prevent you from getting
full value out of the negotiations.
 A3: You may be able to build a more robust agreement that will not collapse or need to be
renegotiated if there is an economic downturn or if unexpected problems arise. That could save
you money and time.

Case: Ethics makes money for Honest Tea and CapriSun

Honest Tea, a drinks maker, searched for a way to reuse the packages from
their kids’ drinks. They found none. Finally they found a recycler that could
use the drink package (a pouch) in some fabrics … but what to make? In
2007, Terracycle suggested bags and kids’ backpacks. The backpacks carry
the name of the recycler and Honest Tea (good for corporate image), but
Honest Tea takes no profit from the bags. The recycler, however, is able to
grow a reliable business that serves Honest Tea. See www.terracycle.net for
more products.

FIGURE 7.5 Honest Tea, Capri Sun, and Terracycle joint recycling solution
Source: Image used with permission of Terracycle.

This ethical approach also benefitted CapriSun, a maker of drinks for

kids and competitor of Honest Tea. CapriSun joined the Terracycle pouch
recycling program in 2008. The previous case supports the idea that ethics
can contribute to the strength of your company. Ethical business behavior is
not just a cost.
Be ethical, but get all the value you can

Your ethical actions neither prevent you from getting more value than the
other side nor from taking value that the other side does not recognize, seek
or care about.

Example

Let’s remember Tanba Agro and Hyogo Cake. The cake factory finally
agreed to buy the eggs. Consider their next conversation.

FIGURE 7.6 Ethics as a net gain

TABLE 7.4 Ethics in action

Dialog Comment

Tanba Agro: By the way, do you want Tanba can use the eggs as a source
us to take away the eggshells? of calcium for the chickens. They
Hyogo Cake: What? We usually will save money by taking the
throw them out. eggshells.
They have agreed to get a valuable
item (eggshells) from Hyogo for
free.
Dialog Comment

Tanba Agro:That is 100kg of trash

everyday. We can pick them up a little
cheaper than the cost of the trash
service.
Hyogo Cake: OK!
In your opinion, is there an ethical problem in the previous conversation or
not?

Business negotiator’s oath of ethics

I will not actively harm another person or company with the process or
results of negotiating. I will actively check that the other parties in a
negotiation are not harmed by their or my actions or agreements.

Section summary

Be sure not to harm other companies, organizations or people

intentionally or unintentionally as a result of your negotiating.

Who should you not negotiate with?

There are some companies and organizations you should avoid – they may
cheat, even if the agreement is robust. Use your BATNA, because deals
with them are bad or very risky. Learn about organizations you should
avoid by reading and by talking to people with more experience. Try to get
positive references about an organization before starting negotiations.
Generally avoid companies that:

1. have a reputation for very aggressive agreements and hardball

tactics;

a. Some big car companies, for example, are excessively

demanding with suppliers regarding price, delivery
schedule, response time, exclusivity, etc.
b. Some large retailers force prices down to the level of
minimal profit, making it hard for the supplier to survive.

2. have a history of fraud or legal problems;

a. Some companies have transferred intellectual property or

secret business information to other companies or
governments. Don’t give those organizations the
opportunity to sell your secrets! Even working with
organizations like that may damage your reputation.
b. Some companies have many ongoing disagreements about
contracts. They may frequently be in court, arbitration or
in settlement actions. Do research to find partners who
have a history of completing contracts with few legal
disputes.
c. Some countries regularly rule against foreign companies
when there is a problem – avoid doing business with
organizations in those countries.

3. engage in unethical/illegal behaviors.

 a. Some companies mistreat their workers in their home
country or in other countries.
b. Some companies have frequently made low quality or
unsafe products.
c. Some companies may want to negotiate with competitors
to set prices within the industry (see news article
http://www.nytimes.com/2013/09/27/business/9-auto-
parts-makers-plead-guilty-to-fixing-prices.html?
ref=business).

If you must negotiate with a company of this sort, be sure to have a

strong BATNA. It may be better to use the BATNA before you start talking!
Why do the bad guys continue to conduct business and find partners?
After decades of bad experiences, we would expect whole countries, not to
mention companies, to be shunned. Yet new companies are attracted to
them despite their bad reputation and record. The answers to this question
seem to fall into these categories:

1. Extremely appealing terms are offered. Inexperienced

businesspeople may be strongly attracted by the chance to grow
profit margins. However, more experienced negotiators will
recognize that the offer can seem very appealing, but the other side
may never pay out fully.
2. Many businesses think they are smart enough not to get tricked –
“It won’t happen to us!”
3. Businesses may have no alternative due to a weak BATNA or
monopoly situation.
4. Social/political pressure requires dealing with a bad partner, at a
loss, in order to gain other profitable opportunities.

Section summary
Avoid negotiations (and close partnerships) with organizations that
could hurt your business or your reputation.
8
Win at Home Before You Go

Educating the boss and coworkers

Teach your coworkers, superiors and staff about negotiation so they can
help you, and additionally so they can understand your results.

Proper support

You know that a negotiator needs time and information to prepare for a
negotiation. The people who work with you may not know that. They may
not understand how much information you need to have. They may not
understand why you need to think the way your negotiation counterparties
think. Without understanding and support at home, you may not get the
support necessary to be successful.
After a negotiation, you will always need to explain why the deal you got
was good. You might explain to your boss, your coworkers, the board of
directors or others. If they do not understand negotiation, they may not
understand your results. Explain key concepts to them.

Questions
What points and what terminology should you teach your coworkers and
other management staff regarding negotiation?
List some points that you feel are necessary, but not too difficult to teach.

1._____________ 5._____________
2._____________ 6._____________
3._____________ 7._____________
4._____________ 8._____________

Section summary
Educate your boss and coworkers to gain their support and understanding before and after the
negotiation. You will not improve the long-term success of your company if you are the only
good negotiator in it!

Back table negotiations

In your working life, negotiation tasks will generally start with

requirements from your boss. A simplified negotiation task might be,
“Don’t spend more than $X, get these concessions, and finish it by Friday
next week.” Notice that this sort of task assignment is lacking even enough
information to complete the HIT list discussed in Chapter 4.
As a negotiator, you have to understand and satisfy your back table. In
the end, you will have to explain to that person or group why you agreed to
the deal you got. You can also indirectly communicate to the back table of
other parties. An Austrian business owner interviewed for this book said he
always gave economic reasons for his offers that the other party could take
to their boss. A Japanese business owner in Tokyo described in an interview
how she explains advantages for the other side based on her knowledge of
their bosses and companies.
Case: Fuji Seiko activity

Consider this case regarding Fuji Seiko.

You have offered the Fuji Seiko negotiation team the following
terms, but you know they have to report the offers to headquarters for
approval. Your product is a little better than your competitors, but a
little more expensive. How would you help the Fuji Seiko team win
the argument with their bosses?
Terms:

three partial payments instead of one lump sum;

delivery one week earlier;
adjustment of color to match the Fuji Seiko product.

Example argument:
Let your CFO know that we will accept three payments with no
price increase – it may help with cash flow.
Your arguments:

Write one or two reasons why you should consider the back tables of other parties in a
negotiation.
The back back table

Behind the back table, you may find the back back table, a spooky space
inhabited by ghosts. These ghosts are people or organizations that you
cannot communicate with, but that may have influence regarding your
choice of outcomes or your negotiation process. Examples of these ghosts
include retired or even deceased coworkers, company founders, idealized
famous personalities, political figures and mythic business leaders.
As an example, the authors are aware of a Tokyo company that cannot
divest itself of an underperforming US bank because its acquisition was by
an executive manager whose importance in the company was closely tied to
it. The executive has been retired for 15 years, yet the current directors will
not even discuss selling the bank because it might insult that retired person.
Even though that person no longer participates in the company, he blocks
the discussion to restructure. His ghost at the table blocks any movement on
the issue.
Ghosts such as the one described can:

block topic areas from discussion (impose taboos);

block outcomes even if they represent practical results;
create a cognitive bias against logical problem solving.

Section summary

Pay careful attention to your back table in order to move smoothly

from talks to agreements. The back table must be satisfied with your
negotiation results before a proper agreement can be made.
Problem solving techniques

Many experienced negotiators are good at problem solving. They think

creatively, react flexibly, and they know useful tools and techniques. Some
of these tools and an overall process are presented in this section.
An overall process for problem solving might start with a high-level
analysis of people and facts, describe problems, identify root causes of
problems and find possible solutions for discussion. The overall process
should begin long before the negotiation parties meet. Later, however, the
process should include all parties – doing so will boost communication and
problem-solving power. The following sequence of steps is a good way to
start. With some practice and experience, you might find a sequence of
steps you prefer more.

Ishikawa diagram (fishbone)

FIGURE 8.1 Sequence of analyses for problem solving

TABLE 8.1 Tools for problem solving

Step Tool Purpose

Step Tool Purpose

Establish the groups and individuals involved directly or

Stakeholder indirectly, their level of power (the ability to influence
1
analysis decisions) and their needs and goals. See Appendix VI
for further explanation.
Ishikawa
2 diagram Roughly sketch the issues contributing to a problem.
(fishbone)
Why-why Determine causes and ultimately root causes of each
3
(five whys) issue.
Identify what to do and achieve in order to solve the
4 What
problem.
5 How Propose how to solve each problem.
Creative Expand the discussion from single problems to integrate
6
solutions related problems and solutions.

An Ishikawa diagram is used to identify and categorize issues

contributing to a problem. A useful diagram can be made quickly.
Generally, these start with the categories shown in Figure 8.2: people,
policies, equipment and environment. The problem itself is written into the
head of the fish (it is often called a fishbone diagram).
Figure 8.3 for a high speed rail line, based on a student’s work, uses the
four basic categories to find causes of complaints about quality of life by
residents near the rail line.
The four categories, people, policies, equipment and environment, in the
previous examples are just suggestions. They are a good starting point
because they cover common problem areas. However, when working on a
negotiation problem, start with these four but also replace and supplement
them with other categories that are suitable for the problem you are working
on.
Why-why (five whys)

After using the Ishikawa fishbone to identify the contributing problems,

select one for better understanding. Drill down into the contributing
problem to find a root cause using the “five whys” approach developed by
Toyota Motor Corporation.
In the following example, the starting problem is the long wait that newly
recruited staff experience before entering the standard training program –
up to six months. Each time the why question has more than one answer,
the diagram branches. Each of these answers may continue or branch until
arriving at a root cause.
Notice that different branches may come to the same answers and root
causes. Some branches finish sooner than others – so how can we know
when to stop asking why? Analysts usually follow these guidelines:

circular (points you back to a previous why in the same branch);

no longer logically related to the original question;

FIGURE 8.2 Ishikawa diagram, basic

 FIGURE 8.3 Ishikawa diagram, high-speed train line

outside the range of the problem/organization;

natural limits of physics.

Reviewing Figure 8.4 carefully, we can see that a lack of established

procedures causes poor communication, which in turn causes the starting
problem. Other root causes contribute as well. Figure 8.4 has provided a
starting point, in fact several starting points, for fixing the original problem.
Looking at Figure 8.4, we can see that some answers are the same, but on
different branches. It is common for different problems in the middle of the
diagram to have the same intermediate cause. So a root cause might appear
in more than one place. However, branches with the same intermediate
causes should end with the same root cause or be explained in a note. The
previous example is corrected in Figure 8.5.
Figure 8.5 now clearly shows the root causes, no matter where they
appear, in white boxes. Some of the root causes appear to be the same,
while others seem to have ended without a root cause (note the items in
patterned boxes). An improved version appears as Figure 8.6, showing root
causes including causes that merge at the ends of branches.
What/how

Now that the why-why has been completed with clear root causes, it is
possible to add a What column at the edge of the why-why that shows what
needs to be achieved.
The What column is an easy way to communicate the obvious needs for
correcting the root causes of the starting problem. Additionally, Figure 8.7
communicates that some of the root causes require the same action. For ten
root causes, we have eight fixes to undertake. And some that seemed the
same on the surface need different fixes.

FIGURE 8.4 Five whys example

Source: Used with permission, Lavoie, 2013.

The next step is to add a How column at the edge after the what column
to list how to achieve those items. This How column does not need to be
detailed. It is a starting point for serious planning and joint work with the
various partners in the negotiation.
Now that a rough set of problems and solutions exists, you can join
forces with the other negotiation parties to work out the details while
creating and claiming value in a well-informed process.

Creative solutions

During the first five steps in the process this textbook proposes, your team
might work alone or with the negotiation partners. If there is an established,
comfortable relationship, all steps can be done jointly. If not, the last step of
the problem-solving sequence is the one where the parties must
unavoidably join forces. But some might say, “Better to work on the
solutions alone and be sure to get the best ones for yourself! Don’t let the
other parties join!”
What do you think? Please write down the advantages and disadvantages
of working out the solutions without the negotiation counterparties.
FIGURE 8.5 Five whys: roots not clear
FIGURE 8.6 Five whys: roots clear
FIGURE 8.7 From why to what

FIGURE 8.8 From what to how

Advantages of working on solutions Disadvantages of working on
alone solutions alone

_____________ _____________
_____________ _____________
_____________ _____________

If you consider the potential for improved ideas as well as the value of
building satisfaction and relationships, and the possibility for building those
things through frequent interaction over problem solving, you may see good
reasons for sharing the solution-creating step and even most of the earlier
steps.

Section summary

Use these techniques (and other approaches) to solve problems both

before the negotiation and during with the participation of all other
sides.

War gaming as preparation

This textbook includes real and fictitious cases to use in learning how to
prepare and execute negotiations. Some of the cases appear as games and
role-playing opportunities. Why stop playing the negotiation game at the
end of this course? In your future negotiations, the preparation team can
take the roles of the counterparties in addition to their own real roles. As
your team members represent the other sides, you will:
 learn how the other side thinks;
gain understanding of their interests;
identify matching interests;
identify conflicting interests.

Simulating and modeling the negotiation will help you communicate with
the counterparties, and help you discover how to create and claim value
with them. This practice and discovery approach is sometimes called war
gaming.

Red Team vs. Blue Team

Organizations facing high stakes negotiations sometimes make a team for

each side, for example Red and Blue teams. The Red Team will play the
roles of other organizations or individuals in the negotiation, with the Blue
Team taking the “home” role. All teams work without contacting each other
for an agreed period of time (days or weeks) to research interests, strategies,
tactics and issues. When the teams meet again, they will behave as in a real
negotiation, presenting offers and counteroffers, proposing solutions to
problems and distributing resources as they see necessary.

Case: War gaming example

Komsel, Inc. and Singcell, Pty. plan a difficult negotiation. They have
many common interests, but resources are very limited. Komsel
decides to conduct a war game in advance, hoping to identify the
probable limits of Singcell in order to present their own ideas without
unnecessary conflict.
Komsel therefore selects staff members for a Red Team that will
play the role of Singcell in a mock encounter. The Blue Team includes
 the Komsel staff members who will go into real negotiations with
Singcell a few weeks later.

Some organizations will go so far as to hire actors who look and behave
like the real counterparts on the other negotiating teams.
Write down the advantages you see in a Red Team v. Blue Team war gaming practice:

Write down the disadvantages you see:

Additional benefit – greater creativity

TABLE 8.2 War gaming sheet, Komsel’s Red Team representing Singcell

Red Team Staff member from Komsel assigned to

Interests Comments
Members understand that role

CFO
Legal counsel
Senior
engineer
Other team
member

When the participants in a war gaming exercise include some of the

actual negotiators, the war game can be used to explore broad possibilities.
Dr. Larry Susskind (2013), writes that is becomes possible to consider “… a
range of possible options that the parties might never discover under normal
circumstances”. The actual negotiation, if it is very tense, may not allow the
negotiators to discuss options that would bring criticism from back table
observers. However, putting the issues into an unofficial war game situation
may provide the freedom to bring up, and seriously discuss, solutions that
would otherwise be taboo. The advantage is that additional solutions get
consideration and may be put into play in the real negotiations that follow.

Additional benefit – intuitive thinking

War gaming creates knowledge that is not easy to pass along and explain –
we gain negotiation skills best through years of experience and interaction
with highly skilled coworkers. This kind of knowledge, tacit knowledge,
does not develop quickly or independently (Polyani, 1967; Nonaka and
Takeuchi, 1995). However, time is a resource that may be in short supply.
Even if we have years available, it may not be possible to gather suitable
experience unless there are numerous challenging negotiations annually.
Lastly, each major negotiation is likely to be unique, so how can we
develop so much deeply intuitive knowledge quickly enough?
Share the knowledge and experiences gained from the simulated
negotiation through in depth communication among the assembled team
members. Through communicating, maximize discussion and reflection that
leads to tacit knowledge in the individuals and in the team as a whole.
Conducting the negotiation more than one time will increase gains in
experience and uncover various possibilities to create and claim value.
The war gaming approach will help you and your team to develop the
deep, unspoken and intuitive knowledge that will lead you and your staff to
quick and sure action at the real event.

Section summary
 Simulating a negotiation with your own staff playing the
counterparties will help with understanding the possible interests and
solutions. Further, you may improve team performance regarding
speed and mutual understanding.

Financial modeling

When negotiating, make use of financial projections supported by

spreadsheets and financial modeling software. These can include
spreadsheets that you develop or models used in your organization. Oracle’s
CrystalBall software is a widely used general-purpose package of financial
models that can be used to create financial projections. DecisionShare
software from Integratto is particularly useful for assessing uncertain
numbers such as the level of sales and costs or profits associated with a
product or service. Without knowing the exact number of units that will be
sold, profits and costs are similarly hard to establish. Additionally,
DecisionShare helps to analyze, display and rank the importance and
sensitivity of elements in a complex negotiation. For example, the software
might reveal that a feature such as cost or estimates of sales or price point is
of greatest impact. The parties can then agree on how to resolve the issue
before it becomes a block to the negotiation. In addition to the tools
mentioned, a variety of calculators and financial tools can be found on
websites for free use.

Section summary
When negotiation requires prediction of uncertain financial numbers,
use software tools to simulate. Then choose the actions that will have
the best results.
9
What Kind of Negotiator …

… are you? … are they?

How do you resolve disputes?

The Thomas-Kilmann Conflict Mode model is widely used to describe how

conflict is resolved. The model compares how assertive a party is to how
cooperative a party is regarding any issue. The model can be used to judge
your own approach on any one issue or the approach of a counterparty to an
issue. Figure 9.1 is very similar to the one presented in Figure 1.3 in
Chapter 1. The key difference is that this one helps you to understand
individual styles (yours and others) as you plan your negotiation.
The concepts in the model have the following meaning:

competing – taking a distributive, Win/Lose approach without joint

wins;
avoiding – delaying or never discussing an issue;
accommodating – accepting proposals of the other parties with little
or no change;
compromising – sharing some benefits and disadvantages among the
parties;
collaborating – working together on solutions and plans.
Note that collaborating falls short of creating synergy as discussed in
Chapter 3, in the section on principle-based negotiation. Synergy means that
completely new joint plans and value are created together.
Of course, your choices based on the previous chart will change
depending on the issue and the context around the issue. However, you
should be able to identify and understand your general preferences and the
preferences of your counterparties.

FIGURE 9.1 Thomas-Kilmann Conflict Mode Model

Source: Thomas and Kilmann, 2007.

Emotional style

Each person has an emotional style. Some are more relaxed, warm,
insistent, empathic, introverted or extroverted. Knowing more about
yourself, your team and your counterparts will help you adjust to their style
and improve communication. Use the quiz in Figure 9.2 from Leigh
Thompson’s (2012) book, The Mind and Heart of the Negotiator, to learn
more about your emotional style.
In the quiz, “R” means rational, “P” means positive and “N” means
negative. Based on your score and your preferences, you can choose to
continue without change or to adjust your style.

Rational – preference for less emotional content, preference for more

logic.
Positive – preference for relationship.
Negative – preference for competition and winning.

Emotional intelligence

Emotional Intelligence (EQ) is the ability to correctly identify and

understand the feelings of others (Bessert, 2007). Knowing those feelings
makes it more possible to find solutions that your negotiation partners will
accept.
To learn more about EQ, take an online quiz like the one at
http://www.ihhp.com/free-eq-quiz/ or
http://greatergood.berkeley.edu/ei_quiz/. You can learn more about
personalities in order to evaluate yourself, your team members and the other
negotiating parties using the five factor model, the Myers Briggs Type
Inventory (MBTI) or other approaches.
FIGURE 9.2 Emotional style questionnaire
Reprinted with permission, Thompson, 2012, p. 117.

Comparing

It is possible to compare individuals based on their styles. Figure 9.3, for

example, compares two people based on their styles including rational,
negative, positive, assertive and EQ.
FIGURE 9.3 Personal styles compared

To create a radar map like the previous one, measure the five
characteristics broadly and simply as high, medium and low with scores of
three, two and one respectively. The advantages of comparing individuals
are explained in the following text box.

Knowing the style of counterparties will help you know what to

expect from them.

Rational parties may avoid showing emotions and may react

poorly to displays of emotion.
Negative parties may manipulate by displaying emotions and
may escalate emotions that they perceive in others.
Positive parties may seek to build relationships and be
sensitive to positive emotions.

Knowing the style of counterparties will help you to adjust to them.

 Rational parties may react well to proposals based on logic
and fairness.
Negative parties may react well to proposals in which they
perceive extra benefit, a win, for themselves.
Positive parties may react well to proposals that show
improvements in relationships.

Knowing the style of counterparties will help you to manage them.

Rational parties may be managed by showing logical steps and

conclusions.
Negative parties may be managed by avoiding a competitive
spiral.
Positive parties may be managed by including the value of
relationship in offers.

Source: Thompson (2012, p. 116), Chapter 5

Assertive

Assertive teammates may reinforce each other’s assertiveness. Weakly

assertive individuals may find that together they are more effective at
putting their ideas into the conversation. On the other hand, strongly
assertive teammates may become overpowering, smothering ideas that
could come from other parties.

Section summary
 Learn about yourself and your counterparties in order to best manage
your approaches and the behaviors of the counterparties.

Cognitive bias

Understanding yourself as a negotiator also means you must understand

how you think. The term “cognitive bias” means influences on thinking that
can lead to errors. These errors are important to understand and avoid
because they may lead to poor decision making. There are many kinds of
cognitive bias – some that are of interest to negotiators are described
further.

Example of framing

A small tech company, Zing, Inc., is entering negotiations with a large,

well-known globalized electronics maker, Pineapple Corp.

Section summary

Good business thinking is not always strictly logical. However, try to

identify and avoid bias in your thinking that could lead to mistakes.

Bias and decision making

The ideal decision making process is one that is conducted in multiple
steps, without time pressure, by experienced people. When time and
resources are limited, the process is often compressed or shortened, with
poor decision making as a result. Even under the best conditions, the
decision makers can fall into cognitive bias.
The process previously described may have good results. In a business
negotiation, the process can be done by one side, or jointly with other sides
if the relationship has developed strongly. Mutual problem solving will lead
to mutual satisfaction and mutual gains. However, time is not always
available for a slow and careful decision making process.

TABLE 9.1 Types and impacts of cognitive bias

Negotiation impact
Type of bias Explanation
(examples)

Anchoring is effective
if the other parties are
Starting with a high sale
not familiar with the
price or low purchase
concept and do not re-
price can create a bias
anchor. If another
Anchoring that shifts the entire
party anchors far from
price discussion to
your target, simply re-
move within a limited
anchor in the opposite
range.
direction in order to
neutralize their anchor.
Interpreting data based Thinking that the other
on what you expect it to sides are friendly and
Confirmation/expectation be, for example not reacting
Bias expecting winter to be appropriately when
cold and wearing a coat they show unfriendly
even on a warm day. behaviors.
 Negotiation impact
Type of bias Explanation
(examples)

Sympathy or distaste Negotiators may make

for a person, team or agreements that do not
Emotional bias
topic may impact optimize gains or
decisions. cooperation.
Expressing a problem
as “a chance to work
together on solutions”
Overall presentation of
is much more positive
an issue or idea (e.g.
than presenting it as a
positive/negative;
Framing difficulty. Research
urgent/non-urgent;
(Neale and Bazerman,
important/less
1985) shows that
important).
positive framing leads
to higher mutual gains
than negative framing.
A negotiator must
insist on high quality
data (i.e. new, clearly
explained, detailed and
A small sample is not aggregated) and
inappropriately must interpret that data
Law of small numbers
interpreted as widely carefully. Skills in
(representativeness)
true (Tversky and statistics are
Kahnemann, 1971). appropriate and
negotiators should take
the time, even if
inconvenient, to
understand data.
 Negotiation impact
Type of bias Explanation
(examples)

Expecting to gain more

Negotiators may feel
than is likely. Research
dissatisfaction despite
(Neale and Bazerman,
a good agreement,
1985) shows that
Optimism/Overconfidence raising the
negotiators who expect
expectations of the
to gain are less likely to
back table
make concessions and
unreasonably.
make agreements.
Rejecting the solutions
Failing to take new
proposed by certain
information into
people because your
Prejudice account because of
culture expects those
existing ideas about the
people to have poor
subject.
business thinking.
Because the receiving
party often
Concessions are not
undervalues
evaluated accurately;
concessions, it is
Undervaluing bias instead, they are
useful to make
evaluated lower than
numerous small
their real worth.
concessions rather
than a single large one.
 Negotiation impact
Type of bias Explanation
(examples)

Responding too
strongly to data that are
striking (Nisbitt and
Ross, 1980). Example:
we may be afraid of
Skilled negotiators
flying because air
must not overvalue
Vivid information bias accidents are front-page
shocking or surprising
news involving large
points of information.
numbers of people. In
fact, however, air travel
is much safer than road
travel by most
measures.

TABLE 9.2 Framing and reframing

Version 1 Version 2

Thank you so much for taking the time

So, I understand you are
to consider our xZhei technology. We
interested in our xZhei
hope you will find it suitable for your
technology.
projects!
This version creates a mindset
This version creates a mindset that the
that the small company holds
large company is doing the small one a
something that the large
favor.
company wants.

High pressure, high speed process for negotiators

Negotiators in the midst of negotiations may feel high pressure to act and
decide quickly regarding complex issues and solutions. The pressure may
come from their back table, the counterparties, external sources or their own
feelings about the negotiation. In situations like this, the negotiators may
shorten the process. Below is one way to manage a shortened process. Note
that this shorter process can only be successful if the negotiators have
identified the problem and have prepared alternative solutions, at least
partly, in advance. It is important for the negotiators to resist time pressure
and evaluate offers slowly and thoroughly.

1. Compare offer to alternatives prepared in advance →

2. Review for bias →
3. Select best →
4. Discuss amendments internally and with counterparties →
5. Accept or refine →
6. Agree to implementation with options to refine or change.

TABLE 9.3 Decision making process and bias

Process Bias

Identify the problem Many kinds of bias can enter the process at any
→ stage. Therefore, review and consideration of bias
Make an intuitive should be conducted throughout the process.
judgment and set it
aside →
Gather information →
Analyze the problem
and solution
parameters →
Evaluate →
Create solutions →
Process Bias

Predict results of
solutions →
Compare solutions
and your intuitive
judgment →
Select best →
Implement best
solution →
Evaluate results →
Adjust the decision or
implementation based
on the evaluation.
Note that the process described above allows for intuition. Take this step early to improve your
intuitive abilities and to capture the input of team members, especially those with lots of experience.
Very experienced people are often able to correctly decide about complex situations quickly because
of their years of modeling, practice and observation (Kahneman, 2011). Writing down the intuitive
solutions and comparing them to more deliberate solutions will:
a. identify situations that are particularly difficult and which need more work;
b. build up the skills of less experienced staff members.

In the ideal process presented earlier, careful decision makers review for
bias throughout all the steps. In the shortened practical process, the
negotiators should add a specific step to consider bias. In this step, they can
identify bias and propose changes to the solution, or reject it completely, in
order to avoid a poor decision. The shortened version also requires
negotiators to have some alternative scenarios prepared in advance – do
your homework!

Kepner-Tregoe decision making process

This widely used process is described in the seminal book The New
Rational Manager. The “rational process” the authors propose follows four
steps: situational appraisal, problem analysis, decision analysis and
potential problem analysis (Kepner and Tregoe, 1997).
Those steps include stating the decision to be made, developing
objectives on a must versus must not and want versus avoid basis,
weighting the wanted results, creating alternative solutions and screening
the alternatives to arrive at a final best possible choice (Parker and Mosely,
2008). It is important to understand that this model does not start with
proposing solutions and trying to pick the best one – that approach may lead
to time wasting efforts that do not take the desired outcomes into
consideration. The steps might appear as follows.

FIGURE 9.4 Steps in Kepner-Tregoe model

Pluses and minuses of Kepner-Tregoe model:

starts with clearly identifying the decision to be made;

 clarifies objectives into must/must not and want/avoid;
understanding the must/must not and want/avoid helps avoid taking
on useless data;
screening process to avoid a poor choice.

However:

fails to address bias as a discreet step or parallel process.

Section summary

Look for cognitive bias in your ideas, and try to avoid bad decisions
based these errors.
Practice your decision making process with your team.

Teamwork

On a soccer team, there are players who specialize in defending or

attacking. However, even specialized players must always defend and attack
as necessary – the roles must overlap. A negotiation team can work
similarly. Some team members can specialize regarding certain issues, but
all members should be able to support each other in practical ways.
Unlike soccer, small teams are generally best in negotiation, unless there
are many very complex topics. Generally a negotiation team should have
one or two specialists or technical people, a knowledgeable generalist and a
decision maker (usually a manager authorized to make certain decisions).
The actions of the team members must overlap as they support each other.
The team may have many members, but they do not all have to go to the
negotiation table. Similarly, the members of a negotiation team work
together by:

a. having special roles;

b. supporting each other in all roles.

The following suggested roles are for teams at the table (during planning,
teams may take different structures as convenient).
Leader:

Agrees to agenda;
Keeps agenda on track;
Acts to resolve or avoid deadlock;
Agrees to final proposal;
Supports specialists when they are leading the conversation.

Specialist:

Leads the conversation when those special topics are in discussion;

Agrees to a specific point when your criteria are met (or signals
leader to agree);
Supports leader and other specialists when they are leading the
conversation.

Q: What does it mean to support other team members?

A: It means you must carefully follow the talking and your team’s overall
plan. If you notice a problem, an opportunity, a mistake, new
information, etc., you need to communicate it to your team members.
You can do this by:

silently writing a brief note and passing it to other team members;

quietly and briefly speaking to a team member;
directly speaking to the counterparty about it.
 This kind of communication is called supportive interaction (Vuorela,
2005). Vuorela gives these examples:

“The sellers ensure that all their arguments are covered with the help
of team-work, with different members of the team contributing to
the on-going discussion at different times” (p. 29).
“They also take turns at times repeating an argument a co-team
member put forth earlier, and sometimes this seems enough to
convince the buyers of their argument” (p. 29).

Q: Is teamwork good for getting all arguments and opinions out openly?
A: Yes. “Teamwork is a useful tool in covering the ‘full front’ when
pursuing an argument with every member of the sales team bringing
forth a different angle of the argument” (Vuorela, 2005, p. 80). For
example, if the conversation moves to another topic before all the key
points have been discussed, a team member can carefully interrupt and
return to the unfinished topic. Teams that have members who are
skeptical or disruptive of the agreement gain the benefit of dealing with
hard challenges. These challenges may help the team avoid errors in the
agreement.
Q: Is it OK to talk with your team members during a negotiation?
A: Generally you should use some internal talk, but avoid talking too much
because it will distract others. You can put in a word or brief comment
or question if your team is used to this behavior. Also, you can talk with
your teammates loudly and clearly in a way that the counterparties can
join. However, internal conferences with long whispering are generally
poor etiquette. If you need a conference with your team, politely ask the
other side to give you a few minutes of privacy or propose a general
break for refreshments. Use the break time to coordinate with your
teammates.
Using notepaper or tablet devices to communicate internally is effective,
and not very distracting to teammates and counterparties. Be sure that
 your team-mates can comfortably use such methods by practicing
before trying it at the negotiating table.
Q: What is “team building”?
A: It means becoming good at working together. This happens by practicing
and discussing strategies and details together in depth. A team leader
needs strong listening skills in order to understand the individual
members, identify the skills and strengths of the team and attempt to
make weak areas stronger. At the same time, the team leader needs to
understand the goals of the individuals in order to align them with the
goals of the team and the company. In addition to frequent meetings
(one-to-one and as a group), having a casual meal or drinks together
helps to build team function. If the team is created specifically for the
negotiation, it may be possible to select compatible team members
based on their personalities and skills.
Teams need frequent interaction and communication in order to share
their knowledge effectively. The sharing of knowledge builds up tacit
knowledge (Polyani, 1966; Nonaka and Takeuchi, 1995) and intuitive
capacity. With time, teams can become very fast to act and decide. See
the section on war gaming in Chapter 8 for comments on building the
ability of a team to work well together.
Read the descriptions of these teams and decide with your partner
which is best.

TABLE 9.4 Preferred team size and composition

Team A includes Team B includes

Two engineers with appropriate specializations One engineer

One marketing person One marketing manager
Two business managers One business manager
One top level manager (CEO, COO, GM or other)
One note taker
Team A includes Team B includes

One finance person

One human resources person

Please fill out the following:

I think Team ___ is best because …

Intercultural teams

Teams that include people from various cultures face some challenges and
enjoy some advantages.
Write some possible disadvantages here:

Write some possible advantages here:

One of the most commonly identified difficulties with intercultural teams

is the increased time for communication that is necessary to get the same
results. Inexperienced managers may be surprised by lack of progress as
deadlines approach. Frequent one-to-one communication may help to
establish the relationships and mutual confidence necessary for a team to
work well together.
Teams that are spread across many locations and meet mainly online or
by phone may experience difficulties such as time coordination,
miscommunication, lack of clarity about tasks, delays and so on. Consider
the individual’s personality and culture carefully, as some will appreciate
additional communication, while others will find it upsetting. Adjust the
mixture of voice, email and other media to suit the individuals.
When considering the members of an intercultural team, the team leader
might aim to gather people with similar rank, previous positive intercultural
experience and reasonably strong skills in a common language.

Common language within the team

The common language of business is usually English, although other

languages are dominant such as Chinese in much of East Asia or French,
Spanish, Turkish and Arabic in other regions. A team that includes native
and non-native speakers will need the native speakers to help improve their
comprehension, for example by using less slang, a slower speed, careful
pronunciation and simple grammar choices. At the same time, the non-
native speakers may need to concentrate on their own pronunciation, choice
of phrases and ability to ask for clarification. Gestures and use of pauses,
facial expressions and humor will also need adjustment – mutually, not by
one group or person only. See Browaeys and Price (2011), Understanding
Cross-Cultural Management, chapters 15–17, for additional useful
comments on these topics.

Section summary

Make sure your team understands the goals, the plan and all of the
steps well. Practice together, prepare together and communicate
frequently.
10
Final Phase

Robust agreements that can survive

At the negotiating table, you should end with clear written agreements that
your legal team will later finalize. You hope that these agreements will
survive as intended.
How can you make an agreement that the other parties will not
reconsider and perhaps break? How can you make a robust agreement, even
in a country that has a poor legal system? How can you get cooperation
from people who are distracted with other projects?
Your ideas:

These approaches may help:

1. Include short-term incentives to continue.

2. Plan actions in steps or milestones that must be completed and
accepted before continuing.
3. Include negative outcomes to deter breaking off.
4. Share value fairly.
5. Communicate the value creation of continuing.
6. Plan for “predictable surprises”.
 7. Communicate to be sure the other sides understand the benefit of
joint cooperation.
8. Create contingent agreements that change with the circumstances
in a way that all sides consider fair.
9. Communicate the high probability of additional successful work in
the future or, even better, agree to future projects that follow up on
the current project (build the relationship, cement the relationship).

The last item on the list first came up at the beginning of this textbook. It is
part of all good negotiation thinking from start to finish. This is the easiest,
most obvious, most effective way to increase the likelihood of cooperation
and minimize the chance of breaking off or cheating.
Movius and Susskind (2009) write, “Design nearly self enforcing
agreements.” That means agreements that reward completion through
incentives and make non-completion unappealing through punishments or
claw backs.
Dr. Larry Susskind (2013) of MIT suggests making agreements that help
against “predictable” surprises. We know that even good ships sink, so we
put lifeboats on them. Even good agreements may be harmed by a bad
economy, changes in regulation or other “surprises” that we can reasonably
expect. Create agreements that can survive such surprises.

Case: The agreement that needed renegotiation

Starbucks, the café chain, found itself in an agreement it could not

live with. After a strong start selling coffee products with Kraft in
1998, the environment changed. But there was no date for ending or
reviewing the agreement. Star-bucks felt in 2010 that it was necessary
to bring the agreement to an end, and offered Kraft cash to end the
agreement. Kraft, however, refused. Thereafter Starbucks simply
 broke the agreement. Kraft insisted on arbitration, which it won in
2013.
As noted in the Harvard Law School article at <bit.ly/1tyCV56>,
the companies could have and should have agreed to a time or set of
conditions for renegotiation. Writing these issues out would have
provided an easy and cheap process for continuing, changing or
terminating the agreement.
In the end, both parties wasted money and decision-making time.
Star-bucks additionally had to pay all the profits it made on similar
coffee products after breaking the agreement, over $1 billion, to the
Kraft spin-off company, Mondelez.

Section summary

Design agreements that can survive changes in the environment.

Control mechanisms often found in negotiated

agreements

After the deal has been agreed upon and the discussion has finished, how
can you be sure that the other sides will do as agreed? There are many ways
to control the actions of negotiation parties after the talking has finished.
These can be summarized as follows:

provide reasons (incentives) for the other sides to complete the work
in a satisfactory way;
 provide reasons (disincentives) for the other parties not do
incomplete, late or unsatisfactory work.

Some of the mechanisms for giving those incentives and disincentives are
described as follows.
Milestones: Agreed intermediate points of completion. When each milestone is reached,
payments and new commitments are made. In a joint venture for manufacturing, milestones
might include purchasing a factory site, installing utility services, constructing the building,
installing equipment and so on. Each major step is a milestone and an incentive to continue. The
opposite would be an agreement that simply describes a single completed target.

Example:

“Upon completion of the Working Prototype detailed in Section 3 of this agreement, Party A
will pay Party B $900,000 by bank transfer within five working days.”

Gates: Points in a project when resources are re-allocated. An agreement with gates allows the
parties to commit resources when necessary and suitable instead of committing major resources
years in advance. The advantages include flexibility and the ability to withdraw if a project fails.

Example:

“After completion and acceptance of Phase 3 of the contract, the parties agree to discuss
allocation of resources for Phase 5, including the following points …”

Incentives: Reasons, usually financial, for a party to perform above the minimum required in an
agreement. For example, a party that completes a task a week in advance might receive 5 percent
more in payment.

Example:

“Completion of installation of the equipment more than five working days in advance of the
schedule set out in Paragraph 7 of this contract will entitle party A to an additional payment
of 5 percent by Party B within the payment terms of Paragraph 12 of this contract.”

Claw back: An agreement to return part or all of a payment if a task is not done as required.

Example:

“In agreement with Section 17a of this document, Party A will pay Party B $10,000 in order
to cover startup costs associated with the project. Should the target of $80,000 gross sales not
be reached by 31 November, Party A reserves the right to insist that Party B repay 75 percent
of the $10,000 startup costs paid by Party A, totaling $7,500.”
 Punishments and penalties: The opposite of incentives. Typical punishments include receiving
less payment if a task is completed late or with low quality.

Example:

“Party A will receive only 90 percent of the sum in Section 7b if the polishing work is not
completed within 30 business days after the date of the agreement of this contract.”

Contingent clauses: These are built in “if” structures.

Example:

“Party A will conduct the E17 test procedure if Party B is unable to complete development of
the substrate by 17 December 2016.”

Renegotiation clauses: If conditions change, the parties can return to a negotiation instead of
facing a drastically unbalanced business situation. In this way, both parties can avoid situations
that could be very destructive of their business and avoid the need to unilaterally break the
agreement.

Example:

The parties shall reconvene to discuss Section 3 of this agreement should the price of gold
decrease below $1100 for longer than one week.

Renewal clauses: These allow the parties to continue business if a major change to a product is
made such as a new edition of software or a reference book.

Example:

In the case that Party A updates the Software Product, they will inform Party B in advance of
the update. Party B will have the first opportunity to agree to continue or renegotiate the
current agreement within five working days of receiving notification from Party A.

And of course… don’t pay fully in advance!

Section summary

Create good agreements that encourage success through fair sharing,

incentives, communication and high likelihood of future activities.
Use control mechanisms that all sides agree are fair in order to
 encourage the parties to proactively solve problems and avoid
difficulties.

When agreements don’t survive: outside support,

mediation and arbitration

Negotiation does not always result in great agreements and satisfied

partners. If the agreements are poorly designed, with gaps in understanding,
no enforcement mechanisms and no tools to repair a disagreement, the
partners may want to renegotiate some or all of the agreement. That of
course costs more time, money and energy… so it is better to develop good
agreements in the first place!

When to renegotiate

You can expect your business partners to renegotiate an agreement if some

or any of the following conditions exist:

a drastic change in the economic environment occurs;

availability of resources changes;
new regulations or legislation impacts the business activity;
political atmosphere changes;
disasters or wars occur;
renegotiation is part of the culture or personality of a party;
relationship considerations change with respect to economic needs.

In some cultures and companies, renegotiation is considered a bad outcome

– a failure. In other places however, renegotiation is seen as a way to
expand the relationship and the business activity.
 In any case, renegotiating part or all of an agreement is better than
allowing the agreement to collapse. Recall the case of Starbucks and Kraft
discussed previously. It would have been most sensible for Starbucks to
have renegotiated before breaking the agreement. In fact, their failure to
renegotiate and their failure to honor the agreement cost them more than the
profits earned by breaking the agreement.
What if the parties cannot come to terms despite trying to renegotiate,
and the agreement collapses? It may be time to call in a third party that will
act as a neutral helper.

Process facilitators, mediators and consultants

Facilitators, mediators and consultants are paid outsiders, usually

negotiation professionals, hired to move negotiations along. Usually they
are selected by mutual agreement among the negotiating parties because
they are experienced, respected and trained. They may regulate the flow of
discussion like a traffic police officer regulates a busy intersection – they
may ensure the negotiation process is fair or certify that information is
correct by accessing confidential information on all sides. They usually do
not deal with deeply substantive issues, however they help the parties voice
their views, actively listen to each other and can help the parties create
solutions through use of problem-solving techniques.
Mediation, facilitation and consulting are generally done with careful
regard for neutrality. Even though these professionals are normally hired by
mutual agreement as neutral outsiders, they will emphasize their neutrality
in various ways, for example by sitting in the middle of the parties, not with
one group or another. Additionally, they may offer confidential
conversations with one or all sides in order to better understand the
thinking, positions and goals of the parties. A careful observer will
understand that a mediator or facilitator can never be truly neutral or
impartial – participation in the problems and parties is what makes a
mediator effective. A useful overview of mediation, including a general set
of rules, can be found on the website of the World Intellectual Property
Organization (n.d.).

Buddhist mediation

Buddhist mediators attempt to facilitate resolution of disputes by applying

Buddhist practices such as:

awareness of self (mindfulness). Mindfulness refers to keeping

overall awareness of multiple facts, positions, opinions, etc. as
objects in the mind, including one’s personal thoughts and feelings,
as objects separate from the self or the situation. Mindfulness
supports attention (Burke, 2010), analysis, comprehension and the
creative development of solutions (Ostafin and Kassman, 2012).
separation of self from the emotions, pressures and statements of the
problem. Separation allows the individual not to become attached to
positions, events, feelings, demands, personalities and so on. No
longer attached to a specific issue or detail, the parties can evaluate
their goals and the goals of other parties more objectively.
awareness of interdependencies. Parties learn that the best solutions
are ones that include the participation and satisfaction of all sides to
the greatest extent possible. Without interdependent action and
resolution, it is very like that one or more parties will reject the
results immediately or later.
• awareness of options for problem solving. As the previous
processes develop, the parties, including the mediator, become more
easily able to create solutions that may have been perceived as
impossible, taboo or unattainable before. Even very unlikely
proposals may provide elements that appear in the ultimate solution.

These practices are explained and taught to the mediation parties as

necessary when the mediation begins and throughout the process.
 While these approaches may be appropriate in areas with strongly
Buddhist cultures, they may also be welcomed in North America and
Europe. Some approaches that have been used among Buddhist mediators
in the English-speaking world include (Kramarae, 2013):

understanding-based mediation approach;

insight mediation framework;
nonviolent communication (NVC) framework;
consensus making framework.

Islamic mediation

Mediation in the Islamic world is based on Sharia, the system of laws

stemming from Koranic teaching. The term wasaata is widely used, and the
process focuses on gaining an outcome that will bring disputing parties to a
peaceful resolution. The wasaata process is intended to include
comprehensiveness and flexibility (Bouheraoua, 2008), especially through
the mediator’s fairness, appropriate knowledge and possible intervention.
Furthermore, the wasaata process involves the wider community, whereas
mediation and arbitration in the European and North American tradition are
usually limited to the immediate participants (Pely, 2011). Ideally, the
mediation includes reconciliation (sulha) in order to bring about a state in
which the parties are expected to have no further disagreement or bad
feeling. Wasaata is not a process specifically for business, though business
disputes may be managed by a wasaata – sulha process.

External experts and fact-finders

Experts and fact-finders may be asked to help when the negotiators lack the
knowledge, time or skill to investigate a question fully. In some cases, a
third party may be brought in from another organization, a consulting
company, a university, government or a competitor to provide information
in a neutral and objective way. The negotiators expect that additional data
and neutral interpretations will help them to find solutions – external
experts and fact-finders are usually not included in the negotiation process
and do not directly participate in problem solving. Ideally, fact-finding
processes should happen early in the negotiation process, however in
reality, they are often only started when the parties have run into a block
because they need more information.

Ombudsperson

The ombudsperson (sometimes called an ombudsman) is found inside an

organization and may be useful if your negotiation is internal to that
organization (for example in the context of labor negotiations). Their job is
to make sure that the process of negotiating an internal disagreement is fair.
They seek to resolve problems early before they involve higher levels of
management and more resources. The ombudsperson is relatively
independent despite being inside the organization. The neutrality of the
ombudsperson is usually not in question because they do not make binding
decisions – they only help the parties to understand. The ombudsperson
might, however, propose resolutions to the parties in a dispute as well as to
upper level management in order to help the organization avoid similar
problems in the future.

Disputes: arbitration or court

Arbitration is, at its core, not a negotiation process. It is a formal process for
resolving a dispute and binding the parties to solutions. After arbitration,
the relationship between the parties may be too damaged to re-engage in
new business projects. Therefore, it is better to try negotiation, mediation
and all the supports mentioned previously before going to arbitration.
 Because arbitration is a formal process, it is more expensive than
negotiation or mediation, though less expensive than a legal court.

1. The parties to arbitration agree in advance to accept the ruling and

the solution of the arbitrator.
2. The parties agree to an arbitrator or a team of arbitrators that they
view as neutral.
3. The parties and arbitrators agree to a process, usually with rules
about presenting documents, arguments and counterarguments.
4. The parties prepare and submit documents and summaries of their
positions.
5. Usually there is a face-to-face verbal discussion.
6. After the discussion, usually weeks or months later, the arbitrators
will deliver a decision that is legally binding.

Section summary

When negotiations fail or become deadlocked, use alternative

methods to restart the process. Agreeing through negotiation,
however, will usually be the least formal and least expensive way to
reach agreements.

Draft agreements

Draft agreements can be made at the table. Draft agreements indicate intent,
and the parties may agree that they are not binding until legal counsel draws
up final agreements. On the other hand, a binding agreement can be made at
the negotiating table if the parties wish. Negotiators who prefer detailed
complex legal agreements will not feel comfortable with a binding
agreement completed at the table – they will prefer to have a final version
completed later by legal staff.
Draft agreements can be general or specific. Some individuals and some
cultures will prefer more or less detailed documents. Generally speaking,
Anglo-American cultures prefer detailed agreements and negotiations. The
written documents, draft or final, can be many pages in length.
A detailed agreement should cover at least the following items:

• payment terms (e.g. in advance, upon

• compliance completion, by milestone or other payment
structures)
• confidentiality
• contributions from all
parties
• damages
• representations, warranties and covenants
• dispute resolution
• enforcement
• risk (e.g. inflation risk, currency risk, political
• exclusivity (including risk, etc.)
sector, channel, territory,
etc.) • share of profits/compensation
• force majeure • tasks for implementation, obligations
• improved versions, new
• term (length of time the agreement will
editions, etc.
continue)
• infringement
• liability • termination
• organizational
• transfer of obligation
structure/ownership
• parties • units of measurement
• purpose • waivers
Other cultures, especially Latin, Pacific, and East Asian cultures, often
prefer general agreements that show intent and broad commitment. These
documents may be quite short, even just a few pages. As an example, the
author’s part time contract with a university in Japan filled barely two
pages. A similar agreement with a university in Canada filled 16 pages!
This textbook, however, recommends detailed agreements in order to
minimize opportunities for misunderstanding and dispute. Well-designed
agreements can save time and cost over the long term. The following
sections list some agreement documents that you might work with.

Memorandum of Understanding (MOU) or Letter of Intent (LOI)

An MOU or LOI is usually not written with high detail. It is usually not legally binding. The
purpose of the document is to describe the spirit of a cooperative agreement and broadly how the
cooperation will function.

Contract

A contract is highly structured and is binding once the legal representatives

of the organizations have signed it. A contract might contain the following
sections, as noted in Bradlow and Finkelstein (2013).

Recitals – identifies the companies and substance of the agreement.

Definitions – defines words, especially technical jargon used.
Business terms – core issues of who, what, where, when, cost, etc.
Representations and warranties – statements of fact, such as “the
factory at
33 Maple St. can support equipment weighing up to two tons per
square meter.”
Covenants and agreements – generally these are promises to
perform.
 Conditions – these include conditions that must be met, such as
inspections, before the agreement comes into force.
Indemnification – liabilities from failure to perform the covenants
and agreements.
Miscellaneous – may include clauses about termination,
renegotiation and so on.
Attachments and schedules – these may include lists of equipment,
facilities, staff, property or other materials important to the
agreement.

Agreement text examples

For examples of texts (free or for fee) that can be used in agreements,
please visit some of the following websites:

General

http://www.wipo.int
http://www.lawmart.com

Dispute resolution

http://www.jamsadr.com
http://www.iccwbo.org
http://www.huschblackwell.com

Confidentiality

http://www.bitlaw.com/forms/nda.html
http://www.hbs.edu/entrepreneurship/pdf/Sample_NDA.pdf
Section summary
Create agreements that cover details to the satisfaction of all parties.
Agree to create draft agreements that are non-binding to allow time
for review by legal professionals.
11
Review from a High Altitude

What is the overall thinking and approach, the heart and mind of
negotiation we need to follow? Lax and Sebenius (2006, p. 253) say “Think
strategically, act opportunistically”. To do so, they suggest the following
strategic approach:

Assess set up barriers:

Thoroughly map all the parties, their interests and their

BATNAs.
Decide sequence and process.

Assess barriers to agreement.

Assess tactical and interpersonal barriers.
Overcome these barriers by mapping backward from the target
deal by making a 3D Strategy:

Set up the right negotiation content and goals.

Design value-creating possibilities.
Emphasize problem solving as a joint approach.

Adapted from 3D Negotiation, Lax and Sebenius, p. 237.

Acting opportunistically means being flexible and ready to change your
ideas in order to get the best results.
Only effective preparation and focused action make the difference – and in our experience, the
best preparation is mastering the principles of 3D Negotiation.
(3D Negotiation, Lax and Sebenius, p. 19)

Your goal: “create and claim value for the long term.”
(3D Negotiation, Lax and Sebenius, p. 237)

Another way of thinking about the overall goal and purpose of business
negotiation is to think, “Let’s maximize value, solve problems and avoid
failure.” Maximizing value means putting new value creation before
distribution of resources and rewards. Solving problems means creatively
removing barriers to agreement and developing value-creating ideas.
Avoiding failure means designing agreements that are workable,
enforceable and profitable.
An overall process is shown in Figure 11.1.
A very simplified version of the negotiation process is shown in Figures
11.2 and 11.3 in successful and unsuccessful versions.
In the example in Figure 11.3, the negotiating parties have started with a
distributive and difficult issue: price. The negotiation is likely to get
blocked or even to fail because there is not enough information at hand for
the parties to resolve the problems. Wise negotiators start by building
relationships and sharing information carefully as in Figure 11.2. In the end,
we can come to a practical “do not” list.
FIGURE 11.1 Negotiation life cycle

Do not be rushed.
Do not be snowed under by data.
Do not be too greedy.
Do not harm others.
Do not give something for nothing.
Do not fail to learn.
Do not fail to prepare.
FIGURE 11.2 Successful flow – leads to completion

FIGURE 11.3 Unsuccessful flow – distributive issues blocked without information sharing

Do not be rushed
Push deadlines back with superiors, clients, partners and other negotiating
parties. Allow more time rather than less time in order to solve problems
and create relationships that will survive fruitfully.

Do not be snowed under by data

Do not allow large amounts of data to confuse you. Data is not useful until
categorized and analyzed. Use careful decision making processes and
appropriate business analysis. Learn to categorize information so that you
are not distracted by too much data.

Do not be too greedy

Learn to capture a reasonable amount of value so that you do not damage

other parties in the negotiation. A reasonable approach will cause your
reputation as a fair negotiator to develop.

Do not harm others

Never directly harm another party because your reputation will suffer.
Worse, you may become a target for others trying to damage you and your
business. Instead, learn to create satisfaction in all parties.

Do not give something for nothing

Giving something for nothing drains your resources. Gaining from your
concessions means the gains must be of comparable value. The gains can be
tangible (assets and resources) or intangible (relationship, reputation, brand,
strategic position, etc.).

Do not fail to learn

Every negotiation, successful or unsuccessful, is a source of learning.

Analyze the process in detail in the middle of and again shortly after
completion of the negotiation.

Do not fail to prepare

There will be few successes in your career if you do not deeply know the
details of the issues and the stakeholders related to it: know the people,
know the facts.
Section summary

An overall process starts with research and finishes with robust

agreements. In between are many repeated steps of communicating,
solving problems and deciding. Each step is an opportunity to learn,
create value and find satisfaction among the participants.
Appendix I
Glossary

3D negotiation: involves three phases of action 1) what to do at the table;

2) designing the target agreement; and 3) setup of the overall
negotiation. Lax and Sebenius (2006) wrote a book called 3D
Negotiation that has been widely translated – check to find a copy in
your language.
Anchoring: setting expectations about cost and the general price range by
making the first price offer. It is generally a good idea to make the first
price offer based on sensible price research.
Assertive: strongly demanding.
At the table: formal negotiation time when the parties are talking. Imagine
all parties sitting at a table, talking.
Away from the table: time and situations (breaks, recesses, meals,
weekends, nights) when the parties are not formally negotiating.
Bargaining chip: a relatively unimportant concession that you plan to give
in exchange for some concession. Sometimes these are called
“sweeteners”. Bargaining/bartering: conceding low-priority items for
concessions on items that are more important to you. Also called “log
rolling” or making tradeoffs. This approach is practical with relatively
simple issues and is often used to sweeten a proposal with concessions.
Bottom line: sometimes this phrase is used with the meaning of reserve
price or point (see Reserve price or point).
BATNA: best alternative to a negotiated agreement (sometimes also called
the “walk away”). BATNA is the result you would have if you did not
 negotiate. See Chapter 3.
Claiming value: trying to get the parts of a business arrangement that are
most useful (and valuable) to you. See Chapter 1.
Concession: something that you give or receive, for example, a better price,
a change of schedule or a change of product that suits the other parties.
Consensus: agreement. Negotiators manage consensus within their team,
with their back table and ultimately with their counterparties.
Counterpart(y): a negotiator from the other side of the negotiating table.
Creating value: discovering new opportunities for value and profit. See
Chapter 1.
Deadlock: a situation in which there is no progress and no agreement. The
parties must break the deadlock or give up and follow their BATNA.
Deal: the package of issues in the negotiation. Also, the agreement.
Deal/no-deal balance: the thinking and decision making that go into
agreeing or not agreeing; the considerations that lead negotiators to
accept an offer or choose their BATNA.
Deal breaker/show stopper: an issue that must be resolved or it will cause
the entire negotiation to fail. Obviously it is important to identify and
manage these issues in advance of negotiations.
Deceit: providing information that is not true. This is almost always a bad
idea. You may gain in the short term, but you may damage yourself in
the long term.
Delinkage: separating an issue from other issues in the negotiation; delink
if a particular issue threatens to ruin the negotiation or if you can
sensibly separate groups of issues from each other.
Distributive negotiating: negotiating the sharing or claiming of limited
resources (such as time, money, products, etc.) in a Win/Lose approach.
Empathy: understanding for feelings of other parties.
False concession: pretending that a concession you must give or do not
care about is a concession that you did not want to give. You can trade
this false concession for something of value. This strategy is not
recommended – when the other side learns that they had to fight for
 something they could have gotten without any question, the relationship
may be damaged.
FOTE: full open truthful exchange. This means telling everything to the
other sides. Parties tell the whole truth, concealing nothing. This is
sensible in negotiations where all sides have confidence in creating
value jointly and sharing it reasonably. See POTE.
Hardball tactics: a variety of aggressive tactics such as threats, delays and
so on. Basically, these are unprofessional and unsuitable for most
business negotiation; however, some businesses use hardball tactics to
put pressure on the other party. Having a good BATNA will protect you
from most hardball tactics. At the table, hardball tactics are best met
with silence or by resuming your normal questions.
Integrative negotiating: bringing together many issues in order to solve
problems, maximize mutual gains, repackage and optimize and make
robust agreements.
Interests: things that a negotiator (person, team, organization) wants. These
things can be tangible (money, buildings, equipment, etc.) or intangible
(services, pride, success, dignity, etc.) Linkage/integration: combining
and relating issues in the negotiation.
Mutual gains: solutions that benefit you and all parties in the negotiation.
The benefits can be different for the different partners.
Negotiation: a discussion with the intent to agree. Discussions include the
sharing of information; the making, rejecting and adjustment of offers;
the solving of problems and the making of decisions and agreements. In
this textbook, the topic is generally that of business, not politics, policy,
hostages or other topics.
Opponent: a person or group you are fighting. Never use this word when
talking about negotiating. You should never fight negotiation
counterparts!
Party: a person or group in a negotiation. The same meaning as
counterpart, counterparty or negotiation partner.
POTE: partial open truthful exchange. Parties tell the truth, but not the
whole truth. Parties may wish to conceal certain information such as
 reserve price and items they want to offer as false concessions.
Principled negotiation: (sometimes called mutual gains bargaining) means
trying to increase the total value of the negotiation by developing new
ideas with your counterparts.
Reciprocity: (sometimes called the norm of reciprocity) refers to the back
and forth sharing of information among negotiating parties. When one
side gives a little, others are likely to give too. Do not give away all
your information at once in order to develop a comfortable exchange of
facts and ideas. Reciprocity not only relates to information – it also
helps to build up the relationship.
Relationships: the long-term connection between the people and
organizations in a negotiation
Reserve price or point: the maximum price a buyer is willing to pay. The
minimum price a seller is willing to accept. Also called “reservation
price”. If the negotiation issue is not about money, reserve point means
the most that a party is willing to give or accept in terms of concessions
or resources. Beyond the reserve point, there is no logic in continuing
the negotiation.
Stalling: intentionally wasting time to put pressure on the other side or
push them into a quick, unfavorable agreement. This tactic is not
recommended because time pressure is a double-edged sword!
Stereotype: a superficial description of a person based on a group, not
individuals. Stereotyping leads to misunderstandings if applied to
individuals. Stereotyping is only useful as a starting point for careful
research into what groups and individuals expect and prefer, as well as
research into their unique preferences.
Strategy: an overall approach to a negotiation. High-level strategies
include compromise, collaborate, collapse and avoid. At a lower level of
detail, specific strategies include the goals of the negotiation and the
sequence of moves necessary to arrive at the goals.
Synergy: working together to create new benefits that parties could not
manage alone.
Tactic: a specific effort to influence the negotiation, for example through
behavior, framing of offers, deceit, staged release of information or
increasing or decreasing the comfort level of the other parties. Tactics
may be hard or soft. Soft tactics can be used to develop a negotiation.
Hard tactics may bring short-term results but may also derail a
negotiation.
Threats: a hardball tactic. Do not threaten your counterparts because it will
damage the relationship.
Ultimatum: a strong offer or demand that must be agreed to immediately.
This is a high-pressure tactic. Typically these are offered at the last
moment. This tactic is easily defeated by extending your time and
continuing a calm discussion.
Walking out: a hardball tactic. Only walk out if your BATNA is good
enough to break off negotiations. Do not walk out in order to put
pressure on the other parties.
Walk away point: the same as reserve point.
Win/Lose: a very simplified form of thinking about negotiating. Suitable
only for distributive negotiations.
Win/Win: a more complex and better way of thinking about negotiating –
create a deal that all sides can be satisfied with. However, an even better
way is to create value for all parties by going beyond Win/Win and
discovering new synergy.
You can find additional useful definitions at
http://www.negotiations.com/definition and other websites.
Appendix II
Case simulations

Case: Inheritance far away

Theresa Powicki died at the grand old age of 97 in the city of

Wellington, New Zealand. She had a reputation as an active and
intelligent woman who decisively improved the quality of elementary
school education in Wellington. She named her grandson Thomas as
the sole beneficiary in her will* because he was the only living
relative. Thomas and his lawyer are the only ones who have read the
will. Thomas lives in Tokyo. He would visit his grandmother once a
year during vacation or Christmas. Travel was long and expensive: ten
hours of flying plus renting a car.
In the past few years, a husband and wife (Bob and Cheryl Willis),
not related to Theresa, who lived in the same town often took care of
the aging woman. They took her to the doctor or sometimes to church
or on excursions and helped with cleaning, even inviting her to their
home on holidays. The Willis family is active in the town,
contributing to the homeless center and volunteering at the fire
department. Bob is a junior high school teacher, and Cheryl lost her
job two years ago.
After her death and after the usual taxes and legal costs, Theresa’s
will provided the house, its contents and about $60,000 New Zealand
dollars (NZD) in cash and securities and, surprise, $500,000 NZD in
gold! Apparently Theresa had wisely bought gold from Willis Metals
(owned by a cousin of Bob’s) in the years before it became expensive.
There are many household items of value, totaling $40,000 NZD, that
are part of Thomas’ childhood memories. Of course, the value of
these items could be great if sold carefully in the proper place and
time, but they would be worth less than half that if sold suddenly at
one time. The house itself is worth $220,000 NZD to $280,000 NZD,
and perhaps even more if the economy improves in the next few
years.
Thomas was pleasantly surprised – he had not expected so much at
all. But then the will was contested by the Willises. They felt that the
care they provided was worth $280,000 NZD. Thomas responded
angrily, “You were just interested in getting her money, you didn’t
really care about her!” However, they said, “In fact, we did a lot while
you did nothing. You hardly ever visited and could never help when
she really needed someone. Anyway, who could have guessed she had
a lot of gold?” This conversation was reported in the local newspaper.
The Willises brought the case to legal court in the city of
Wellington. The judge froze the various properties until a decision
could be made. Thomas had this decision to make: avoid court by
taking only the remaining money and property and let the Willises
have their cash, or fight the battle in court. Of course, a court battle
would mean perhaps a few years of traveling back to New Zealand
and lots of worries. A win for Thomas would mean a share of the
inheritance being lost in fees to lawyers as well as travel. Worse,
losing the fight would mean paying those expenses as well as giving
up $280,000 NZD in cash.
Decision: Thomas will try negotiation to avoid going to court and
to avoid paying all of the $280,000 and to avoid the expenses of
travel, lawyers and so on.
 *A will is a document that indicates what to do with a person’s money
and property after he or she dies.

1. Is this negotiation mostly distributive or mostly integrative?

2. What are the interests of Thomas?
3. What are the interests of Bob and Cheryl?
4. Are there issues other than money that Thomas could integrate into
the negotiation?
5. Should Thomas, Bob and Cheryl negotiate directly or include
another person(s)? if so, whom?
6. Approximately, what are the reserve points that Thomas and Bob
and Cheryl should set before they start talking?
7. Is it possible for the parties to create value together?
8. What is Thomas’s BATNA?
9. What is the BATNA of Bob and Cheryl?

Case: Three-way joint venture

Background

Three companies are engaging in negotiations to form a joint venture to

produce an electronics product. The three companies have not done
business together before, but they all have international experience. The
companies include:
TouchPad, KK: A maker of electronic touch pads in Itami, Hyogo, Japan.
They are seeking a contract manufacturing company to produce a new touch pad for service
industry use.
Wushi Dalian: An electronics assembly company in Dalian (大連), China.
Taakto OY: A software company in Oulu, Finland.
The three companies have generally discussed their plans by email and
phone, but this is the first meeting of all three. The goal of this meeting is to
agree to a three-way joint venture, sharing investment, profits and risk.
Roughly, the three companies, Touchpad, Wushi and Taakto, expect to have
a 4:4:2 shareholding ratio, respectively.
In order to be successful, the three companies must combine their
resources to collect about $12 million in contributions (cash or other).
Therefore, they must consider the value of non-cash contributions such as
intellectual property, facilities, skills and so on. These non-cash
contributions might help to balance the cash contributions, or they might
make it impossible to manage the deal. If the potential deal is not
acceptable to the business needs and realities of one of the companies, then
that party should decide not join the deal.
Building on the Memorandum of Understanding (MOU, see the
following section), the parties must now decide how to evaluate the non-
cash contributions of each. Each side can be flexible in the short term, but
the long-term outcome has to be one that all parties believe is durable.
Generally, the three companies expect to provide the following elements to
the JV.

MOU: Taakto, Wushi, TouchPad

TABLE A2.1 TouchPad,Wushi,Taakto

TouchPad Wushi Taakto

Most of the
Design, operating User interface, certain client
manufacturing and all
system, marketing, and server software, post-sale
of the assembly, most
concept, most of monitoring, some investment in
of the non-cash
the cash investment cash, some in-kind expertise
investment
Each company has already agreed to a non-binding Memorandum of
Understanding (MOU). The MOU includes the following text:
The parties, TouchPad, Wushi and Taakto, announce their intent to form a joint venture (JV) with
approximate shareholding of 40:40:20, respectively. The activity and field of the JV shall be
touch screen control pads generally, with details of the following issues to be decided on during
negotiations:

TouchPad intends to take the role of OEM, designing the equipment, developing the
operating system, managing the overall concept and undertaking marketing, distribution,
after-sales support and all interaction with customers and end users.
Wushi intends to take the role of assembler with staff and facilities to assemble
components, sub assemblies, housings and so on. Likewise, Wushi will directly manage
certain sub-assembly and component companies that are located in China.
Taakto intends to design and develop the user interface, certain client and server
software, post-sale monitoring and some support services.

Case: OVD hosts a foreign investor and local

business

General background for OVD, GlobalDesign

and LCM
GlobalDesign is a Canadian company that designs and sells consumer
products for daily use, including many innovative products that might
be popular for a year or two or react to new technology. GD is proud
that it was the first company to bring products such as protective pads
and ergonomic grips to consumer electronics like tablets, smart
phones and the newest wearable technology.
Previously a vertically integrated manufacturer, the company
restructured in 2001 to become a designer and B2B/B2G marketing
company, leaving manufacturing and retailing behind. Most of GD’s
manufacturing has been done in China up to now, however a series of
 unfortunate incidents regarding corrupt officials has made them
consider doing business in Ruritania, a large and growing South East
Asian country. Ruritania also does not have a snow-white reputation,
but business acquaintances have said it is “not too bad”. GD has
reviewed several companies in Ruritania and asked Overseas
Development (OVD) to arrange several meetings. The first is with
LCM, a local contract manufacturing company.
OVD is a government agency. It exists to bring together foreign and
local companies. OVD’s charter allows it to make small investments,
take an equity share up to 20 percent in new companies (JVs or
independent firms) and provide expertise and facilitation in exchange
for payment, a fee or an equity position. OVD is hosting the meeting
in their downtown office.
LCM is a three-year-old company with a small plastics facility
outside the capital city. It has successfully completed several contracts
for US and Japanese firms. They are excited to meet with a large
foreign company like GD.

Case: AP and Shepard Fairey and HOPE

A case of copyright infringement

In 2008, the US presidential election saw hopes and excitement arise
around one candidate in particular, Barack Obama, who would later
be elected. The excitement inspired numerous artists to create works
based on then-candidate Obama. One of the most well-known and
enduring works was created by Shepard Fairey, an artist using stencil
art that had gained wide recognition. For more information about the
artist, see <www.shepardfaireyprints.com> and other sources.
 The artist based his work (see Figure A2.1, right) on a photograph
(see Figure A2.1, left) taken by photographer Mannie Garcia, who
was temporarily working for the news agency Associated Press (AP).
AP discovered the original photo was from AP in early 2010. AP
was upset to discover that an image that they had ordered and paid for
was being used to such wide acclaim – all of which went to Mr.
Fairey. Additionally, the image came to be sold on many day-to-day
objects as it became increasingly popular. The profits from these
objects went to the artist, not the photographer and not AP.
AP considered legal action. However, things were not so clear.
Their lawyers told them, “The picture has been changed – it will be up
to a court to decide if the changes are substantial enough that it can no
longer be considered the same picture. There are few guidelines and
precedents for this matter, so much will be up to the judge.” Further,
they explained, “The ownership of the photo is also not so clear. Mr.
Garcia was not a full time employee, so his images do not
automatically belong to AP. At the time, he was not even a part-time
worker for AP – he was a temporary hire and had not signed a
contract. Even though he was paid for his time and he submitted the
photos to AP, it is not completely clear who the rights for the picture
belong to.”
Meanwhile, the artist refused to discuss sharing the ownership of
the changed image or profits from it. Fairey claimed that under the
established rules and laws of “fair use”, he was legally safe in his use
and “reinterpretation” of the image.
With time, AP collected enough legal arguments to consider action.
At the same time, Shepard Fairey considered his legal strengths and
weaknesses; likewise, Garcia decided to let AP represent him. Both
sides gave long thought to the potential costs of a protracted legal
battle … and they decided to negotiate. But what should they agree
to?
Here are some facts and estimates regarding the case:
A court case of this sort could take six months to five years.
One or both sides could maximize delays in order to drive up
the costs and irritation for the other side. A single quick court
action might cost $50,000. A single lengthy court battle might
cost $2.5 million.
Shepard Fairey has used the art of other artists in much of his
work, ranging from his “Andre the Giant” series to
commissioned work for corporate clients. A legal loss to AP
would put him at risk of other lawsuits and potential losses.
Shepard Fairey claims that he and his design company (Studio
Number One) are nearly broke. This claim seems unlikely, but
AP has to admit that there would be additional time and cost
after winning a court case in order to get any money at all
from the artist.
AP estimates gross sales from products with the image before
2011 to be $5 million, and an additional $2 million per annum.
Fairey currently estimates gross sales from products with the
image to be $500,000, and an additional $200,000 per annum.
Independent observers estimate gross sales from products with
the image to be “closer to AP’s guess”.
Fairey claims that income from the Obama poster during the
election years was spent entirely on more posters – he
considers this to be legally a campaign contribution.
The cost of an independent audit would be about $50,000.
Independent observers estimate that the total market for
products with these images could range from $1 million per
annum to $5 million per annum depending on the popularity of
President Obama.
AP has agreed with the photographer, Mannie Garcia, that
they will represent him in the negotiations, providing some
share of the agreed outcomes to him.
FIGURE A2.1 Photo and poster
The AP photo, left and the Shepard Fairey poster, right. Source: Mannie Garcia/Shepard
Fairey/AP

Your assignment
Represent your client (AP/Garcia or Shepard Fairey) and come to an
agreement about at least the following points:

sharing of profits up to the time of agreement;

sharing of profits after this agreement;
statements by either side to the public in general;
protecting AP photos;
other issues, if any.
 Determine your goals, your reserve positions for your goals, your
BATNA and who will participate in the actual negotiation at the table.

Case: Shoe business coopetition

General information
Mr. Tang and Mr. Lee were colleagues in a division of the company
Runaway Sports1 in 1993, devoting their personal time to developing
a unique, dual-purpose roller-skate sneaker. For over three years, Tang
and Lee devoted their evenings and weekends to the project, working
through the research and development (R&D) process. The various
expenses of developing drawings and a 3D prototype were financed
by Tang Industries2 – Mr. Tang’s father’s family business. The unique
roller-skate sneaker was thus developed in Taiwan, and a patent was
first granted in Taipei in 1999 and classified as an invention3 type of
patent. Tang and Lee shared time developing their ideas, investing in
the product as a joint business venture to generate lucrative profits.
Further patent applications regarding this roller-skate sneaker were
submitted to over 50 countries in East Asia, Central and Western
Europe and North America. At this point, Tang and Lee left their day
jobs to work full-time developing their own business.
The original prototype was considered the personal property of
both Tang and Lee – under patent law, each co-inventor named on the
patent application owns that property. Patent law gives co-owners of a
patent the right to make, use, license, sell and import the patented
invention. Having gained the official patent license, Tang and Lee
shared the rights to their exclusive product. The priority of the patent
right prohibits other parties from producing imitation goods in the
countries where the patent has been granted, acting as protection
against intellectual infringement. Upon release, both Tang and Lee
had legal claim to future revenue, and for a while both Tang and Lee
seemed content.

History between Tang and Lee

Of the two, Tang was the more business savvy. Tang had an eye for
detail and benefited from having a strong family network, as Tang’s
father was a well-respected entrepreneur with manufacturing plants
throughout Southeast Asia. Lee’s physics background helped
distinguish what they were offering. His technical knowledge was
fundamental to the product’s inventiveness. Lee was confident that the
design and appearance of the prototype was sure to be a smash hit,
and his production design was both sleek and functional. The
prototype was to be the first dual-purpose shoe of its kind, and
although the R&D costs were substantial, both men were confident
that they could recoup the costs relatively quickly. Up until this point,
Tang’s family had financed the project from conception through R&D
and also through initial production, as Tang and Lee had encountered
problems getting credit to manufacture at the scale they desired.
Between 1999 and early 2001, patent applications in over 50
countries were granted, and the prototype was launched and
distributed throughout the world. The shoe sold especially well in the
domestic market of Taiwan, as what they had developed was truly
original. The annual revenue of this sneaker from global sales and
patent authorizations to other firms was $100,000 USD. Tang valued
Lee’s sense of design and agreed to share future profits with him on a
50–50 basis, despite Tang’s family having financed the R&D costs,
estimated at $40,000 USD. Their sneakers were marketed towards
kids and teenagers.
Conflicting interests

Lee thought Tang was taking credit for his contribution, and the two
had conflicting ideas on how the original prototype might be
improved. Unexpectedly and rather quickly, Tang and Lee parted
company in late 2001, soon after the original prototype patent had
been granted. Lee left Tang and moved to Europe to establish his own
company within two years. Tang also established his own business in
2001 as a sub-unit of his father’s business enterprise and utilized his
family’s network connections to distribute the roller-skate sneaker, as
his father’s business had trade links throughout Asia and the Far East.
From 2001 to 2003, both entrepreneurs implemented individual
business strategies and important new products loosely based upon
the original roller-skate sneaker. In 2013, Tang and Lee both released
their own second-generation roller-skate sneakers based on their
initial prototype. Tang released his second-generation sneaker in
November 2013 and mainly applied for patent design and patent
utility. Lee realized his second-generation sneaker in March 2013 with
a pending patent in invention and utility. Their second-generation
patents had unique attributes, and the shoes themselves were
redesigned for customers with different needs. The key features of
Tang’s second-generation shoe included a cool and easy adhesive
strapping. The shoes were hard-wearing and featured a cushioned
sole. Lee’s second-generation sneaker included a shock-absorbing,
foam-based material located in the shoe’s sole, inspired by his
background in physics. Bitter rivals, Tang and Lee quarreled over who
had had the original idea and spent a small fortune securing patents in
a variety of domains but also on litigation, suing one another over
breach of intellectual property and ownership.

Marketing positioning
In keeping with Tang’s price point, Tang’s roller-skate sneaker
became especially popular in the Far East as his shoe was
substantially cheaper (40 percent) to manufacture than the
competition in Europe. Lee’s roller-skate sneaker was more stylish,
comfortable and sold well to fashion conscious Europeans. His
business had to absorb higher production costs and focused on
developing products that were truly innovative.

TABLE A2.2 Tang and Lee second-generation products

Second Manufacturing Manufacturing Market Product key

generation price/pair location price/pair characteristic

Tang’s $13–
$5–$7 USD South Asia Fair value
shoe $17USD
$8.5– $18–
Lee’s shoe Europe Fashion
$11.5USD $26USD

TABLE A2.3 Tang and Lee comparison

Granted
Firm’s patents
Background Employees Key business network
turnover since
2001

1 South American
$850,000 invention countries and East and
Tang’s firm 12 people
USD 3 utilities Middle Asian merging
5 designs countries
 Granted
Firm’s patents
Background Employees Key business network
turnover since
2001

4
inventions
$450,000 European and North
Lee’s firm 5 people 4 utilities
USD American countries
15
designs

The two sports shoe entrepreneurs became bitter rivals, doing

whatever they could to get an edge over the other. Neither Tang nor
Lee were beyond poaching staff, and occasionally would go out of
their way to put the other’s product in a less than positive light.
It took many years before Tang and Lee could discuss matters
rationally. Not wanting to meet face-to-face, they appointed their
trusted business advisors to seek out an amicable solution to resolve
their long-standing dispute. As Mr. Lee’ trusted business advisor,
Helmut is expected to find a satisfactory solution to please his client.
Wei Wei is a trusted business advisor of Mr. Tang, and she is expected
to find a beneficial solution for her client. Both Helmut and Wei Wei
are patent clerks in private commercial firms, and have arranged to
discuss their clients’ concerns and negotiate on behalf of Tang and
Lee to find a mutually beneficial and satisfactory solution.
Note: A patent clerk in commercial enterprise is often an
investigator charged with examining patent applications to provide
consulting opinions to patent applicants regarding whether a claimed
invention could be potentially awarded a patent. Generally speaking,
the most important task of a patent clerk is to review the technical
information disclosed in a patent application. This involves reading
and understanding a particular application and then searching to
determine what technological contribution the application provides to
the public.
A patent is awarded for informing the public about special technical
details of a new invention, so the work of a patent clerk involves
searching existing patents, scientific journals, data resources and other
material for prior artwork (diagrams, etc.) and to verify an application
to determine whether it complies with the legal requirements. These
requirements are often substantially different depending on the
country in which the patent has been registered.

Further questions for consideration

What are the distinguishing attributes of their positions?

What are the dispute points?
What do Tang and Lee stand to gain by pooling their
resources?

Invention: a creation from a technical concept based on the

laws of nature (20 years duration).
Utility: a creation that has been made in respect of the form,
construction or fitting of an object (ten years duration).
Design: a creation made in respect to the shape, pattern,
color or their combination of an article (12 years duration).
1
a fabricated company name
2
a fabricated company name
3
There are three categories of patent in Taiwan: invention, utility and design.
Case: ZawaSoft and Pak-Ton

Background information
ZawaSoft and Pak-Ton are considering a partnership. ZawaSoft’s new
“On the Spot” software makes it possible for Pak-Ton’s electronic
batteries to last three times longer. Pak-Ton would like to license the
technology from ZawaSoft for its products (electronic batteries for
small electronic equipment up to 1kg). ZawaSoft has three
shareholders, each with a 20 percent share. According to newspaper
reports, the shareholders are aggressive about seeking profits within a
one to two year timescale.
Pak-Ton was established by a committed Zen Buddhist – this
philosophy and system of ethics remains a basis of the company
today. Pak-Ton publishes a quarterly newsletter relating their business
and ethics to Buddhism and has annual events with temples near
company offices and plants.

Case: Recruit the best!

Recruit the best!

FC Nürnburg is a club in the top league of Germany, the Bundesliga.

The club competes against top teams like Munich, Hamburg and so
on. Although Nürnburg has always been in this league, it has never
won the title and seldom performs strongly. The past two years,
however, have seen a significant improvement in the quality of play
and players and the number of victories. The club’s fortunes appear to
be headed upward!
This year FC Nürnburg is recruiting another leading player onto the
team. Financial resources are limited of course, so they are aiming to
get only one player. They hope they have found their new star in the
person of Bolas Chojonez. Chojonez is a shy and religious person
who taught swimming safety in his home country (which he misses)
and famously rescued two children from a flood there. He swims
daily.
Chojonez arrived from his native home of Philippines to the league
below Nürnburg’s two years ago. Each year he has improved,
especially last year. His opportunity to leap into one of Europe’s
leading leagues has come! It is this league that has produced World
Cup winners and legendary individuals, teams and coaches for 40
years.
Chojonez is now 19 years old, considered young for a football
player. If he can avoid injuries, he may have ten to 12 years of good
football ahead of him. Chojonez is considered among the top players
of the lower league, but has not been ranked within the Bundesliga.
The Nürnburg team pays starting squad players an average of
€500,000 per season (there are 18 games in a season), usually minus 5
percent for every missed game (if the game is missed due to injuries,
the player loses only 2 percent). First-year members are usually paid
less. In addition to the 11 starting team members, there are 20 other
members who play on practice teams and occasionally join the main
team. These players earn an average of €150,000 annually.
FC Nürnburg has a strong connection to the city’s community.
Players appear in public at kids’ programs and other events frequently
throughout the year. Popular players attract many daily emails and
letters as well as fans with signs at games; therefore, shirts with their
name and number sell well.
 Your task

Please come to an agreement that covers at least the following

contract issues:

salary;
number of years;
illness/injury compensation.
It is of course acceptable to come to no agreement.

Case: Sonde SA strikes a balance

General information for all participants

The Japanese affiliate (in Osaka) of Sonde SA has a small number of
French expatriates on the sales and design team – only ten. Of these,
five change annually, meaning that each person is in Japan for two
years. These expatriates arrive and leave with the Japanese fiscal year
(April–March). They expect to take three to four weeks of vacation in
August like most people in France; however, they are instead limited
to a few days during Obon, a three-day national vacation. As a result,
several of them stay home “sick” for a week or more in August and/or
September. At the end of two years, they generally stop working early
in March, staying home for almost one month. They say they are sick,
but probably they go bicycling in the countryside!
This intercultural simulation includes five roles. There are two
French roles (the site CEO and a representative of the French
 workers) and three Japanese roles (human resources manager, the
head of the sales and design team and a low level supervisor).
The French staff complains about the short vacation time loudly
and long each year.
Your job is to find a suitable solution. You will discuss and interact
with the following people:

HRM chief manager;

head of sales and design team;
French CEO of Japanese affiliate;
Japanese supervisor of the design team;
French worker (sales and design team member).

See Appendix VII for materials for each of the previous five roles.

Case: Cultural IP anime

Background
PXWX of Hangzhou, China is an animation firm that provides
animation services to various Japanese animation studios. The studios
in Japan develop the main content, ideas, characters, style and stories.
PXWX usually provides services such as coloring, background and
the many drawings that fill in the movement between key pictures.
This relationship has been stable for about ten years, during which
time PXWX has steadily increased its gross revenues, number of
contracts and number of customers in Japan.
RekiMan of Hirakata, Japan became a customer of PXWX about
four years ago and has enjoyed a good relationship with PXWX
 during that time. Reki-Man specializes in animations of historical
material and folktales targeting young adults.
Last year, PXWX began its first original animation series. It is for
the Chinese market. PXWX developed the style, characters, stories,
all animation sequences…everything, releasing the first series of ten
episodes to wide domestic acclaim. In the development process, the
storyboards (a series of pictures outlining the action) of an episode
were accidentally sent to RekiMan. RekiMan quickly returned the
materials to PXWX with encouraging comments about the quality of
the materials and PXWX’s project in general.
PXWX, however, only last week, was horrified to find that a work
order from RekiMan included a set of storyboards strikingly similar to
the ones PXWX had accidently sent to RekiMan. PXWX was
incensed!
They immediately notified RekiMan that they would start legal
action for theft of intellectual property in the Hangzhou city court
system. PXWX was quoted in a news article in the Hangzhou
Business Press complaining about RekiMan’s piracy. Further, they
told RekiMan that work would immediately stop on the current
project, though the contract was 20 percent ($300,000) prepaid and
only 10 percent of the work has been done. Finally, they told
RekiMan to stop work on their Yamashiro White Snake project in
Japan or face additional legal action in Japan.
RekiMan responded that they had in no way stolen anything from
PXWX and proposed negotiations to avoid court proceedings that
would destroy the relationship and be pointlessly expensive. PXWX,
feeling somewhat less heated, agreed to listen.

Case: Toyota Tsusho and Encana – second round

Background for Toyota Tsusho and Encana
In April 2012, Toyota Tsusho and Encana announced an agreement in
which Toyota Tsusho would pay $602 million to gain 32.5 percent of
Encana’s Horseshoe Canyon field. This field produces so-called dry
gas from coal beds at relatively shallow depths.
The development of coal bed methane (CBM) gas is not too
expensive because wells are neither deep nor high pressure. However,
when a field is mature, it does not produce gas so quickly. How much
gas remains in a developed dry gas field like the Horseshoe Canyon
play is quite well understood, so it is usually possible to know when
the field will be depleted and when the remaining gas will require
special expensive efforts to recover.
The 2012 deal includes 4000 existing wells and 1500 future wells.
The field has been in production for many years and the geology (and
output) is very well understood and very predictable. The deal is a
royalty interest deal in which Toyota Tsusho will get 32.5 percent of
the gas produced.
Toyota Tsusho was quite satisfied with the 2012 deal: it captured a
long-term supply of easy-to-handle gas with easily predictable
maintenance and running costs. So Toyota Tsusho sent its accountants
to sharpen their pencils and found some additional money it could use
for more gas field investment.
Toyota Tsusho and Encana are preparing new negotiations for other
gas fields or additional investment in some of the remaining part of
Encana’s Horseshoe Canyon play that is not part of the original
agreement (now part of Prairie Sky Royalty). Encana holds 60 percent
(78 million shares) of this company.
With Japan’s nuclear power plants almost all closed and unlikely to
restart soon and access to oil from Iran, Russia and other countries
seemingly always at risk, the appeal of energy from a politically
reliable source is great. Canada, a politically stable energy exporter, is
a great potential partner. Moreover, gas is much cleaner than the coal
that Japan imports from Australia, China, Indonesia and North
America. Japan consumes about 4,500 billion cubic feet of natural gas
annually, and about 4,300 billion cubic feet are imported. Total
[annual] primary energy consumption in Japan is over 20 quadrillion
British thermal units (Btu) (US Energy Information Agency, 2013).
In recent years, North American gas-producing companies are
avoiding investment in CBM as the price of gas has declined since
2011 and recovered only recently to prices between $3.50 and $4.00
per million BTU. Price forecasts are unclear. Even though most power
plants in North America have switched to gas from coal, supply seems
likely to stay ahead of demand.
In 2012, ConocoPhillips announced, “ConocoPhillips will virtually
cease capital spending on North American dry natural gas assets to
focus on projects that offer higher returns” (Magill, 2012). For that
company, and others, it meant a focus on oil and wet gas. The term
“wet gas” refers to natural gas that includes many complex
hydrocarbons, including highly valuable liquids (condensates). These
liquids are easy to transport (no condensing equipment or pressurized
pipeline needed), require less processing than crude oil and command
a high price. Dry gas, on the other hand, has less value and is usually
transported continuously and efficiently by pipeline, but requires very
little processing.
Encana has developed the Horseshoe Canyon play in accordance
with the Toyota Tsusho agreement, drilling in 2013 approximately
238 net natural gas wells and 45 net oil wells. Production after
royalties averaged approximately 335 MMcf/d of natural gas and
approximately 9.9 Mbbls/d of oil and NGLs. As of 31 December
2013, this play included approximately 1.7 million gross undeveloped
acres (1.5 million net acres) that Encana controlled (EDGAR SEC,
2014, p. 11). For the purpose of this negotiation, the 1.7 million acres
previously mentioned are not available for discussion.
 Gas prices appear to be recovering in North America, however
most analysts predict long-term oversupply. The light line in the graph
in Figure A2.2 shows the change in natural gas prices in North
America from Summer 2013 to Summer 2014. The dark line shows
the change in oil prices over the same time. Wise negotiators will
update the following information at any of several websites with
commodities data.

FIGURE A2.2 Oil and gas price movements

Source: money.cnn.com

Useful jargon for all parties

Bbl: a unit measure of oil, one barrel of oil. One bbl = 158.98
liters.
Btu: British thermal unit. A measure of energy, one cubic foot
of natural gas contains about 1030 Btu. Japan uses about
20,000,000,000,000,000 Btu of energy (all sources) annually.
CBM: Coal bed methane, gas that comes from coal located in
the ground.
 Condensate: natural gas condensate. A range of chemicals
found in natural gas and oil that can be used for making fuel or
plastics. These must be separated from the widely used dry
natural gas that is transported in pipelines and tanks to point of
use. The separation of condensates from gas usually occurs at
the wellhead or a processing facility in the pipeline.
Condensates are inexpensive to refine further (oil, for
example, is more expensive and complex to refine).

Condensate types (C1 – C5)

C1: methane (dry gas). The “liquid rich” gases are:

C2: Ethane
C3: Propane
C4: Butane
C5: Condensate (liquid, not a gas, composed of various
hydrocarbon chemicals)

Dry gas: gas that comes out of the ground with few or no
condensates. Generally, gas from coal beds (CBM) is dry.
Flaring: the practice of burning unused gas at the wellhead.
This practice is targeted by environmentalists as destructive
and wasteful.
Play: the meaning of “a play” in the oil and gas industry is an
opportunity to get resources from a certain geology. Example:
Barnett shale oil in Texas is a play that refers to oil in a certain
kind of rock found at a certain depth in a certain region. The
Alberta Bakken play means oil and gas in a layer of rock
covering more than 500,000 km2 below the surface in
Saskatchewan, Manitoba, North Dakota and Western Montana.
Many other wet and dry gas plays exist in North America.
 Royalty interest: “In the oil and gas industry this refers to
ownership of a portion of the resource or revenue that is
produced. A company or person that owns a royalty interest
does not bear any of the costs of the operations needed to
produce the resource, yet the person or company still owns a
portion of resource of revenue produced” (Investopedia,
2015).
Shallow gas wells: like CBM wells, these are usually low
pressure and therefore relatively cheap to build and maintain.
Wellhead: the point where the gas or oil well breaks the
surface. The wellhead is a structure immediately below and
above ground that safely maintains pressure and strength. If a
wellhead fails, there is usually an explosion, fire and
tremendous damage.
Wet gas: two meanings: 1) natural gas that comes out of the
well with high levels of condensates, or 2) gas that occurs with
water coming out of the well. The water must be disposed of
(expensive and requires special plans and permits).

Cubic feet

Mcf: thousands of cubic feet

MMcf: millions of cubic feet
Bcf: billions of cubic feet
Tcf: trillions of cubic feet
One cubic foot = 0.0283 cubic meter
One cubic foot = 28.3 liters

Case: Channel-Port aux Basques

General Information Port-aux-Basques and
AFD

Channel-Port aux Basques is a town of old fishing villages. It is one

of the oldest continually inhabited towns in Newfoundland, Canada,
founded in the 1680s by Basque fishermen from France and Spain.
Prior to that, Basque, French, Portuguese and Spanish fishermen
visited irregularly to trade with the aboriginal population, starting in
the mid-1500s. The town is some 900 km east of the city of St John’s,
Newfoundland’s main city. The economy is supported mainly by the
Marine Atlantic ferry terminal, which connects the Newfoundland to
Nova Scotia. In addition to the maritime history, the remains of the
rail station and some old boats make the town an interesting historical
location. The city managers will meet with a development agency to
seek funding to improve the local economy.

FIGURE A2.3 Newfoundland, Canada

Source: Google Maps
Case: Three party email negotiation – residential
real estate

General information for all parties

The following case is to be conducted by email only. The three parties

are:

vender – seller of the property, Mrs. Lee;

real estate agent – Wang Homes;
buyer – Mr. and Mrs. Pim (Thai couple).

The housing market in Asia has been growing. Lately, Asia-Pacific

housing markets are getting stronger (for more information see Global
Property Guide, 2014b). There are more and more foreign and
overseas buyers who are finding property prices affordable in
Malaysia. People now want to sell their homes, as they stand a better
chance of getting a good price for their property. Properties are selling
very quickly. The difficulty of finding reasonable prices is causing the
housing market to inflate. From a buyer’s perspective, a new influx of
homes has come to market, giving buyers more opportunities to invest
in different types of properties. Real estate agents are pleased to see
new opportunities opening up.
A married couple, Mr. and Mrs. Pim, are planning on settling down
and are considering raising a family together. After discussing
mortgage advice with various bankers, they are aware of how much
they are able to borrow. They have a good credit history and have
incurred no debts of any kind. Mr. and Mrs. Pim hold bank accounts
in both Singapore and Malaysia, and bank with the same globally
recognized financial institution.
Currently, Mr. and Mrs. Pim rent temporary accommodations in a
suburb of Kuala Lumpur (for more information see Global Property
Guide, 2014a), Malaysia, near to Mrs. Pim workplace, and a second
apartment in a quiet and safe area, close by Mr. Pim’s retired parents
in Singapore. Despite living in Malaysia for over three years, neither
Mr. Pim nor Mrs. Pim speaks fluent Malay or English. Mr. Pim speaks
no Malay whatsoever and spends at least six months of the year in
Singapore, working in the music industry. Due to the disadvantage of
language, the couple would like to use email to communicate and
negotiate with the real estate agency in Malaysia.
Mr. and Mrs. Pim have been actively searching for a house in
March and would like to have their own home by summertime. Mrs.
Lee is a teacher and would like to sell her house before the new term
starts. The real estate agency Wang Homes is responsible to Mrs. Lee
for selling her house in Kuala Lumpur, Malaysia (see the house
brochure, Ref. KLA03A, that follows).

How to conduct this negotiation

This is a five-day email negotiation. Participants are encouraged to

plan their e-negotiation strategy in advance. There is a suggested
maximum of ten emails that may be exchanged between each party.
The rules are simple:

a maximum of ten individual e-mails may be exchanged

between the buyer and the agent;
a maximum of ten individual e-mails may be exchanged
between the vender and the agent;
there is no word limitation and attachments are also permitted.
TABLE A2.4 Three party email negotiation: issues and initial planning

Cost Buyer Seller Agent

20,000 MYR (18

Renovation 9,000 MYR No sale, no fee.
months)
The higher the
White 3,000 MYR (six agent’s fee, the
Not in the budget
goods months) lower the
solicitor’s fee.
New 7,000 MYR (18
Not in the budget
furniture months)
House 1,000 MYR
1000 MYR
movers (furniture)
30 percent of gain
House gain above 220,000
tax 5000 MYR or 10
percent exemption
Included in
Agent’s fee
house sale
0.75 percent of
the cost of the
Solicitor’s
house sale that
fee
excludes the
agent’s fee
100,000 for 1
Stamp percent above to
duty 275,000 for 2
percent
900 MYR
Others
(rental)
Cost Buyer Seller Agent

If the house is sold for 275,000 MYR inclusive of 2.75

Example
percent agent’s fee (7562):
• The solicitor’s fee: (275,000 − 7562) × 0.007 = 1872
• The stamp duty fee: 100,000 × 0.01 + 175,000 × 0.02
= 4,500
• The total cost of the house, including legal fees, is
281,372 MYR.
Share the cost of the
Other house
agent’s fee between
299,000 MYR or Reducing agent’s
buyer and seller.
Property in fee for the seller.
Play time and await
BATNA Singapore (more Suggesting both
a higher offer, but
expensive, and parties split the
risk sacrificing the
more likely to be agent fee.
down payment on
an apartment).
new property.
275,000 MYR of
RP Furniture inclusive
house sale price
Asking
256,000 MYR 275,000 MYR
price
300,000 MYR,
250,000 MYR
Walk away including all
(about to lose profit)
costs

TABLE A2.5 Three party email negotiation: value claiming by party

Party Motive Needs Value-claiming points

Party Motive Needs Value-claiming points

Close to
The First time buyer No house
Raising a family transportation
buyer chain
links
No vehicle
Have little
money
Quick transaction Bank’s
Time pressure
initial agreement
on housing
No sale, agent makes no
market
bonus
Avoid addition
rent in Kuala
Lumpur
Strategic advantages of the
Getting bonus
Linking the location
The (source of
interests of Fairly new renovation
agency majority of
both parties condition. Good
income)
transportation links
Ready to move in
condition
Quick sale to reduce time
pressure
Company resources
Before the new term
starts A minimum value is
set at 250,000 MYR for
foreign buyer
The Down
Moving with Found the property
seller payment
Party Motive Needs Value-claiming points

Time urgency Ready to move out Selling

Mr. Lee on down pieces of furniture or
payment white goods
Good taste on the house
Highlighting the second
house project with the
same estate agent
No sale, agent has no
bonus

For the seller, deciding how to sell

If you can’t sell your home to the buyer, you may wish to take into
account whether the buyer:

is a first-time buyer;
has found a buyer for their own property. If so, is it part of the
chain of buying and selling and how long is the chain;
is your buyer paying cash, or are they more likely to get a
mortgage;
wants to move at the same time as you.

Five notes on selling

1) Price – a person can generally sell a house by lowering the

price.
 2) Differentiation from the neighbors – make the house
memorable (e.g. note high-grade windows, new roof, custom
designs and improvements such as a patio or conservatory).
3) Appearances count – remove all clutter from inside and
outside of the building. Potential buyers want to see a clean
and tidy house that is spacious.
4) Sweeten the pot – another way to attract buyers is to offer
incentives. For example, offer to reduce fees for a quick sale
or offer to pay the cost of moving. Offer a transferable
warranty or offer to introduce them to what is available in the
neighborhood.
5) Improve curb appeal – remove unsightly shrubbery. Paint the
front door or patch-up the drive. The first thing a buyer sees is
a house’s external appearance, and the way it looks compared
with the surrounding neighborhood will set your property
apart.

For the buyer, how much do you want for your

home

The estate agent in Singapore or Malaysia is responsible for obtaining

potential buyers. The agent would try to get the best possible price for
the seller. Just remember, the seller does not have to accept the first
offer put to them. The seller shouldn’t be rushed into making a
decision he/she may regret.
Decide what you are looking for in a property – whether you
require parking and/or a garden, a specific number of bedrooms, the
style and period may also be relevant, etc. Most importantly, consider
what you want out of the location – schools, commuting convenience,
shopping, noise levels and so on – do your research. This is likely to
be your biggest personal financial outlay in your life, so visit several
properties and be selective.

Accepting an offer

Even if the seller has accepted an offer, there is nothing unlawful

about a change of mind and accepting a higher offer from someone
else before you have exchanged the fee to take the seller’s home off
the market. The seller should also bear in mind that when an offer is
made and accepted, the potential buyer has the option to change
his/her mind. The buyer has 14 working days in which to withdraw.

Legal work

After the seller has accepted an offer, he/she is required to inform

whoever is doing the legal work. In both Singapore and Malaysia, this
is done by either a solicitor or licensed conveyancer. In Malaysia, a
solicitor works on behalf of both parties – seller and buyer. Recently,
however, it is becoming increasingly common for both parties to be
represented by individual solicitors: one for the buyer and a second
representing the seller.
When foreigners purchase any kind of property, the minimum value
is set at 250,000 MYR (for more information see Global Property
Guide, 2014a). To take the advertisement off the market, a letter of
offer/acceptance must be signed, and a 3 percent deposit is expected
from the buyer. Then, the sale and purchase agreement must be signed
within 14 days and stamped at the Stamp Office. It suggests the buyer
have a 14-day cooling off period, during which time they could
abandon the project; however, they would lose the deposit. From the
date of signing, the buyer has three months (maximum) to complete
the full transaction.
Ref. KLA03A

Wang Homes

House in Sri Hartamas

275,000 MYR INC.

Attractive, semi-detached townhouse built in 1900, with an art-

nouveau exterior. This period property is situated in the residential
area of Sri Hartamas, near Ampang. The neighborhood has access to
restaurants and a supermarket. The property includes four generous
bedrooms, office and a large living room leading to a modern fitted
kitchen. The property also includes two bathrooms. The ground floor
has access to two large storage spaces. Total living space is 130m2.
Excellent transportation links: a 350m walk to two bus stations and
800m to a metro station. Energy performance certification is rated at
the level of Standard.

Characteristics

1900
Year Garage No, shared driveway at rear
established
Semi-detached
Type Kitchen Separate kitchen
house
Excellent, art-
Interior Transport Metro and bus
nouveau design
Energy Boiler (six Windows Single-glazing throughout,
 years old) with authentic art
characteristics
Original oak-
Flooring Garden No, terrace decking
flooring
House tax 800 MYR/year Cellar No, but two large storages
Community Two bathrooms and two
No Bathroom
charge toilets

Ground floor

Entrance: 8.5m2
Storage underneath stair: 1m2
Tiled flooring
Toilet with basin: 2.5m2
Shared driveway (45 m2) with two further storage spaces towards the
rear of the house (10/12m2)

First floor

Landing and hallway: 7m2

Living room and dining space: 42m2
Terrace: wood decking 20m2
Office: 4m2

Second floor

Landing and hallway: 4m2

Two bedrooms: 13.5m2
En suite bedroom: 16m2
Bathroom: 7.5m2 (including wash basin, toilet and bathtub)

Third floor (attic)

Hallway: 2m2
Two bedrooms: 9/11m2
Note: The house price with INC, indicates that the agent fee is
included in the house sale.
Appendix III
Planning documents

Issue/reserve planning document, Brett

TABLE A3.1 Brett planning sheet, blank

Planning document – clusters

FIGURE A3.1 Cluster planning

Cluster planning is most useful for complex negotiations with multiple

parties.
FIGURE A3.2 Cluster planning, blank

Reserve line

FIGURE A3.3 Reserve line planning

FIGURE A3.4 Reserve line planning, blank

Backward planning
FIGURE A3.5 Backward planning
Source: Developed based on Lax and Sebenius, 2006, p. 234.

FIGURE A3.6 Backward planning, blank

Source: Developed based on Lax and Sebenius, 2006, p. 234.
FIGURE A3.7 Flowchart planning

TABLE A3.2 Modified Raiffa scorecard

TABLE A3.3 Modified blank Raiffa scorecard
Flowchart planning

This kind of chart takes some skill and practice to design, but it is very
good for your planning.
Diamonds show steps, and the last one in a series indicates the reserve.
Notes explain links among issues.

Issues, steps, reserve, scorecard

This planning document (a modified Raiffa scorecard) helps you to track
the positions between your preferred (1) and least desirable (reserve) steps.
You can include notes about linked issues or how to handle them in the
negotiation.
Appendix IV
Negotiation errors

Error: how not to give a concession

Analysis questions:

What did the sales team give? _________________________________

Why?
_____________________________________________________________
____
What did the buyers give? ___________________________________
Why?
_____________________________________________________________
___
What do you think happened to the sales team after this?
_____________________________________________________________
___
Write a sentence or two for the sales team to correctly offer this discount:
_____________________________________________________________
___
_____________________________________________________________
___
_____________________________________________________________
___
Negotiator’s Oath, according to Simon Hazeldine in Bare Knuckle
Negotiating (2006, p. 54):

I solemnly promise never to give something for nothing!

Error: when to go slow

TABLE A4.1 Error: when to go slow

Nonaka: Let’s start with the price – is $5.50 Nonaka should now realize
per unit OK? that $5.50 was very favorable
for Tanaka. Nonaka should
Tanaka: Sure! Now let’s talk about delivery have opened higher to gain
time. value for his company.
What can Nonaka do? The opportunity to get a higher price has gone. The
opportunity to get a concession for coming down has gone. Nonaka can try
to be more careful on another issue and link it to the price.
Now Nonaka has made an
Nonaka: OK, delivery time. This is difficult
offer and found out more
for us because of the busy season.
about what Tanaka needs.
Nonaka’s offer is well
We are scheduling the work for the end of structured, getting plus $0.75
October. but not committing to an exact
time.
Tanaka:We need to get the work somewhat Now, Tanaka has a reason to
sooner … consider paying more and the
two parties can explore the
situation constructively.
Nonaka: Sooner? Do you mean September? In the end, Nonaka can drop
the price again, but only if
there is a gain in some tangible
Tanaka: Actually early August would be or intangible way that is
the best. important.
Nonaka: We could manage that, but set up
and preparation will not be as efficient. If
you are willing to pay a little more, $6.25,
we would be able to manage around the
first week of September.
Tanaka: Well, in that case …
But let’s think about Tanaka’s quick answer, "Sure!"What did that quick
answer signal to Nonaka? By answering so quickly, Tanaka let Nonaka
know that the price was too low. As a result, Nonaka knew to try to
increase the price. Nonaka is a smart negotiator who got good value for his
company without damaging the other company.
Error: watch your BATNA

The following case shows a major US company that could not back out of a
project after a public commitment that damaged their BATNA.

Case: The very public offer

In 2011, Hewlett Packard (HP), the well-known electronics company

that led Silicon Valley from its earliest days, acquired Autonomy, a
leading UK software and services provider.
In early summer 2011, the CEO of HP, Leo Apotheker, and his
counterpart at Autonomy, Mike Lynch, discussed the possibility of an
acquisition. At the same time, other US companies considered making
offers to buy Autonomy. In the following weeks, however, those other
companies rejected acquiring Autonomy. Nonetheless, on 18 August,
HP announced in a press release that they would attempt to take over
Autonomy, paying about $10.25 billion, a 64 percent premium to the
stock price. The same press release announced the closing of HP’s
$40 billion personal computer business and the WebOS tablet and
smartphone division, in order to refocus on software services. Lastly,
the press release disclosed that HP held $13 billion in cash for any
and all business use.
Autonomy, meanwhile, had run out of potential buyers. With the
formal acquisition offer, HP would have to pay significant penalties in
the UK for cancelling the takeover, unless serious troubles came to
light on the side of Autonomy.
 Observers and analysts immediately criticized HP’s plans and their
stock priced dropped significantly, from about $32 to about $23 that
week. The CEO was severely criticized and then fired on 22
September. On 28 September, Oracle released a statement that they
had found Autonomy too expensive at about $6 billion (Oracle, 2011).
Nonetheless, the new CEO at HP, Meg Whitman, approved the
acquisition at a premium greater than 70 percent on 3 October 2011.
How was it possible for Autonomy to leap in value from $6 billion
to $7 billion to about $12 billion in a few months in the eyes of HP,
even as its CEO was criticized and fired?
To answer the previous question, consider the following questions:

1. What was Autonomy’s BATNA? Was it strong or weak?

2. What was HP’s BATNA before the press release of 18
August? And after the press release?
3. What was in the press release that informed the world that
HP could not reverse course?

Some answers can be found in the HP press releases of 18 August:

http://h30261.www3.hp.com/phoenix.zhtml?c=71087&p=irol-
newsArticle&ID=1598003
http://www8.hp.com/emea_africa/en/hp-news/press-
release.html?id=1051736#.U9UD5PmSzX5

And 3 October:

http://www8.hp.com/us/en/hp-news/press-release.html?
id=1373462#.U9b-jvmSw3k

And in these news articles (feel free to search for additional related
articles):
 http://www.bloomberg.com/news/2011–08–18/hp-said-to-be-
near-10-billion-autonomy-takeover-spinoff-of-pc-
business.html
http://fortune.com/2012/11/30/how-hps-meg-whitman-is-
passing- the-buck

Comments on the H-P Autonomy case

Before the announcement of 18 August, HP had the choice of buying

other software companies, though none had seemed so appealing.
However, with $13 billion, it could have acquired several smaller
companies, looked for other large companies or chosen other ways to
make use of the money. Therefore, it had a reasonably strong
BATNA.
Autonomy had a weak BATNA – they could continue as an
independent company with little organic growth (this was known to
HP and other companies that considered acquiring them) or try to
make more acquisitions. They were not able to find another company
to acquire them. After discussions with various companies in early
summer 2011, HP seemed to have the stronger alternatives.
However, after 18 August, Autonomy’s weak BATNA was better
than HP’s. The press release of 18 August showed that HP was betting
almost all its money (more than $10 billion of $13 billion total) on
one company, at the same time they were starting a major
restructuring that would end their PC business and its profits. To Mike
Lynch at Autonomy, and most readers of the press release, it seemed
that HP had no choice but continue with the acquisition. HP had
publicly destroyed their BATNA. Unsurprisingly, Autonomy raised its
price.
On top of damaging their own BATNA, HP made it very difficult to
stop the transaction because they had too much momentum in the
 project (full restructuring plus acquisition), as well as ego and
credibility at risk among board members. About a year after the
acquisition, HP admitted an $8.8 billion loss.

Error: back table out of sync

In the fictitious case that follows, we can see how a manager brought back a
result that was unsuitable for and unacceptable to upper management.

Case: Not what the boss really wanted

Alaana informed Jowa of his assignment to complete a deal with

Artix, Inc., a customer, for their cooperation in developing an
improved version of pallet lifting equipment. She said, “Please
negotiate the details with Artix regarding the commitment of hours
and staff, as well as the expectations of each side. Above all, we have
to keep our costs down and keep ahead of our competitors.”
Despite this fairly vague statement of goals, Jowa researched the
relationship with Artix, learned about the individuals he would talk
with and put together a reasonable agreement committing both sides
to exchanges of information, discussions, testing and so on. The
agreement put much of the burden for action on Artix and avoided
exposing Jowa’s company to open commitments of staff and time.
When he brought the draft agreement to Alaana for approval, she
looked somewhat annoyed. “You let them take over the project! They
will have so much of the inside knowledge that they will not need us.”
She then negotiated a new agreement without the support of Jowa.
 Jowa thought this result was unfair – he had made an agreement
that bound Artix to them, not one that would allow the other side to
dominate the partnership. However, he realized he had not kept in
close enough contact with Alaana. He had let the negotiation get out
of contact with the back table.
Appendix V
Cultural differences

This appendix contains a few more cultural notes based on the research of
Hall, Hofstede, Trompenaars and Hampden-Turner, as well as others. None
of these cultural differences can always and reliably be found in any
culture; please refer to the discussion in Chapter 4 on culture and
stereotyping.
Review of Chapter 4: culture and behavior expected at a national level does not always apply to
individuals, so therefore thinking that all people from one country will behave similarly is false.

Additionally, please consider that experienced negotiators from any

country may intentionally neither react nor behave like most people in their
home culture.

Showing emotions

Generally, most North Americans, Europeans and people in these language

groups show their emotions more obviously than East Asians do; culture
researchers call this being affective. Affective means that they are more
likely to show that they are frustrated, satisfied, happy, uncomfortable, etc.
by speaking or by body language Although they show emotions easily, they
may not be able to read emotions well!

Reading emotions
Generally, the cultures of North America and Northern Europe are low
context, which means they may have difficulty reading facial expressions,
tone of voice and other body language. They prefer to get information in the
form of direct words and phrases.
The result is that affective, low context cultures communicate a lot of
information, but cannot read the same information as well from opposite
cultures. Therefore, East Asian negotiators may be able to clearly
understand the feelings of counterparties from those cultures. But the North
American and Northern Europeans may not be able to read the East Asian
side.

Advantage for …

Unless one side is trying to deceive the other, there is no deep advantage.
But there is a strong chance of miscommunication because North
Americans and many Europeans could fail to understand the East Asian
side. Therefore, the East Asian side should make their feelings about
progress, satisfaction, likes and dislikes clearly and explicitly known in
words to negotiators from North America and Europe. How? They should
try to put their feelings into words, and they should try to use stronger body
language with some cultures than they use in their own culture. This
process is called accommodating the other side. Do not try to completely
accommodate negotiators from other cultures, but do try to be sensitive and
a little bit accommodating as you communicate with them. Adjusting in
small steps will help the mutual accommodation of all parties.

Too much cultural accommodation

If both sides accommodate too much, no one will be able to correctly

understand their words and body language. What to do? Accommodate a
little, but not too much. Accommodate more as you become more deeply
familiar with local expectations and practices. When you are not sure, ask
for information using simple sentences and get advice from individuals with
high experience in your culture and the culture you are targeting.

Building trust across cultures in negotiation

Jang and Chua (2011) identify a difficulty that negotiators face when
dealing with parties from other cultures. The very behaviors that help you
build trust in your culture may cause misunderstanding and mistrust with
parties from other cultures. With people from your own cultural
background, you know and can use the correct combinations of phrases, the
right kind of eye contact, appropriate posture and so on that leads toward
trusting relationships. Your idea about this script of actions might, however,
lead to the wrong results with people from other backgrounds. In order to
manage this process and to learn suitable approaches and scripts of action,
Jang and Chua suggest active learning of cultural intelligence (CQ). You
can learn more about CQ at http://www.culturalq.com.

Time

People from different cultures may understand time very differently. Most
North Americans and many Europeans feel that time must be used
“effectively to gain progress”. In negotiations, they may have limited time
available and feel pressure to finish an agreement. Because of this pressure,
inexperienced negotiators may give concessions when they get close to
their deadline.

TABLE A5.1 Misunderstanding perceived value of time

Conversation Comments
Conversation Comments

This negotiator is showing his

Smith: I can’t believe it – we impatience. Within the US, this would
have been talking about this all be an easily understood signal that
day with no conclusions! means: “Let’s stop wasting time and
agree to some concrete details.”
Outside the US, Smith’s words might be
misunderstood in many ways.
This negotiator does not recognize the
Tanaka: I see. Can we discuss the
signal from Smith and continues with a
part about marketing again?
slow process.
Smith: Why? We talked about it
for 45 minutes! It’s clear that you
don’t care about progress. That’s Smith gets even more upset.
enough. Let’s move on to some
solid numbers.
Tanaka: Ok. Let’s move on to the Tanaka seems to understand the need to
related data. We should analyze move on. But he did not communicate
this together. It will only take a his understanding to Smith. Worse, he
few hours. suggested another long, slow process.
Smith: No. Maybe we should not.
Smith has given up and ran. Even if we
I have to visit a company in
consider Smith too impatient, this is a
Taiwan. I hear they like to do
failure for both Smith and Tanaka.
business fast.

TABLE A5.2 Improved conversation about time

Conversation Comments

This negotiator is showing his impatience.

Conversation Comments

Smith: I can’t believe it — we have been talking about this all day with no
conclusions! Tanaka: I see.___________________________________

Smith: OK — I feel that "time is Now Smith knows that Tanaka

money," but I am willing to understands, and the relationship is not in
discuss .. . danger of collapse.

In many cases, negotiators with a more flexible idea of time have been
able to win significant benefits from negotiators who panicked because of
time limits. Experienced negotiators from any culture will not react to time
pressure this way – they will manage to avoid time limits. Consider this
hypothetical conversation between a US negotiator (Smith) and one from
Japan (Tanaka).
Let’s improve this conversation so that it becomes a positive event. If
Tanaka has enough experience, he will know how to react to Smith. Please
write what Tanaka should say and do.
Appendix VI
Stakeholder analysis

What is a stakeholder? Stakeholder definitions:

The Project Management Body of Knowledge (PMBOK) says that a stake-holder is “a person or
organization that is actively involved in a project or whose interests are impacted by the
execution or completion of a project.”
(Project Management Institute, 2013, p. 376)

A person or organization that has an interest in the project or who could be impacted by it.
(Grisham, 2010, p. 77)

The people and groups of people who have an interest in the operation and who may be
influenced by, or influence, the operation’s activities.
(Slack, Brandon-Jones and Johnston, 2013, p. 43)

Central and peripheral stakeholders

It is useful to describe stakeholders based on how active or important they

are to a project.
Figure A6.1 shows stakeholders that are central and peripheral to a
negotiation course. Please consider who they are and why they are central
or peripheral.
FIGURE A6.1 Central and peripheral stakeholders

Are the lists complete? If not, please identify stakeholders not included
previously.

Central Peripheral

A list of stakeholders should be as broad as possible. Are you a

stakeholder in a bridge being built in your town? Probably yes – after all,
you and your family pay taxes for that bridge, and you or your visitors and
suppliers may use it. With such a broad and open-ended idea about
stakeholders, we need to sort the stakeholders in other ways to better
understand and react to them.

Power/interest grid
How can we accurately identify some stakeholders as more or less
important or powerful, and thereby understand how the project manager
should handle them? Figure A6.2 provides a simple tool for assessing and
managing stakeholders.
See also page 249 of the PMBOK Guide, Figure 10–4, as well as other
comments on analyzing and managing stakeholders, in Chapter 10 of the
PMBOK Guide.

Warning – they don’t stay in one place!

We have put stakeholders into categories: central, peripheral, high interest,

low power, etc. But stakeholders are people, or groups of people, and
therefore they can change. A high-interest stakeholder at the start of a
project might retain power but lower their interest as the project develops.
For example, a bank lending money to a contractor may strongly shape the
timing, scale and activities of the contractor, but most of that shaping will
happen as the loan is being agreed to. Afterward, the lending bank still
retains power, however it is likely to lose interest and unlikely to use that
power unless payments are late.
FIGURE A6.2 Power interest grid

TABLE A6.1 Stakeholder analysis, blank

 In another example, an environmental activist group may have low power
until a project to build a new factory is underway. After the local residents
see the earthmoving equipment, they may suddenly join the environmental
group, helping to move it from high interest/low power to high interest/high
power.
The lesson is this: after you understand the stakeholders on all sides of a
negotiation, you must regularly review your information and change your
actions toward the stakeholders appropriately.
Use the following case to complete Table A6.1. Answer the “how to
handle” column from the point of view of a UK government official.
Careful internet searches will provide additional information.

Case: Sensitive foreign investment

In 2014, Huawei, the Chinese electronics maker, made an equity

investment in XMOS, a UK technology company. XMOS has several
corporate investors including Xilinx (US) and Bosch (Germany).
Huawei was blocked from some commercial activities and sales in the
United States in 2013 due to the sensitive nature of the top-
performing equipment.
XMOS makes semiconductors, especially for the rapidly growing
“internet of things”. Making a point that Huawei was welcome to
participate in this industry in the United Kingdom, the Prime Minister
welcomed the company in 2012. The move puts Huawei ahead of
competitors in Taiwan and moves them closer to equality with
electronics makers from the US and Japan, who already have a strong
presence in the UK.

1. Who are the stakeholders in this case?

2. What should be expected from them?
 3. What can those stakeholders expect?

Use the stakeholder analysis Table A6.1 to consider the parties and
their interests.
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Moore, C. W. and Woodrow, P. (2010). Handbook of global and

multicultural negotiation. Jossey-Bass: San Francisco, CA.
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Index

accommodate 8, 9, 107, 140, 210

active listening 29, 68, 69
alternative dispute resolution (ADR) 87, 115
American, north 29, 33, 61, 62, 65–7, 158, 160, 179, 185, 209, 210
American, south 24, 29, 179
arbitration 87, 124, 153, 156, 158–9
avoid (strategy) 8–9, 11, 19, 63, 114, 124, 139, 155, 169

back table 12, 46, 65, 68–9, 127–8, 136, 144–5, 167, 206–7
backward planning 51–2, 198
bargaining 39, 167, 168
best alternative to a negotiated agreement (BATNA) 2, 13–14, 26, 32–4, 36, 44–5, 48, 86–7, 105,
110–12, 115, 124–5, 163, 167–9
bias 128, 143–7
Buddhist 157, 181

Canada 90–2, 113, 160, 185, 187–8

Canadian 92, 93, 174
China 20, 36, 58, 71, 76, 92–3, 173–4, 183, 185
Chinese 36–8, 70–2, 75–6, 90–3, 110, 151, 183, 216
cognitive bias 128, 143–4, 147
compromise (strategy) 8–9, 11, 114, 169
conflict 5, 52, 56, 63, 92, 117, 135–6, 139–40, 178
cross cultural 63, 151
cultural intelligence (CQ) 210

deadlock 26, 56, 65, 75, 87–8, 148, 159, 168

deal breaker 51–2, 80, 168
deceit 168–9
decision maker(ing) 67–8, 71, 84–5, 143, 146–8, 153, 166, 168
distributive 5–8, 13, 16, 27, 139, 164–5, 168–9, 172

empathy 10, 12, 19, 21–5, 29, 42, 120, 168

ethical(s) 22, 50, 107, 109, 112, 121–4, 181

false concession 103–4, 168

flowchart 35, 199, 201

gender 73–4

high context 63
humor 100, 119–21, 151

impression management 25–7, 106

inconsistency trap 19, 111
intangible 8, 27, 53, 55, 166, 168, 204
integrate 30, 42–3, 59, 65, 129, 172, 174
integrative 5–8, 12–13, 16, 27, 43, 79, 168, 172
intercultural 22, 44, 62, 150–1, 182
interests 2, 5–7, 21–5, 30, 36–8, 40, 45, 49–51, 53, 55–6, 76, 111, 113, 116, 135–7, 168, 172, 178,
191, 213, 216
intuition 69, 146
Islamic 158

Japanese 6, 22, 33–5, 61–2, 67–70, 112, 127, 174, 182–3

Kepner-Tregoe 146–7

lies 111, 118

link(ing) 12, 32, 42–3, 59, 85, 87–8, 99, 106, 110, 117, 168; delink 12, 32, 42–3, 59, 85, 87–8, 99,
106, 110, 117, 168; linkage 168
low context 63, 66, 209, 210

mediation 117, 156–9, 169

modeling 135, 137, 146

new value creation 7, 40, 164

ombudsman 159

perspective taking 19, 23, 25, 29, 57, 188

persuasion 100, 117, 118
position 5, 13, 16, 22, 38–41, 51–2, 58, 60, 63, 70, 81–2, 85–6, 88–9, 104, 112–15, 150, 157, 159,
174, 177, 180, 201
power (in relationships) 9, 12–14, 37, 64, 98, 129, 214–16
principle based negotiation 38, 139
problem solving 3, 5, 13, 55–6, 70–1, 73, 75, 93–4, 96, 99, 113, 128–9, 132, 135, 143, 157–8, 163,
165, 198

reciprocity 19–21, 29, 104, 169

relationship 9–12, 14, 19–22, 24–30, 38–9, 44, 49–50, 56, 62, 66–7, 69–71, 75, 82, 86, 91–2, 94–6,
99–100, 104, 106, 109, 111–14, 118–22, 132, 135, 140, 142–3, 150, 153, 156, 159, 164–6, 168–9,
183–4, 200, 207, 210–11
renegotiation 69, 105, 153, 155–6, 161
research 3, 23, 29, 31, 46–7, 51, 58, 67, 69, 98, 105, 112, 124, 135, 144, 166–7, 169, 177, 192, 207,
209

satisfaction 22, 27–9, 79, 94, 118, 135, 143, 144, 157, 162, 166, 210
scorecard 49, 53–5, 200–1
shutdown moves 88–90
stakeholder 10, 12, 45, 52, 69, 113, 116, 129, 166, 213–15
strategy 8–13, 51, 73, 91, 113–14, 163, 168–9, 189
supportive interaction 148
synergy 40–1, 106, 139, 169

tacit knowledge 137, 149

tangible 8, 27, 28, 53, 55, 111, 166, 168, 204
team building 149
teamwork 147–9
threat, threaten 2, 13–14, 26, 37, 39, 69, 75, 86, 114, 118, 169 3d Negotiation 3, 16, 22, 31, 33, 44,
50, 51, 163–4, 168
training 6, 8, 66, 130, 157

visual communication 93–4, 96

war gaming 135–7, 149

wasaata 158
win-win 9, 38, 40, 169
Notes

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