Negotiation II

I have been dragging this post for too long, too long that I felt that if I don't start and finish it by now I'll forget about it sometime.

Ok to answer the 3 questions I have brought up earlier:

I. What is negotiation?

II. What are the criteria of effective (and successful) negotiation?

III. What are the factors that affect decision?


First I would like mention the 3 key concepts of negotiation：

1. BATNA: Best Alternative To Negotiated Agreement -- what you will get if no deal or agreement is arrived, or say, the opportunity cost of this negotiation

2. Reservation Price: the value (both maximum and minimum) at which it will be indifferent for you to enter or not enter into the agreement, or in other words, your bottom line

3. ZOPA: Zone Of Possible Agreement -- the (known and unknown) range between the parties' reservation prices, or the bargaining range

To arrive at effective negotiation, one can never leave out these 3 concepts. Your BATNA determines where your bottom line is, and your bottom lines determine the range of your bargaining power. Another thing to keep in mind is that, do not ever assume zero-sum game. Many people tend to think that whatever gained by you would be my loss and vice versa. That is not true. As long as the final deal falls between your bottom line and that of the other party, both of you are benefiting from the agreement.

What negotiation is really about, I would like to refer it as a Mutual Gain Approach (MGA) for the negotiation parties. It is important for both parties to clarify their interests and at the same time, create mutual value instead of distributing (if possible), that is to say, enlarge the pie before dividing it.

the Mutual Gain Approach has been summarized to the following points:

1. Always come prepared --analyze your own and other party's BATNA

2. Negotiate totality of agreement instead of one issue at a time

3. Clarify interests

4. Identify opportunities from the differences --relative value, risks, expectations etc

5. Attempt to CREATE mutual value before DISTRIBUTION

6. Present ALTERNATIVE PACKAGES

It's pretty simple to list down these points as one's checklist or so, however what is most crucial is to keep them in mind while negotiating. and that usually is the most difficult part. The first trap of negotiation is COMPROMISE. When you start to consider lowering your price, have you thought of offering an alternative or something in extra for the other party? If you can provide an alternative package, it might create much more value and incentive for the other party and at the same time make your offer more attractive.

Other than that, it should be noted that most negotiations are not a one-time off deals. Thus one should try not to push the negotiating party to their very bottom line. Sustainable cooperation is the key.


So what are the factors that affect decision in a negotiation?

(to be continued next time)