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The goals of the negotiation

Discuss about the Cultural Analysis Of The Underlying Assumptions Of Negotiation.

There are certain goals, topics or issues which are required to be addressed at time of negotiating a merger. They are as follows:

  • Price for the banquet hall
  • Long term cost
  • Payment conditions
  • Legal formalities
  • Time period of the agreement.
  • Increment percentage
  1. Dividing the topics into groups

Our negotiation topics and importance rating

Topic/Issue

Very important

to us

Important

to us

Scarcely important

to us

Price

ü 

Long term cost

ü 

Conditions of payment

ü 

Legal Jurisdiction

ü 

The time period of agreement

ü 

Increment percentage

ü 

Other settlement issues

ü 

Topic degree of importance vs. our possible relationship with the counterparty

A strong interest in achieving the outcomes like getting the deal and winning the negotiation, with little or no effect on the relationship reflects a competitive (distributive) strategy. Whereas a strong interest in focusing only the relationship goals such as building or enhancing a good relationship with the other party reflects an accommodation strategy. If both type of goals are important, then negotiator should opt for a collaborative (integrative) strategy (Baber & Fletcher-Chen, 2015). 

In case of negotiation, it is always better to have a collaborative approach rather than a distributive one. In a contract, if the party shows a little defensiveness, then the negotiator must explain the intention behind his actions, thus facilitating a collaborative settlement instead of changing other’s perspective. So, the negotiation regarding acquiring a company will be carried out with a collaborative approach (Carrell & Heavrin, 2008).

Goals vs strategy

Topic

Negotiation strategy (distributive/collaborative)

Price

Collaborative strategy must be used so that mutual benefits can be gained.

Payment Conditions

Distributive strategy must be applied so that payment can be done faster

Legal requirements

Collaborative. It helps in making the legal formalities easier and yield more.

Time period

Should remain inflexible so that the process of negotiation can be completed on time.

Percentage of Increment

Distributive strategy is used.

Other issues

Should be solved with mutual understanding.

Determining your minimum/maximum goals and BATNA

Our BATNA?

Our BATNA will be to look for the other banquet halls where we get our reasonable return of 20% and more.

Minimum objective

Maximum objective

Price of banquet

To receive an amount that covers the expenses.

To keep the price as high as possible.

Long term cost

To keep the cost low as much as it is possible.

To get maximum benefits.

Payment terms

To have the suitable payment method

To receive the payment amount quickly.

Legal formalities

To avoid the penalties

To keep them simple and less in numbers.

Time period of the agreement

Shorter time period.

Make the sale as quick as possible.

Increment percentage

To have a minimum of 20% increment.

As high as possible.

Other issues related to settlement

To be done with the mutual understanding

Avoid the conflict of interest at time of settlement

Analysis of the situation from the counter party’s perspective

Other party’s BATNA?

To look for other banquet halls where less increment is required to be paid and which have proposals better than ours.

Degree of importance of each of the other party’s topic

Topic/Issue

Very important

to them

Important

to them

Scarcely important

to them

Price

ü 

Long term cost

ü 

Conditions of payment

ü 

Legal Jurisdiction

ü 

The time period of agreement

ü 

Percentage of increment

ü 

ü 

Settlement issues

ü 

Other party’s minimum and maximum objectives

Minimum objective

Maximum objective

Banquet price

To pay the amount as low as possible.

To pay the reasonable and affordable price.

Payment terms

To choose the suitable method of making payments  

Make quick payments

Legal formalities

To avoid the penalties and other issues

As few as possible

Increment

To avoid paying the increment.

To pay the minimum increment on the initial price.

Settlement issues

Resolve them by mutual Understanding

To solve them in their best interest.


Do we understand ZOPA?

A Zone of Possible Agreement is that situation where the seller and buyer both agree at a price that will benefit both of them. It is also called bargaining range (Gates, 2011).

  1. A possible exchange between the parties

Topic/Issue

Rank of priorities in our hierarchy

Rank of priorities in our counterpart’s hierarchy

Price for the hall

I

I

Cost in long term

I

II

Payment conditions

I

II

Legal requirements

II

II

Time period

II

II

Increment.

I

II

Issues related to settlement

III

III

Our position assessed by our counterpart

There are several tactics used for changing the perception of other party in a negotiation process. The other party must be aware of our BATNA and priorities. One tactic used is to behave well with the counterpart and make them understand the conditions and the priorities as it will help in changing their perception (Luecke, 2003). The other party must be aware of the issues that are very much important to us and that are least important to us. As per their assessment, our priority is the price of acquiring the company and solving the other issues with collaborative approach (McCarthy & Hay, 2015).

  1.  Our objectives as assessed by our counterpart

Topic/Issue

Rank of priorities in our hierarchy according to our counterpart

Should we plan to change that perception?

Price or consideration amount

I

No.

Cost in long term

III

Yes.

Conditions related to payment

I

No.

Legal jurisdiction

II

No.

Agreement time

I

No.

Increment  

I

No.

  1. Balance of power

Topic degree of importance vs. our possible relationship with the counterparty

The issue of power in negotiation should be looked at objectively and psychologically. The objective advantage of the negotiator depends on how much real advantage (objectively measured) we have, while the psychological one comes from the subjective assessment of the counterparty.  If, in the opinion of our opponent, we have the advantage, then indeed we do. If however, the counterparty considers us to have little power (weak), then regardless of how attractive our offer is, we will be regarded as having little power.  We should, therefore, conduct an analysis of the balance of power, consider the consequences of different options and, if necessary, try to make appropriate changes (Barry, Lewicki & Saunders, 2015).

Please distribute a one hundred (100) point percentage of “power” among both parties.

Our power percentage   40% Our counterpart’s power percentage    60%

The advantage or power of each negotiator always has a source. Therefore, we should be aware of the power source of both parties.

Our power source(s)

Our counterpart’s power source(s)

Adequate infrastructure and assets

Ability to pay the purchase consideration

Strong Goodwill

Capable of generating a demand for a product.

Attractive location

Has Bargaining power

High value of the brand in a market

Has a choice of having various alternatives or options.

  1. Our counter party’s strategy

The counter party strategy will be distributive in some cases and collaborative in some. As the buyer has limited time and resources, it would likely to employ a distributive strategy in some issues like consideration amount and payment methods. While issues related to legal requirements, settlement and other, the company chose to solve them by mutual understanding.

  1. Planning our own strategy

In order to have a successful negotiation process, we would apply collaborative strategy and solve all the issues with mutual consent. This will derive many benefits such as enhancing the relationship with the counterparty and increases the value of the agreement.

Tactics used to increase our real and perceived power and obtain more value

Distributive bargaining strategies and tactics are useful for maximizing the value of a deal and when the two parties are at the claiming value stage of negotiations. This strategy also helps in increasing the real powers. Changing the perception of the counter party by making the outcomes less attractive can also be used as tactic for increasing the value and power (Shell, 2006).

  1.  How to support our goals, statements, and positions

Our goals should be supported by objective data or standards.

Minimum and maximum objective

Use of available data and legitimization to convince the other party of the legitimacy of our demands

Price

To receive reasonable consideration

As per the counterparty requirements we could bid for the consideration of our interest.

Cost

To incur less cost

As our company has more power and authority, we can convince the other party to comply with this goal.

Payment time

Receiving quick payments

Due the counterparty need for having a banquet, we can make them to choose the payment period and method of our interest.

Legal formalities

Keeping them less in number.

With our strong goodwill, it will be easier to convince the counterparty for less legal formalities.

  1. Our opening proposals
  1. Reasonable purchase consideration.
  2. Good quality and maintenance
  3. Flexible terms and conditions.
  4. Various mutual benefits
  1. Questions
  1. The amount of consideration
  2. Expectation from the negotiatior.
  3. Mode of Payment.
  4. Questions regarding legal compliance.

The above is a good plan to start the negotiation. As the bargaining moves forward, we gain knowledge about our counterpart and the perception of our situation and approach. We will need to collect feedback, summarize it and then analyze the progress to re-evaluate and adjust our continuous strategies and approaches in this case.

International negotiations –cross-cultural issues and their impact

  1. Your Personal Cultural Profile

Describe how your own culture can impact the deal on the table:

  • Power-distance: In our culture there is low Power Distance Index as the customer is given more priority in the business (Hofstede & Hofstede, 2004).
  • Collectivism vs. individualism: We opt for having a strong collectivism rather than individualism, as it helps us in maintaining good relations with our counterparty.
  • Femininity vs. masculinity: Our culture have Femininity approach as it results in placing more importance on establishing good relationships with other party.
  • Uncertainty avoidance: Appropriate steps are been taken to avoid the possible uncertainties and obscure situations.
  • Long- vs. short-term orientation: Long term orientation is been followed in our culture as it leads to performance oriented rewards (Sebenius, 2002).

Our culture truly reflects in our communication skills. The way we convey are demands or communicate with the counterparty do affect the deal. We generally used direct and simple method of communications as it is easy to interact with other party.

It is in our culture that we are ready to take various kinds of risks, without affecting the deal and relations with the party.

The goals of our negotiation are time sensitive and are for a particular period of time. Our cultural dimensions can affect the time sensitivity of our objectives. It is due to our culture, the time period of the goals can increase or decrease. 

We strategies those objective first which provides value to the agreement and meet all are requirements and objectives.  

Describe how your counterpart’s culture can impact the deal on the table:

  • Power-distance: The counterparty has high Power Distance Index due bargaining and purchasing power.
  • Collectivism or individualism: The other party culture also opt for collectivism and aims at enhancing the relationships.
  • Femininity vs. masculinity: Femininity approach is been adopted to have modesty in the relations with the negotiator.
  • Avoiding uncertainty: Low uncertainty avoiding index is there and are more inclined to open ended learning.
  • Long- vs. short-term: Long term orientation is been followed (Brett & Gelfand, 2006).

The communication method adopted by our counter party is also formal and simple which makes it easier for us to interact and convey our objectives, demands and proposals to them.

As the party does not hold more power and is not have a sound position, so it is likely to take less risk in the negotiation.

The low PDI and UAI of counter party can impact the negotiation deal and their time sensitive goals or objectives.

Negotiation strategy preferences

Counterparty prioritize those strategies which help the in meeting their primary objective of having high consideration.

References

Baber, W. W., & Fletcher-Chen, C. C. (2015). Practical Business Negotiation. Routledge.

Barry, B., Lewicki, R., & Saunders, D. (2015). Essentials of negotiation. McGraw-Hill Higher Education.

Brett, J. M., & Gelfand, M. J. (2006). A cultural analysis of the underlying assumptions of negotiation theory. Negotiation theory and research, 173-201.

Carrell, M. R., & Heavrin, C. (2008). Negotiating essentials: theory, skills, and practices. Prentice Hall.

Gates, S. (2011). The negotiation book: your definitive guide to successful negotiating. John Wiley & Sons.

Hofstede, G. & Hofstede, G.H. (2004). Cultures and Organizations: Software of the Mind. McGraw-Hill.

Luecke, R. (2003). Harvard business essentials: negotiation. Harvard Business Press.

McCarthy, A., & Hay, S. (2015). Advanced negotiation techniques. Apress.

Sebenius, J. K. (2002). The hidden challenge of cross-border negotiations. Harvard Business Review, 80(3), 76-85.

Shell, G. R. (2006). Bargaining for advantage: Negotiation strategies for reasonable people. Penguin.

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