Discuss about the International Business Negotiation for Bidding and Closing.
Negotiation is not a process that is only reserve for the skilled diplomat, top salesperson, or ardent advocate for an organized lobby, it is something that everyone does, and almost on the daily basis. In order to understand this, there is need to understand the meaning of negotiation in the context of international business. International Business Negotiations is an interaction between two or more business units, originating from different nations who attempt to define their interdependence in any kind of business. It includes the matters like licensing, sales, acquisitions and joint ventures (Aggestam and Towns, 2018). A Successful negotiation is the evaluation of the commercial and impressive presentation, appreciation of the cultural differences and proper understanding about the negotiation parties (Schech, Skelton and Mundkur, 2018). In short, it is the process of managing any kind of relationship. The characteristics include the conflicts of the desires and needs between two or more parties that expect give and take from each other.
The Negotiation Process had various parts including preparation, relationship building, information gathering, information using, bidding, closing, and implementation of the final deal (The President and Fellows of Harvard College, 2018). The preparation part includes initial preparation of whole negotiation process; this is also known as the pre-negotiation period, which includes only the acceptance of negotiating an agreement and starting of the negotiation. Relationship Building is deciding the kind of relationship negotiating parties’ wants to build that includes two kinds of relations, which are cooperative and competitive relationships (Bouwman, 2018). The cooperative strategy includes the “win-win” situation. This kind of negotiation states that both parties are going to gain something from the particular negotiation. The other type of relation includes “win-lose” situation, including the situation in which one party is going to gain something from the negotiation and the other is going to lose from the process of negotiation. Information gathering includes collecting the data about the parties, negotiation agreement, and the topic of negotiation, views, and attitudes of both the parties on the negotiations (Thomas et al., 2018). The next process is concerned with using the information in such a way that it will be useful during the process of negotiation. The next part of the process includes the bidding part of the negotiation. In this part, actual bidding takes place in order to find out the result of negotiation. In the next part, the closing of negotiation takes place that means the disclosure of actual results of the negotiation after the bidding takes place (The President and Fellows of Harvard College, 2018). The last part of the negotiation includes the implementation of the result of the negotiation. In the case of competitive negotiation, the result declared includes all the details of the subject matter and declaration of the person who wins the negotiation. The cooperative negotiation includes the implementation of all the actions that are mention at the time of result, as this strategy states that there must be some kind of benefit to both of the parties (Wang and Xia, 2018).
Negotiation is not that kind of process that is only reserve for the skilled diplomats. This means that now the negotiation is a very broad concept but still people think that negotiation is only reserve for the top salesperson, highly skilled diplomats, or any of the ardent advocates. The reason behind this is the understanding of the negotiation as a subject matter. The process of negotiation includes lower, middle, and upper level people and organisations. Negotiation is a very broad concept that states that negotiation done at every level in the society; it is not restricted to top or middle level managers (Wertheim et al., 2018). During the process of negotiation, there are many bargaining powers that are being observed which include, giving relative importance to a particular project, availability of the alternatives, the strengths of both of the parties and urgency for the negotiation including the powers that are observed at every level and at many of the other activities other than business (Zartman, 2018). Negotiation is the bargaining power of two parties over each other. At some of the places, the term negotiation and bargaining used in interchangeable ways. Bargaining observed at many places and at variety of the activities from the fruit market to the top management of any organisation (Jang, Elfenbein and Bottom, 2018).
It is explain with an example of the fruit market, it observed that many times people want to purchase a particular product at the specific price, so we try to bargain for the price we want to pay for that particular product in order to decrease the price, this is the time, negotiation takes place. In this example, from the point of view of negotiation, it is state that it is a kind of competitive negotiation in which two parties include the customer and the seller of the product. They both had a profit motive behind the negotiation. The seller wants to sell the product at the price in which he can get the maximum amount of profit and the buyer wants to purchase the product at the low price in order to save their money. In this example, both the cases are possible co-operative and competitive. In the co-operative strategy, the different price paid for the product for which, comparatively less amount of loss given to the seller and less amount of saving for the customer. In the competitive strategy, either the price of the buyer is the final price, or the price of the seller is the actual price paid for the particular product. The other options consumers have are that consumer will shift to the next best alternative (Kaufman, Ozawa and Shmueli, 2018).
The next example of negotiation is that of a shopkeeper who wants to sell its products. A consumer always wishes to purchase a product as the minimum price as possible and the seller wants to sell the product at the maximum price. In this situation, the negotiating parties are the shopkeeper and customer and the negotiation done between the parties on the product, purchased by the consumer. In the case of Co-operative strategy, the negotiation will end when the result will be the final price of the product within the range. The range decided between the prices, which are an offer from both the consumer and the seller. Then, the final price decided between both of the prices and this will end the negotiation, the result is in which both of the parties gain something from the negotiation. In the competitive strategy, either the price of the buyer is accepted or the price of the seller accepted as the final price of the product, but in this kind of strategy, there is an option in the hands of the buyer to switch the competitor’s product. This will only happen in this strategy as competitor’s price and the availability of the product plays an important role in the purchase decision of the product (Kühne and Weber, 2018).
Global Companies now days are very much dependent on the effectiveness of the business negotiations for their growth and survival. The companies who deal with the global market needs to deal with the competitors all over the world, to do this they need to be acceptable to all the kinds of traditions and the customs of the world, this will not only increase the market share but it will also help them to bring diversity to the organisations. To explain this, there is an example of a Global Sports Organisation, who is very much acceptable to the culture of the place in which they are selling a particular product. DeGrandis Sporting Goods, a global sports organization wants that, endorsement of their brand is to be done by MS Dhoni, an Indian Cricket Player for the promotion of their bats which are transported all over the world. In order to advertise the product in India, they had taken an Indian Cricket Player to connect with the Indian values and sell the product the agents of both the organization had done a process of negotiation. This is one of the kinds of international negotiation, which had given the example of their acceptance and adaptability towards different cultures (Lewicki et al., 2011).
These are the examples taken in order to explain that negotiation should happen in all the levels and everywhere. From the first example, it has explained that level of the business had no impact on the process of negotiation. The example of fruit seller clears that consumer’s do some part of the negotiations on regular basis. This shows that negotiation is not only for the high officials but it is also present in everyday activities. The next example explains that it is not only limited up to the national level but it also happens in the global market. As the DeGrandi Sports Organisation had given the best example of the acceptance as the negotiation settled on “win-win” strategy. The negotiation settled between the ranges decided by both of the parties. This means that the actual amount is given for the negotiation obtained in which both the parties are gaining something during the process of negotiation (Maidan et al., 2018).
There is also a concept known as multi-party negotiation, which states that two or more parties are involved in the negotiation, each of them represents their interests and work together in order to achieve a collective objective. It is generally more complex in nature and is also very difficult to manage because many parties participate in this kind of negotiation and there is a wide variety of the ideas, opinion, believes and each one of them wants to gain as much profit as they can from the negotiation. This kind of negotiation involves many kinds of complexities in which the first one includes logistical complexities. This means complexities in the distance as the ways are not clear and the main motive is to resolve the conflict (Sandin and Francis, 2018). The other one is procedural complexities, which means that due to the reason of many parties the procedure becomes very complex and complicated. The other kind of complexity is Social complexities; including the difference that occurs during the time of negotiation as all the dynamics of the negotiators, start to behave in their own way as the social environment can change any time and from any dialogue during the discussion. Last and the most important complexities include the informational complexities. This means when there are many parties for the negotiation, this can increase the quantity of the information as at the time of negotiation there should be complete information of all the parties. In order to analyze all of them, the complexities in education are also increased. This is also been observed in many places and at many times as this kind of negotiation is also not restricted to top-level managers but is also observed in many lower level managers and not only in the business but also in other activities as well. It will explain by the examples of different levels (Matlary et al., 2018).
The first example includes the lower level example that shows the multi-party negotiations happen between three individuals about a certain topic. The example of the co-operate explains that when the senior ask their employees to do a certain kind of work and the employees try to negotiate for this in order to do less work. In this case, negotiation takes place in which the parties include the employer and the employee. Negotiation takes place for the work, which will do by the employees given by the employer. For the bidding part the negotiation, employer wants the work to be completed but the employees want to minimize the workload, in order to save their time. The result of this kind of unauthorized negotiation can result in any of the strategies like if in the end, the result is in the favor of the employer and all the employees need to work as per the direction is given by the employer. In this situation, the strategy becomes “win-lose” strategy as the employer will win and the employees will lose. If the result will come as the employees are successful in minimizing the workload. This can result in “win-win” strategy as both the employer and employees will win because they both are gaining something from the negotiation. The employer needs to sacrifice something as the work done will decrease and the employees will gain as they are saving their time due to less workload (Matos, 2018).
The other example includes the example of top management in the organization. In these kinds of cases, generally, the “win-win” strategy takes place. The decision taken, consulting all the directors of the company. In this case, negotiating parties are the directors of two companies and the topic on which negotiation takes place is the matter or the trade on which negotiation takes place. The result is either come from “win-win” situation or from the “win-lose” situation. In the “win-win” situation, the deal will take place with the terms and conditions, which are, decided to keep in mind that each of the company will gain something from the negotiation. The “win-lose situation generally do not arise if both of the parties are not agreed to a common solution so they will close the deal without doing anything. This will lead to loss to both of the parties as the deal is closed and no party is going to get profit from the deal. This will only bring loss to both the companies. The loss will be the loss of time, the image of the company and can spoil the future relations of both the parties, which can ultimately affect the profit of the company (McKenzie, 2018).
Every organized negotiation had some of its key elements, which are present in all the negotiations including BATNA, Reservation value, ZOPA, the Zone of all the possible Agreements. In order to study about the organized formal negotiation, these terms play a very big role and these are the terms when used together can create a very powerful framework to find out the best strategy for the negotiation. BATNA is the short form for the “Best Alternative to a Negotiated Agreement”. This is the next best alternative available in front of them if any one of them not agreed to accept the final price decided after the negotiation. For every organization trying to get into the negotiation, need to understand that it is very important that one party is able to access other parties BATNA very well. It can become a very big weakness as because if the other party has a better alternative other than that deal they will switch to that alternative. This has been decided at the time of negotiation because this reflects the interest of both of the parties towards the entire negotiation, which can ultimately affect the result of the negotiation (Rheindorf and Wodak, 2018). Reservation Value is the last point, which is favorable for any of the parties will accept at the time of the result of the negotiation. In case of negotiation of the product, happen between the parties. The minimum amount any party will accept for the product. This is express in terms of numbers (Sales Readiness Group, 2018). The next and most important element of negotiation is ZOPA, which means “Zone of Possible Agreements.” This is the range at which the result is been declared. In the technical terms, it is the range, which is set between the reservations values of both of the parties. These are the ranges, between which both of the parties will agree at the time of negotiation (Menkel-Meadow, 2018).
In order to explain this, an example in which negotiation will take place between the buyer and the seller is used. In this, the seller and the buyer reservation value are determined. In this, the BATNA will be no deal will take place. The ZOPA is decided between the buyer and seller reservation values, in this, the seller reservation value is the minimum price seller is willing to accept and the buyer’s reservation value implies the amount the buyer is willing to spend at the time of negotiation. In the situation of “win-win” strategy, the prices decided is determined between the ZOPA range and in the situation of “win-lose” strategy, the final price is either the reservation value of buyer or the reservation value of the seller. Sometimes the conflicts also arise from the decisions taken, considering the price of both of the parties. This major reasons arising from all the conflicts, these are either concern for them or concern for others (Morse and Cohen, 2018).
Implementation of Final Deal
These apply to all the processes of negotiation not only in organized formal negotiations but also in unorganized negotiations as well. We explain above examples of unorganized negotiations in the organized negotiation process. This can explain with the previous example of unorganized negotiation in which the BATNA of the negotiation is to leave the product that means not purchasing the product from that particular seller. The reservation value is the final value given by both of the parties. In the case, the value consumer is willing to give for a particular product and the final price that a seller is ready to accept for the product. The ZOPA is the range between the reservation value of consumer and the seller. The strategy can become “win-win” strategy if the final price is obtained between the ZOPA rang but it is not the reservation price quoted by any of the parties. In the strategy of “win-loss,” strategy either the reservation price of the consumer is final price or the price of the seller is the final price decided for that particular product (O'Neill, 2018).
In the next example of the shopkeeper, the BATA is that the consumer will switch to another shop if the choices are available and if no other option is available, he will change its entire strategy. If the choices are available then the “win-lose” situation will arise otherwise win-lose situation will not arise. The reservation value, in this case, is the price, which a seller agreed to accept, and for the consumer, the reservation value is the value that he is able to accept. The ZOPA obtained between the range of reservation value of the buyer and the seller. The result will be decided as “win-lose” strategy if the consumer will apply their BATA which is only applicable when the alternatives are available with them. The “win-win” strategy will apply when the consumer will accept the price of the seller (Ramirez-Marin and Brett, 2011).
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