Elements of Business

Negotiation

Power Point by Prof. Dr. Carmen Paunescu

2016

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Key Learning:

 The five elements of negotiation

 Negotiating parties
 Negotiation terms; distinguish between
interests and issues
 Situations where negotiation takes place

 Negotiation rounds

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The five elements of negotiation

1. Two or more parties (or interests)

2. Interdependence

3. Common goals

4. Flexibility

5. Decision-making ability

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1. Negotiating parties

 Those who are engaged in trying to agree on a

particular issue

 Visible and invisible parties

 Interests, needs, concerns

 Essential, important, desirable, throwaway

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2. Interdependency

 Establishes motivation for parties to enter into

a negotiation to reach an agreement
 Without interdependency no reason to
negotiate, no motivation to reach agreement
 By working together all parties will benefit

 Degrees of interdependency include:

 one-shot negotiation,

 repeat transactions, or

 long-term relationship

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3. Common Goals

The two most important types of goals

1. Content: the substance or specifics

2. Relationship: how the parties want to be

viewed by each other

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Other Types of Goals

Prospective: initial objective

Transactional: objectives that arise during

negotiations

Retrospective: objectives that arise after

negotiations are complete

Collaborative: mutual objectives

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4. Flexibility

 Participants in a negotiation need to be flexible

to insure that it is not seen as purely
competitive and that the spirit of the
negotiation process will be nurtured
 Flexibility and a give-and-take attitude
encourages trust
 A power shift can quickly occur in a
negotiation situation. A negotiator must be able
to respond in a strategic way.

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5. Decision-Making Ability

 Negotiation involves at least two people

making decisions that require judgments and
choices
 Judgment involves recognizing and evaluating the
content of the options presented
 Choice involves actually selecting an option

 Some common decision-making complications

include lack of commitment or authority.

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Decision-Making Ability

 Parties often differ in how they think or process

information

 People develop schema as a way of

organizing current knowledge and as a way to
process future information

 Some schemas create biases

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Exercise: Decision-Making

 Who would you like to be your boss?

 A totally unknown professional person
 A good friend of yours, qualified enough for the
position
 Your girlfriend/ boyfriend
 Who would you employ?
 A totally unknown professional person
 A good friend of yours, qualified enough for the
position
 Your girlfriend/ boyfriend

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Negotiation terms: issues vs. interests

 Issues – the specific items or terms actually

negotiated

 Interests – what is hoped will be accomplished

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Negotiation issues
 Specific items or terms you actually negotiate:
 What is or is not going to happen

 Who will be responsible

 When it will or will not happen

 How will it be done

 What happens if one of the parties does not

live up to the agreement

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Negotiation interests
 What you hope to accomplish to address your
underlying concerns
 Substantive issues

 Procedures used

 Maintaining the relationship

 Matters of principle

 Basic human needs such as security,

economic well-being, sense of belonging,
recognition and control over one’s life

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Negotiation location

 One’s own territory (advantages and

disadvantages)

 Neutral location

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Exercise: Negotiation location
"The Critical Importance of Negotiation
Location"
Dear Negotiator:
I represented my company in negotiations with another firm trying to
work out a deal my management wanted badly. Negotiations were
held almost every week for over three months until we decided we
could not come to a deal and called off the negotiations. Here's the
critical point in my question. All the negotiations were held at the
other firm at their request for their convenience. We are located
across town in a large city so it worked out well for me since I live
near their location. Now, after the negotiations did not work out, my
management believes that the fact that all the negotiations were
held at their location was a major reason why the agreement was
not accomplished. This bothers me a lot and I would like your
opinion. Was that a huge mistake?

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Negotiation rounds

 Multiple parties and multiple issues

negotiations

 A high conflict between parties

 Highly complex negotiations

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Learning Exercise: House for rent

 You have been relocated by your employer to a new

city for an assignment that will probably last for two
years. You do not want to sell your home, a four-
bedroom, two-bath apt., so you decide to rent it.
 A friend of yours in real estate has a potential lessee
for you to meet. He is a 30-something, single doctor
beginning a two-year residency in the local hospital.
 You have some concerns about a single guy living in
your house and taking care of it the way you would,
but you agree to meet with him and possibly negotiate
a lease.

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House for rent

 Who are the interested parties in this

negotiation and what are their prospective
interests and goals?
 Is there any interdependency between
parties? What kind?
 Do parties have common goals?

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House for rent

 What are the issues in this negotiation? Can

we talk about multiple rounds of
negotiation?

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House for rent

 What are five options you are willing to

propose in this negotiation so that all parties’
interests are met?

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