Lecture 1

Negotiation skills

Contents

Negotiation tactics3

The negotiation process1

Negotiation styles2

1. The negotiation process

Negotiation: -- process in which two or more people or organizations

with common or conflicting interests work towards a way of resolving an issue or agreeing on how they will cooperate

Business people are negotiating all the time: formal negotiation: sit down at the table, talk about the

unit price, the conditions for a timely delivery, the clauses for compensation and force majeure, etc.

informal negotiation: talk to your boss about the pay raise contact your debtor about the overdue payment call your supplier to claim compensation for a wrong

dispatch of merchandise ask your subordinates to finish the work according to

the scheduled timetable

1.1 Before the negotiation

1. Identify the team leader: able to select team members, prepare the negotiation plan, make the bargain, make decisions on concessions and the final terms, generate high morale and maximum contribution from each member

2. Form the negotiating team: size: 2-5; never reduce the negotiating team to one,

no matter how qualified the negotiator is; don’t exceed five to avoid lack of control

coverage: include members in commercial (price, market, delivery terms), technical (specification, delivery program), financial (terms of payment, insurance, financial guarantees) and legal (terms and conditions of contract) areas, as well as an assistant to the main negotiator (make notes, do calculations, remind him of any missing points)

3. Collect and assess data from various sources: MOC (商务部 ), CCPIT (中国贸促会 ), Chinese Embassy, Chinese local companies, foreign trade corporations, banks, agents

4. Develop the negotiation plan: a framework within which to negotiate; formulated by all the team members and finally approved by the team leader and the top management; the plan should:

identify the team leader and other members of the negotiating team

set up the lines of communication and reporting system define the negotiating objective in terms of the major issues to

be discussed develop counter-proposals in case objections are raised on any

of the points you proposed sate the minimum acceptable level for each of the major items:

e.g. price concession of 5%, remittance (汇付 ) or collection (托收 ) as terms of payment, FOBST as terms of delivery, 1-year extra warranty

establish the time period within which the negotiation should be concluded

1.2 During the negotiation

1. Opening: exchange greetings and aims to set the “climate” for the later communication, establish some common ground before moving into areas of difference, esp. Japanese (slow start, value trust more than agreement), e.g.

I’ve been long hearing of you and your company, and I’m very pleased to know you in person.

We’re very glad to have the chance to visit your factory. I do hope I can make a substantial deal with you today.

Hi Mr. Bingley, how are you getting along with your business?

Nice to meet you again. How are sales in Sweden? We’ve seen your catalogue and exhibits in the showroom.

We’re interested in the latest model of drills in particular. 2. Identifying: specify in detail the issues to be resolved, e.g.

To come straight to the point, what is the CIF New York price for your dishwashers?

We need to talk about the terms of delivery. Let’s return to the topic of commission, shall we?

3. Bargaining: negotiate the identified issues, propose your position, initiate the other party’s stance, make concessions and compromise, e.g. The quality of the last batch is far from being acceptable. To tell you the truth, $200 can hardly cover our

production cost. For friendship’s sake, we may exceptionally consider

reducing our price a little, but never to that extent. Honestly, the rate of commission you propose is far too

small. Then how big a step are you prepared to take? Could we make a compromise? How about a 5%

discount? We have made a reduction on the price. So it would be

your turn to make some concessions on the terms of payment.

It’s our final position. Now it’s up to you.

4. Concluding: summarize the points and confirm the agreement, e.g. Ok, let’s call it a deal! I’m glad that you add your order. Fine. Let’s get the contract finalized. You’ve driven a hard bargain, but we’ll accept it,

since we have been doing business for so long. So you will arrange for the L/C to be opened in our

favor as soon as you get back, and we will effect shipment within two weeks on receipt of your L/C.

That sounds reasonable, but it’s subject to the final confirmation of the head office. I will have you a definite answer tomorrow.

That’s a deal. We look forward to a long-term relationship with you.

Case study: Price negotiation

The seller: Mr. Wang, the Export Manager of a Zhejiang-based company producing plastic products

The buyer: Mr. Welsh, the Import Manager of a large chain store company in the U.S.

The setting: After a factory tour, Mr. Welsh picks up several products and starts to negotiate prices with Mr. Wang

Your tasks: 1. What are the major issues identified and bargained in

this negotiation? 2. What nonverbal signals sent by both parties are most

impressive to you? In what way do they help both parties to achieve their aims?

2. Negotiation styles

Possible negotiation outcomes: Win-lose Lose-win Lose-lose Win-win

The aim of win-win negotiation is to find a solution that is acceptable to both parties, and leaves all involved feeling that they've won – in some way – once the negotiation has finished.

Five negotiation styles

the yes-but technique: to affirm first to establish the image as cooperative and appreciative of the viewpoint of the other party, and then to identify the differences and reject what the other party would like you to do; cf. the “no-although” way

the side-stepping technique: to side-step an issue you don’t want to answer directly, e.g.

Can you guarantee delivery by Jan 1st? – Here, have a look at the program to see how we’ve

been doing in the past three years, and you can know how reliable we are.

3. Negotiation tactics

offer more options: to make the other party’s job easier, and to discover the maximum common ground, e.g. possible options for a request of price reduction include: quantity/repeat order discounts improved packaging and labeling (for the same price) more prompt delivery or better payment terms free promotional materials in the language of the import

market free training of maintenance staff and after-sales

consulting service supply of free parts to replace those damaged from

normal wear and tear market exclusivity higher commission rate

make the other party seem unreasonable: to challenge the validity of a proposition, e.g. Your company, as the seller, is responsible for any delay to the

contract. – Normally yes, but you know, the seller cannot be responsible

for events over which he has no control, such as war or riots.

be personal and emotional: be dramatic and sometimes sentimental, as everybody can be charmed or touched, e.g. If we were not friends, I will have no way to quote you such a

rock-bottom price. Oh, you are really tempting me! Oh believe me, you drive me to a tight corner. We don’t have

any profit margin in that case. This is our latest design. I have to say you have incredible

taste.

After-class assignmentAfter-class assignment

Case study: Negotiation tactics

The seller: Mr. Fang, the Manager of an import & export company which produces gifts and decorations for Christmas, Easter and other traditional holidays

The buyer: Mr. Leeser, the General Manager of a German wholesaler

The setting: In a trade fair in Guangzhou, Mr. Leeser walks into the booth of Mr. Fang’s company, and is attracted by the exhibited products.

Your task: Based on the negotiation styles and tactics we’ve discussed, evaluate the performance of both parties in the negotiation.