SN-A1-engb 1/2011 (1038)

Strategic Negotiation

Professor Gavin Kennedy BA, MSc, PhD, FCInstM

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Strategic Negotiation

Strategic Negotiation was written by Professor Gavin Kennedy BA MSc PhD, a Professor at Edinburgh Business School, Heriot-Watt University, Edinburgh, Scotland, since 1984. He ran one of the UKs first courses on negotiation at Brunel University, London, in May 1972, and has worked for many blue chip organisations in the public and private sectors in the UK and many other countries (France, Germany, Poland, Netherlands, Norway, Sweden, Spain, Portugal, Switzerland, Italy, Romania, Israel, Palestine, China, Hong Kong, Malaysia, Singapore, Australia, Papua New Guinea, USA, Canada and South Africa) as a negotiation trainer and consultant. His experiences as a negotiator, from operational level for senior managers to strategising, managing and preparing for major, complex and high-value contracts at Board level for CEOs and directors, have been distilled in numerous books.

Professor Kennedys latest book, Adam Smiths Lost Legacy (Palgrave Macmillan, 2005) introduces the early contribu-tions of the famous 18th-century Scottish Enlightenment philosopher to the analysis of negotiation. Smith was the first to state the role of the conditional proposition (IfThen) in negotiation: see www.lostlegacy.co.uk.

Many of his books, such as Everything is Negotiable, Random House, 1983 (3rd edition, 1997), The Economist Pocket Negotiator, 1988 (5th edition published as The Economist Essential Negotiation, 2004), Profile Books and the Economist; Negotiation, 1992 (2nd edition 1998); Kennedys Simulations for Negotiation Training, 1993 (2nd edition, 1996) Gower; Kennedy on Negotiation, 1997, Gower; and The New Negotiation Edge: a behavioural approach for results and relation-ships, 1998, Nicholas Brealey, have been translated into numerous languages, including: Swedish, Dutch, Spanish, Portuguese, Polish, Bulgarian, Romanian, Armenian, Russian, Hebrew, Chinese, Japanese, Arabic, Indonesian, Greek and Italian.

Professor Kennedy retired from full-time academic work in 2005 but continues to facilitate the Negotiation, Influence and Strategic Negotiation courses at EBS, as well as undertaking negotiation consultancy for major corporates. Among the organisations he has worked with are: IBM; Motorola; Digital; Honeywell; Shell; British Petroleum; Total; CWS; Royal Bank of Scotland; Barclays Bank; NHS; Scottish Enterprise; Allied Irish Bank; Scottish Water; British Rail; Atlantic Container Line; Xerox; SPAR; Standard Telephones and Cables; Cable & Wireless; BBC; United Distillers; National Power and Scottish Power.

http://www.lostlegacy.co.uk/

First Published in Great Britain in 2006.

Gavin Kennedy 2006

The rights of Gavin Kennedy to be identified as Author of this Work has been asserted in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers.

For Felix and Ren

Strategic Negotiation Edinburgh Business School vii

Contents

Acknowledgements xi

Preface xiii

General Introduction xv

PART 1 Module 1 The Strategic Negotiation Process Model 1/1

1.1 Introduction 1/1 1.2 Foundations of the Business Plan (Boxes 1 6) 1/2 1.3 Analysis and Diagnosis (Boxes 79) 1/3 1.4 Overview of the Seamless Strategies and Process (Boxes 1316) 1/5 Review Questions 1/16

PART 2 FOUNDATIONSModule 2 Basics of Contracts 2/1

2.1 Introduction 2/1 2.2 Promises, Promises 2/2 2.3 Elements of Contracts 2/2 2.4 Anatomy of a Contract 2/3 2.5 Contracting as a Bargaining Process 2/16 2.6 Negotiating Contracts 2/23 Review Questions 2/26

Module 3 Pay, Benefits and Union Negotiations 3/1 3.1 Introduction 3/1 3.2 National Pay Bargaining 3/3 3.3 HR Considerations 3/4 3.4 Union Recognition and Representation 3/7 3.5 Gradations of Recognition 3/9 3.6 Formal Negotiation Procedures 3/12 3.7 Communicating for Major Negotiations 3/14 Review Questions 3/16

Contents

viii Edinburgh Business School Strategic Negotiation

Module 4 Managing Complex Negotiations 4/1 4.1 Introduction 4/1 4.2 Transaction Logistics 4/2 4.3 Corporate Risk 4/4 4.4 Public Sector Negotiations 4/6 4.5 Managing the Negotiation Team 4/8 Review Questions 4/12

Module 5 Organisational Growth Strategies 5/1 5.1 Introduction 5/1 5.2 Organic Growth 5/4 5.3 Licensing (Box 4) 5/8 5.4 Master Franchise Agreements 5/22 5.5 Joint Ventures (Box 4) 5/25 5.6 Mergers and Acquisitions (Box 4) 5/29 5.7 Threats and Vulnerabilities (Box 6) 5/32 5.8 Three Growth Options 5/36 Review Questions 5/38

PART 3 TOOLS Module 6 Bid Strategies and Tender Negotiations 6/1

6.1 Introduction 6/2 6.2 Bid/No Bid Decisions 6/2 6.3 Bid Traps 6/6 6.4 Bid Theory and Practice 6/7 6.5 Bid Strategies 6/10 6.6 Two Erroneous Opening Bid Strategies 6/13 6.7 Entry Price PB Strategies 6/17 6.8 Requests for Proposals (RFPs) 6/19 6.9 Post-RFP Negotiations 6/21 6.10 Strategic Choice of Bid Targets 6/22 6.11 Bidders and the Process Model 6/24 Review Questions 6/29

Module 7 Analysis and Diagnosis 7/1 7.1 Introduction (Boxes 7, 8, 9) 7/1 7.2 Force Field Analysis (Box 7) 7/2 Exercise 7.1: Drawing a force field 7/6 7.3 Atkinsons Expanded Force Field 7/7 7.4 Atkinsons Measure of the Balance of Power 7/16

Contents

Strategic Negotiation Edinburgh Business School ix

7.5 McKinseys Multi-Stakeholders Model 7/25 Review Questions 7/36

Module 8 The Negotiation Agenda 8/1 8.1 Introduction 8/1 8.2 The Approach 8/2 8.3 Derivation of the Negotiation Agenda 8/8 8.4 Content of a Negotiation Agenda 8/13 8.5 Assembling a Negotiation Agenda 8/22 8.6 Compiling the Negotiation Plan 8/25 Review Questions 8/39

Module 9 Foundation Skills for Negotiators 9/1 9.1 Introduction 9/1 9.2 What is Negotiation? 9/1 9.3 A Simple Diagram of the BuyerSeller Dilemma 9/2 9.4 The Negotiators Surplus 9/4 9.5 Preparation Phase 9/6 9.6 Debate Phase 9/8 Basic Skills Test 9/24

Appendix 1 Practice Final Examinations A1/1

Practice Final Examination 1 1/2 Practice Final Examination 2 1/5 Examination Answers 1/8

Appendix 2 Answers to Review Questions A2/1

Module 1 2/1 Module 2 2/3 Module 3 2/5 Module 4 2/7 Module 5 2/9 Module 6 2/12 Module 7 2/14 Module 8 2/19 Module 9 2/21

Index I/1

Strategic Negotiation Edinburgh Business School xi

Acknowledgements

I acknowledge my intellectual debts to my late partner and friend, John Benson. He contributed to our work on the Strategic Negotiation consultancy project from the start. He was Chairman of Negotiate Ltd, our consultancy, and we worked together from 1971 to 1975 to devise and deliver one of the early UK negotiation skills courses (Workshop Bargaining) for the Management Programme at Brunel University, and at Scottish & Newcastle Brewery from 1974 to 1980. From this, John and I delivered consultancy and training courses in many companies in the UK, the rest of the European Union and Australia, and trained many others to do so too.

Johns career in personnel took him to the main Boards of three major PLCs, Scottish & Newcastle, Nabisco and Reed Packaging. In 1980 we co-authored Managing Negotiations, published by Random House, which went through four editions and placed our 8 Steps/Four Phases model of the negotiation process into the public domain (reinforced when the Rank Organisation made a highly successful training video from it, The Art of Negotiation). Our last co-authored book, Local Pay Bargaining, published by the Management Development Group in Scotland in 1994, and from which I draw materials in Mo