Understanding Principles of Negotiation for Global Impact
Negotiation is a key aspect of decision-making where parties strive to resolve conflicting interests through a win-win process. It involves preparation, strategy selection, information exchange, explicit communication, agreement, and commitment. Practicing principled negotiation involves focusing on interests, generating options, and ensuring decisions align with objective standards. Important concepts include interests, issues, positions, BATNA, reservation price, and more. These principles apply to various fields, including the wine and grape growing industry.
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Lodi Wine Grape Growers Jim Olson January 9, 2017 Graduate School of Management University of California, Davis PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
What is negotiation? Negotiation is a form of decision making in which two or more parties talk with one another in an effort to resolve their opposing interests. (Pruitt, 1981, p. xi) A win-win decision-making process by which two or more parties are trying to find a mutually acceptable solution to a complex conflict. NOT a win-lose process PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
The Science of Negotiation PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Common Negotiation Process Preparation Strategy selection Information Exchange Explicit talking and listening Agreement Commitment PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
How to Practice Principled Negotiation Separate the people from the problem Focus on interests, not positions Generate a variety of options before making a decision Insist the result be based on some objective standard PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Important Concepts in Principled Negotiation Interests: Underlying desires, goals, needs Issues: Tangible points of agreement that can help you achieve your interests Positions: Specific values for the interests you define above. A range of values for acceptable agreements or just a starting position BATNA: Best Alternative To a Negotiated Agreement (NOT A NUMBER!) Reservation Price: Price at which you are indifferent to whether a negotiation reaches agreement or doesn t Closely related to your BATNA PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Important Concepts in Principled Negotiation Interests: Underlying desires, goals, needs Region prominence Region affluence Individual wealth and derivatives Issues: Tangible points of agreement that can help you achieve your interests Price Length of contract Yield Variety Farm plan Brix Other PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Important Concepts in Principled Negotiation Positions: Specific values for the interests you define above. A range of values for acceptable agreements or just a starting position BATNA: Best Alternative To a Negotiated Agreement (NOT A NUMBER!) Other customers Other uses Other products Reservation Price: Price at which you are indifferent to whether a negotiation reaches agreement or doesn t Closely related to your BATNA PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Prepare 1. Answer the following questions: What are my interests, what do I want to achieve? What are the specific issues that will help me achieve these interests? What are my target and bottom-line positions on each issue? What are my opponent s interests? What are the specific issues that will help my opponent achieve those interests? What are my opponent s target and bottom- line positions on each issue? PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Prepare 2. Develop several alternative agreements Set aside time for creative brainstorming before the negotiation Put together several agreements with various outcome positions for each issue 3. Define your BATNA The more attractive your BATNA, the more power you have The best alternative for you may be no agreement PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Define your strategy and carry out tactics Strategies can be based on: Your desire/concern for OUTCOMES Price, power, working conditions, etc Your desire/concern for the RELATIONSHIP Trust, friendship vs. distrust, antagonism 5 Basic Strategies Collaborative Competitive Accommodating Avoiding Compromising PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Negotiation Strategies High Accommodating Lose to win Collaborative Win-win Compromise Split the difference Importance of Relationship Avoiding Lose-lose Competitive Win-lose Win at all costs Low Low Importance of Outcomes High PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Distributive dimensions of negotiation The goal of any negotiation is not just to reach an agreement, but to reach one that is better than what you could get without negotiating (Better than your BATNA) PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Prescriptions for rational distributive bargaining Define the interests, issues, positions, BATNAs, and reservation prices for you and your opponent Determine the bargaining zone for quantitative issues (e.g. Price) Bargaining Zone (or ZOPA zone of potential agreement) Quantitative range of settlements where both parties are better off than without the negotiation Range of prices where both parties reservation prices overlap Reservation Price: Price at which you are indifferent to whether a negotiation reaches agreement or doesn t Closely related to your BATNA PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Positive Bargaining Zone Seller s lowest price overlaps with buyer s highest price No bargaining zone is when there is no overlap in reservation prices Positive bargaining zone $50 $75 $100 $20 Buyer s Reservation Price ($75) Buyer s Target Price Seller s Target Seller s Reservation Price ($50) PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Make tables assessing potential outcomes at different settlement prices Settlement price Seller interest satisfied Buyer interest satisfied $50 $60 $70 $0 above reservation $25 below reservation $10 above reservation $20 above reservation $5 below reservation $15 below reservation Positive bargaining zone $20 $50 $75 $100 Buyer s Reservation Price ($75) Buyer s Target Price Seller s Target Seller s Reservation Price ($50) PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Consider the potential integrative dimensions of the negotiation Determine if other issues exist besides price Determine what interests price may represent (i.e. price may be a proxy for status) Determine if other costs can be incorporated into the negotiation and treated as interests PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Knight Excalibur Negotiation Exercise In carrying out this negotiation, remember to think about: Interests Mine Counterpart s BATNA, Target and Reservation Price Mine Counterpart s Bargaining Zone (ZOPA) Potential Trade-offs PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Knight/Excalibur Positions, BATNAs, and Reservation Prices Knight Positions $500? $470? Knight BATNA Buy from someone else? No bid government deal? Knight RP $600 Excalibur Positions $600? $480? Excalibur BATNA Hank s SM Tractor Excalibur RP $100 RP $100 Knight Excalibur RP $600 PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Impact of the First Offer First offers often act as an anchor from which people fail to adjust appropriately Final agreements are more strongly influenced by initial offers than by subsequent concessionary behavior Initial offers provide an anchor Re-anchor!! PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
How Do You Re-Anchor? Make a quick counter-offer that is just as aggressive Threaten to walk away Ask the other person to try again Ask them to explain their reasoning Make a joke PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Concessions Allow yourself room to make concessions Develop a rationale around each of your concessions Make bi-lateral, not uni-lateral concessions: Don t reward obstinate behavior with concessions!! Signal information in the size of your concessions Make your concessions smaller as you approach your goal PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
A word about power, influence, and leverage Power: A position or attribute that allows one to use influence to get individuals and groups to behave in desired ways Influence: The processes used to affect the beliefs, perceptions, and motivations of individuals and groups to behave in desired ways Leverage: A situational advantage based on the balance of needs and fears PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
The Art of Negotiation PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Game Theory GameTheory Branch of applied mathematics devised to analyze certain situations in which there is an interplay between parties that may have similar, opposed, or mixed interests. Britannica Developed by John von Neumann and Oscar Morgenstern in their book The Theory of Games and Economic Behavior (1944) Players try to outsmart one another by anticipating the others decisions or moves A solution to a game prescribes the optimal strategy(s) for each player and predicts the average, or expected, outcome. Simple to extremely complex applications and very useful in negotiations PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Game theory in negotiations Know as much about your opponent as possible In addition to interests, positions, BATNAs and reservation prices Know what makes them tick Order the discussion agenda to your maximum advantage PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
The art of agenda design I want a raise 1. 1. Let s discuss my salary 2. 2. We won a huge contract 3. 3. We lost a medium contract 4. 4. We know why and are going to win the next one I want a raise 1. 1. We lost a medium contract 2. 2. We know why and are going to win the next one 3. 3. We won a huge contract 4. 4. Let s discuss my salary PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Movie and dinner game You and your partner don t care whether you go see Hunger Games (near the Chinese restaurant) or Star Wars (near the Italian restaurant) But you definitely want Italian food for dinner Your partner loves Chinese food How do you order the agenda? 28 PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Business strategy as driver of negotiation strategy Well defined interests, issues, BATNA of yourselves Well understood interests, issues BATNA of your customers What are your strategic and tactical alternatives? Expanding the pie beyond your competitor s reach Identify and exercise sources of power, influence, and leverage Marketing strategy push Social network marketing strategy pull Branding Inglenook Niebaum Coppola Rubicon Inglenook More PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Top Ten Key Success Factors 1. HUGE customer value proposition 2. LACK of competitor presence 3. HIGH barriers to entry/scale 4. SIGNIFICANT core competence 5. HUGE market and growth opportunity 6. HIGH revenue potential 7. HIGH profit potential 8. LOW cost of entry (for you!) 9. LOW business risk 10. HIGH long term strategic value 9/22/2024 WestShore Management Group Proprietary and Confidential 30 PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
The Business Plan Outline 1. Business summary 2. The problem 3. The company solution 4. Customer/market opportunity 5. Product roadmap 6. Competition matrix 7. Marketing/distribution strategy 8. Manufacturing (if any) strategy 9. Business model/3-year financial plan 10. The team 11. Financing terms 12. Summary 9/22/2024 WestShore Management Group Proprietary and Confidential 31 PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
The Lodi problem Every single business problem has a solution A key part of the solution is solid negotiation strategy and tactics Lasting solutions come from inside knowledge, fresh out- of-the-box -thinking, patience, perseverance, trial and error, and execution There is a Lodi solution PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
Lodi Wine Grape Growers Jim Olson January 9, 2017 Graduate School of Management University of California, Davis PREPARING INNOVATIVE LEADERS FOR GLOBAL IMPACT
