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Negotiations Exam 1 Study Guide

by: Elijah Duduit

Negotiations Exam 1 Study Guide MGT 428

Marketplace > Marshall University > Business, management > MGT 428 > Negotiations Exam 1 Study Guide
Elijah Duduit
GPA 3.6

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About this Document

Covers lecture material and basic principles of negotiating.
Wai Kwan Lau
Study Guide
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This 5 page Study Guide was uploaded by Elijah Duduit on Saturday February 13, 2016. The Study Guide belongs to MGT 428 at Marshall University taught by Wai Kwan Lau in Spring 2016. Since its upload, it has received 51 views. For similar materials see Negotiations in Business, management at Marshall University.

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Date Created: 02/13/16
MGT  428  Exam  1  Study  Guide     Why  do  we  need  negotiation?   -­‐   Deals/compromise   -­‐   Build  relationships   -­‐   Increase  understanding   -­‐   Reach  accomplishment   -­‐   Skill  worthy  of  practice     Characteristics:   -­‐   Multiple  parties   -­‐   Must  have  situation  of  mutual  interest   -­‐   Must  expect  positive  outcome   -­‐   Parties  must  desire  agreement  above  all  else   -­‐   Give  something,  get  something   -­‐   Tangible  and  intangible  features,  not  just  outcome     Nature:   -­‐   Interdependence  (not  a  dominant  party,  working  process)   -­‐   Issues  (distinct  items  to  be  discussed)  vs.  interests  (what  you  want  originally )   -­‐   Role  of  incentives  (people  respond  to  incentives,  can  promote  better  negotiation)   -­‐   Conflict  (can  destroy  hopes  of  negotiating )     Conflict:   -­‐   Intrapersonal  (what  a  person  feels  inside;  not  negotiation)   -­‐   Interpersonal  (between  people)   -­‐   Intragroup  (inside  groups)   -­‐   Intergroup  (between  multiple  groups)   -­‐   Conflict  can  be  beneficial  and  harmful,  but  always  needs  to  be  carefully  managed     Best  Negotiators:   -­‐   Preparing  takes  more  time  than  actual  negotiating   -­‐   Must  be  problem-­‐solver  instead  of  competitor   -­‐   Identifies  all  parties’  issues  &  interests   -­‐   Prioritizes  issues  &  interests   -­‐   Lists  all  avenues  if  mutual  agreement  is  failed  to  be  reached   -­‐   Decide  plan  and  how  to  execute  it   -­‐   Prepares  for  various  reactions   -­‐   Research;  focus  on  facts  and  logic   instead  of  emotional  decision-­‐making     Ethics:   -­‐   Always  a  chance  that  deception  may  try  to  rise   -­‐   Utilitarian  approach;  best  option  gives  best  benefits  to  highest  number   -­‐   Rights  approach;  must  protect  rights  of  all  people   -­‐   Justice;  abide  by  and  apply  rules     Bargaining  mix:   -­‐   All  issues  in  negotiating   -­‐   Ex.      Job  offer  includes  priorities  and  other  choices,  salary,  benefits  with  job,  insurance,  retirement,  etc   -­‐   The  more  issues  there  are,  the  higher  the  chance  all  parties  will  leave  happy  with  their  deal   -­‐   Excessive  issues  makes  negotiating  unmanageable   -­‐   Expanding  pie  –  key  principle;  means  making  more  value  for  all  parties,  more  things  need  negotiated         Initial  offer:   -­‐   Aka  opening  offer;  begins  negotiating  and  shows  boundary,  can  give  advantage  to  one  who  makes  it   -­‐   Seller’s  perspective:  listing  price   -­‐   Buyer’s  perspective:  only  the  first  offer   -­‐   Person  who  gives  initial  offer  varies  on  situation   -­‐   Good  negotiators  make  statement  with  offer,  leave  room  for  talks,  do  their  research     Target  point:   -­‐   Aka  aspiration;  best  possib le  outcome  that  is  within  reason   -­‐   Issues  with  money  should  be  calculated  prior  to;  must  do  research   -­‐   Issues  not  involving  money  should  still  have  the  facts   -­‐   Good  negotiators  set  challenging  goal  for  each  issue,  do  not  give  away  their  target  point,  are  strateg ic   with  their  information     Resistance  point:   -­‐   Aka  reservation  amount;  where  negotiator  refuses  to  go   -­‐   Point  where  negotiation  decides  to  take  or  leave  offer   -­‐   Usually  remains  secretive,  can  be  final  offer   -­‐   Varies  depending  on  buyer/seller     Best  Alternative  to  a  Negotiated  Agreement  (BATNA):   -­‐   Best  outcome  to  be  reached  without  negotiating   -­‐   The  better  the  choices,  the  better  the  negotiator’s  bargaining  power,  more  likely  to  make  initial  offer   -­‐   Must  analyze  all  choices  to  have  highest  negotiating  position     Worst  Alternative  to  a  Negotiated  Agreement  (WATNA):   -­‐   Opposite  of  BATNA;  worst  outcome   -­‐   Always  think  about  WATNA  before  talks/negotiating     Bargaining  range:   -­‐   Aka  settlement  zone;  between  all  parties’  resistance  points   -­‐   If  overlap  occurs,  there  is  positive  range  and  agreement  is  probable  upon  good  information   -­‐   If  points  match,  bargaining  range  becomes  0  and  agreement  is  less  likely   -­‐   If  no  overlap,  zone  is  negative  and  agreement  is  highly  unlikely     Settlement  point:   -­‐   What  parties  have  agreement  with   -­‐   There  is  one  for  all  issues   -­‐   Must  never  overlook  issues     **Look  up  Figure  2.5  in  book:  Comparison  of  models     Concern  for  other’s  outcomes  while  not  concerned  about  mine:  avoiding  inaction   Concern  for  other’s  outcomes  while  highly  concerned  about  my  outcomes:  high  competition   Concern  for  relationship  while  low  concern  for  my  outcome:  accommodating  and  yielding   Concern  for  relationship  with  high  concern  for  my  outcome:  collaboration   Compromise  is  all-­‐around  mixture  of  aspects     Approaches  to  negotiations:   -­‐   People  change  approach  with  diff ering  circumstances   -­‐   Personality  is  high  influence   -­‐   Distributive  approach:  competitive  behavior,  winner  and  loser,  not  worried  about  relationship  after  talks   -­‐   Integrative  approach:  expanding  pie,  meet  all  parties’  needs,  desire  to  maintain  relationship       Framing:   -­‐   Perspective  of  negotiation   -­‐   Positive  frame  generates  better  outcome;  negative  generates  worse   -­‐   The  more  negative  the  frame,  the  higher  the  chance  for  conflict   -­‐   Can  reframe  negotiations  (ex   –  buying  house  in  need  of  repairs,  seller  claims  it  is  fine)     Reciprocity:   -­‐   If  someone  gives  you  a  favor,  you  owe  them  one  back   -­‐   Most  powerful  principle  according  to  experts   -­‐   Can  lead  to  concessions   -­‐   Bad  behavior  can  lead  to  mirroring  approach,  which  can  mean  to  destruction  of  negotiation     Distributive  Negotiation:   -­‐   Goal  is  achieving  efficient  compromise   -­‐   Focuses  on  distributing  outcomes   -­‐   Competing  to  see  who  gets  best  outcome   -­‐   Getting  more  while  opponent  gets  less   -­‐   Parties  are  adversarial   -­‐   Think  of  eBay,  sellers  focus  on  price     Mixed-­‐Motive  Bargaining:   -­‐   Much  conflict  but  potential  for  integration   -­‐   Works  best  with  parties  who  have  ongoing  relationship  and  many  issues  to  resolve  (expanding  pie)     Leverage  &  power:   -­‐   Leverage  is  made  up  of  benefits  brought  to  the  table,  m ake  it  valuable  to  other  party   -­‐   The  better  the  BATNA,  the  more  powerful  your  opponent  is     Power  tactics:   -­‐   Rationality  (using  logic)   -­‐   Ingratiation  (being  friendly)   -­‐   Coalition  building  (forming  alliance)   -­‐   Exchange  (trading)   -­‐   Assertiveness  (forceful)   -­‐   Upward  appeal  (support  from  authority)   -­‐   Imposing  sanctions  (coercive  power)     Tactics  to  change  power:   -­‐   Increase  your  BATNA  and  value  of  contributions,  OR  decrease  quality  of  other  party’s  BATNA  and  value  of   their  contributions     Hardball:   -­‐   High/low  ball  (opening  offer   unbalances  other  party)   -­‐   Bluffing  (who  will  back  down  first)   -­‐   Intimidation  (aggressive)   -­‐   Bogey  (discussing  unimportant  things)   -­‐   Nibble  (asking  for  small  items)   -­‐   Overwhelm  with  information  (too  many  facts)   -­‐   Good/bad  cop  (one  is  tough,  other  is  reasonable)       Hardball  responses:   -­‐   Prevent  it   -­‐   Ignore  it   -­‐   Discuss  it   -­‐   Respond  with  hardball     Information  sharing:   -­‐   Focus  on  facts   -­‐   Task-­‐related  questions   -­‐   Discuss  individual  issues   -­‐   Do  not  ask  about  needs   -­‐   Negative  behaviors  (reactions,  point  out  differences,  attack  arguments,   bottom  line)     Concession:   -­‐   What  is  given  up  in  negotiating   -­‐   Winner’s  curse:  when  first  offer  is  accepted  and  they  felt  they  could  have  done  better     Logrolling:   -­‐   Making  concessions  for  issues  not  as  important  to  gain  ground  for  ones  that  are   -­‐   Offers  higher  profits  for  both  parties     Commitment:   -­‐   Final  step,  very  important   -­‐   Tentative  agreement  (not  binding)   -­‐   Noting  similarities     Keep  process  moving:   -­‐   Offering  trade-­‐offs   -­‐   Proposing  potential  resolutions   -­‐   Give  deadline     Indicators:   -­‐   Consistency,  Honesty,  Authority,  Respect ,  Agenda,  Reputation     Ensuring  commitment  is  kept:   -­‐   Public  announcement   -­‐   Down  payment   -­‐   Written  agreement     Impasse:   -­‐   When  agreement  is  not  reached   -­‐   Third  party  is  potential  solution   -­‐   Alternative  dispute  resolution  (ADR):  arbitration,  mediation       Integrative  Negotiation:   -­‐   Interest-­‐based  bargaining   -­‐   Based  on  Harvard  Project  by  Fisher  and  Ury   -­‐   Both  outcome  and  relationship  are  important   -­‐   Pie  is  not  fixed   -­‐   Win-­‐win  or  non-­‐zero-­‐sum       Four  Basic  Components:   -­‐   Separate  people  from  problem     -­‐   Focus  on  interests  (substantive,  relationship,  process,  principles)   -­‐   Generate  options  (brainstorm,  develop  alternatives  for  working  together)   -­‐   Evaluating  alternatives  (objective  criteria,  remove  personal  standards,  evaluate  prop osals  by  merit)     Knowing  other  party’s  needs/interests:   -­‐   Ask  open-­‐ended  questions   -­‐   Improve  integrative  performance   -­‐   Help  reach  common  ground     Obstacles  to  creating  value:   -­‐   Premature  judgment   -­‐   Single  answer  minded   -­‐   Believing  pie  is  fixed   -­‐   Assuming  other  party  is  the  enemy     Trust:   -­‐   More  powerful  party  sets  tone  of  trusting  or  suspicious   -­‐   Past  behavior  predicts  future  behavior   -­‐   Research  other  party  if  you  do  not  know  them     Honesty:   -­‐   Depends  on  personality,  value  system,  situation   -­‐   Other  party  may  use  too  much  info  agains t  you    


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