global business negotiation

CARLOS GONZÁLEZ DE VILLAUMBROSIA GONZÁLEZ 1

The Globa l Nego t ia tor What is Negotiation?

We are continually trying to resolve disputes in our life. From professional issues like the salary in our job, the price to pay a supplier, the time to get the products, to other personal issues like assets separation in case of divorce or the day to meet with friends just for fun. From a business perspective, we can use different processes to resolve disputes between parties trying to get a positive agreement: Mediation: It consists on the use of an unbiased third party to assists the other parties to negotiate their own settlement. All the parties agree that the mediator may do so. Arbitration: The parties of a dispute are referred to one or more persons, the arbitrators, by whose decision they agree to be bound. The decision is legally binding for both sides. Collaborative law: A process enabling couples who have decided to separate or end their marriage to work

with their lawyers in order to avoid the uncertain outcome of litigation. Conciliation: A conciliator acts between the parties to lower tensions, improve communication or provide technical assistance. It differs from arbitration in that the conciliation process has no legal standing, and the conciliator usually has no authority to seek evidence or call witnesses, usually writes no decision. Lawsuit: All this methods are outside the courts. A lawsuit is a civil action brought in a court and has to be avoidable because is very expensive. In California there are more lawyers than in the whole Japan. Negotiation: According to Wikipedia, is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy various interests of two person/ parties involved in negotiation process.

METHOS OF DISPUTE RESOLUTIONS MEDIATION It consists on the use of an unbiased third party to assists the other parties to negotiate their own settlement. All the parties agree that the mediator may do so. ARBITRATION The parties of a dispute are referred to one or more persons, the arbitrators, by whose decision they agree to be bound. The decision is legally binding for both sides. COLLABORATIVE LAW The parties of a dispute are referred to one or more persons, the arbitrators, by whose decision they agree to be bound. The decision is legally binding for both sides. CONCILIATION A conciliator acts between the parties to lower tensions, improve communication or provide technical assistance. It differs from arbitration in that the conciliation process has no legal standing, and the conciliator usually has no authority to seek evidence or call witnesses, usually writes no decision.

LAWSUIT All this methods are outside the courts. A lawsuit is a civil action brought in a court and has to be avoidable because is very expensive. In California there are more lawyers than in the whole Japan

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Negotiation Strategies

Although each party tries to gain an advantage for itself by the end of the process, we can define different strategies to make the negotiation possible: Avoidance: It means that you are not ready to negotiate or not in a good position to do it, so the most intelligent position is to skip it. "If you are going to lose, fly" Tsun Zu. Accommodation: Loose the battle to win the war. In this case we are assuming a temporal lost, but expecting a much better future victory. It is very important that the other part is smart enough to understand the rules. Competition: For me to win you have to loose. This strategy might be used if we don’t really need a long-term relationship and we have better alternatives. A good trick in this situation is to not kill the other part. Collaboration: In this case, we look for a win-win situation. The agreement

leaves both parties feeling that they've won. It doesn’t mean that the cake is divided equally. This is a good strategy for long-term relationships and trust. Compromise: Similar to the collaboration strategy, but splitting up the profit in the same proportion each part. This is not usually the best option. A camel is a horse painted by two people. Whatever strategy you chose, it must be the same during the process and that the other part knows where you go.

SOME PIECES OF ADVICE

Be good but not nice, this is for wimps (losers) You always have to be fair You have to kiss a lot of frogs in order find the prince Never indicate you are losing control Never negotiate drunk. It indicates weakness

DID YOU KNOW? Men negotiate better for themselves Women better negotiate in collaboration

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Cross cultural negotiations The world is global, therefore many negotiation cases are going to deal with people from different countries and cultures. We have to develop cross-cultural skills to avoid stereotypes, understand the way to do business with them and get the best agreement: Values: This means the personal beliefs, national characteristics, religion, attitudes and world view. Communication patterns: Some countries like to go direct through the questions while others like to build a good relationship first and going around the case. Low context countries are direct communicators: the word means what the word means. Yes is yes and no is no. Europe and America are good examples. In high contextual countries like in Asia, you have to "read the air", which means you have to understand the context, the situation, the body language. Concept of space: Some countries are used to talk very close, they like keeping eye contact

and touching while others prefer distance and touching can be viewed as a very offensive action. Concept of time: What is on time for each country? While Spanish, Brazilians and Latin countries are used to come late, others like Germany or America are always on time. Although it characteristics are changing, the Lewis model is a good approach to classify the countries by three cultural types: Multi-active: They try to talk most of the time, do several things at once (multi-tasking), emotional, display feelings, often interrupts, people-oriented, feelings before acts. Reactive: Great listeners, reactive attitude, very polite and indirect, conceal feelings, never confronts, do not face or eye contact, doesn't interrupt, very people oriented, diplomacy before truth. Linear-active: Talk half the time, do one thing at a time, plan ahead step by step, low context communicators, party conceals emotions, rarely interrupts, truth before diplomacy.

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Negotiating in Spain Greetings: In Spain it is common to shake hands the first time you meet someone. On future relations it is also common to give two kisses between women and between a man and a woman if you already know each other, this could be a little bit confusing so if you have any doubt it is always better to shake hands. Dressing: The physical appearance is considered to be very important; you can lose the respect from others if you are not properly dressed. Businessmen should wear dark suit, with a light color shirt and a necktie. Meetings: One of the most popular ways of doing business in Spain is the lunch meal. Executives of the companies meet at restaurants to build business agreements. These lunches normally take a couple of hours. Normally, the first hour of the meal you do not discuss about the agreements of the business relationship, and you just talk about personal stuff on this first hour. It is at the end of the

meal when you start talking about the business. To close an important business agreement executives from both companies usually have a few lunch meals. It is usual for us to discuss personal matters even though we have only met once. This typical social behavior can be accompanied with non verbal language as we tend to express a lot of information by our gestures. Most meetings have the sole intention of expressing opinions between subordinates and superiors, and it is not so important to reach a consensus or establish an objective. Use of business cards: Spaniards typically exchange their business cards at the beginning of a meeting. This cards include, name, surname and occupation, but they do not make any references to prior studies. Hierarchy: Although most family owned businesses are run according to a strong hierarchical system, there is an increasing number of new well prepared young managers that are introducing changes to less structured organizations. We intend to be individualists rather than team players.

SOME PIECES OF ADVICE

Although it is necessary to understand other cultures, you do not have to behave like them. The best way to negotiate is being yourself (values, norms, behavior)

DID YOU KNOW? Women are higher context communicators than men Koreans are polychromic, that means they go forward and backward through the case and sometimes can confuse the other part. Contracts have not the same value depending on the country. In Chine there are just suggestions but not mandatory, as occurs in mostly the rest.




In order to get a successful outcome in the negotiation. the first step is to make a plan. The plan has to be at least this points: Goals ¿What do you want? Identify and prioritize each of the goals. They have to be SMART: Specific, measurable, achievable, realistic and time bound. How will the others parties view the situation? Prepare different scenarios and make the same issue putting yourself in their shoes. Based on a situational analysis of the other party, anticipate the strategies the other side can be expected to use to achieve their negotiation goals. We have to define optimal goals and minimal goals. Reservation price Your bottom-line, the minimum conditions you need to get in each point. You should never seal a deal below this conditions. BATNA Best Alternative to a Negotiated Agreement. If I go away, what’s my B plan?

The deal we are trying to get is better than this, but not with any conditions. That is the main reason because we have to be sure that other options are available in case the negotiation do not succeed. If we have no BATNA we can be killed in a negotiation. Opening offer What is my initial proposition? You have to argue each point in order to make the other part feel that your offer is good enough to accept or negotiate under the framework you have established. Concessions During the negotiation process, it will be necessary to give something to get something better for us. We have to know our priorities and concessions and rank them.

Alliances Do you have any partner? Is there any other party who shares some goals? The team is stronger than individual. Some companies understand it and collaborate while compete. This is just the beginning, now we have to follow the plan and get experience executing it to make a difference.

NEGOTIATION PLAN: "Planning without action is futi le, action without planning is fatal" (Oriental Proverb) "The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand" (Sun Tzu)


Rules to negotiate with difficult people Never make an enemy of an opponent. Don’t play the same game, don’t react. Go to the balcony and breath. Don’t use but, it can create create an argument. Is better to say something like "I would like to consider this..." Don’t reject. Consider the opportunities. The bottle can be half full instead of half empty. Don’t push, try to seduce your opponent. Don’t escalate, retract to facts and do not become the case in something personal.

Negotiation Highlights (Aha's) Trade-off: When you ask for something, you have to know what are you what are you willing to give.

If you only have a hammer, you will see all problems as nails. Other times you need to seduce people, not just beat them. Rational is not relevant. We need to check we understand the same and what the other part see. If you care too much you overpay. Don’t fall in love with the opponent. Preparation is the key. Never send an email when you are angry. Never put the address until you write it. Poker is like negotiation, you have to count the cards you have, the cards they have and the cards they might have. Raise your price. If you have never lost an order, you are too cheap. You don’t know where the top or the bottom is until you touch it. Keep this written probe: "is there something to know that if I knew, I would change my decision to negotiate with you?" If the other part lies, he is K.O.

BUSINESS SLANG

Bean counter = Accountant Dog = The worst

Hassle = Bother or trouble

On the same page = In agreement

Mickey Mouse = Ridiculous and amateurish

Stoke = To add fuel to the fire

Voodoo economics = Questionable economic assumptions

Zoo = Crazy situation or environment




"This is not a regular class, I am not a teacher, I am an instructor. We are not here just to read a book." The first proof of that was a quick arithmetic test to break the ice. We were supposed to unfold the paper and make some calculations as fast as possible. The first one should stand out. 3, 2, 1 go! I tried to delight my classmates and I finished second, thinking that I had done a great job. Once everybody finished, the instructor told us to read again the first paragraph of the test, which said different instructions to complete it, so everybody missed the test. First lesson, read everything before start, you need to understand each case before going through it. The same for the contracts, read everything before sign it. It is better to spend time at the beginning than regret for the rest of the time. After this challenge, every other challenge went a little bit further. Euro-Lat-Asia Mixing some Aha's (highlights) with practical cases, we were developing our personal negotiation skills. The next case was the Euro-Lat-Asia, a nice approach to win-win situations. We were split into 2 groups, in each group we

had 2 teams who were going to compete each other. We had to discuss with the team and make a decision each 5 minutes just if we wanted to collaborate or not. In some rounds we could negotiate. I learned the importance of keeping a strategy and make sure that the other part understands it. I also learned that it is important to keep the same negotiator during the whole process, it means trust. We have to understand when to compete and when to collaborate. Sometimes to be greed is worse for everybody. Alpha-Beta For the next class we had to prepare another case: Alpha-Beta. I had the role of a Global company leading in Robots sales which wanted to gain market share in a developed country trying to collaborate with the local firm. It was important not only to get inside paying a lot or trying to kill the other part, but make sure the other part that was your expertise and sales force could help both the make more profit. I learned the importance to prepare the case deeply, the importance of thinking in long-term and search new ways apart from the numbers to get a good deal, like for example the local company's expertise in laser. The importance to negotiate in parallel to various points to do not get stuck.

NEGOTIATION CASES

When you are negotiating, to get a Toyota is ok but not special. Top class negotiators try to come home with a Lamborghini. Here are some learned lessons from practical exercises:



Lambert-AAA All seemed to go smooth. I had negotiated with a Brazilian girl, emotional, collaborative and easy-going. For the next case I had to play the role of a huge hotels chain thinking about make a fusion with a smaller company. I tried to apply the previous lessons but I saw that didn’t work. The negotiation was ok, I could take advantage of my preparation of the case, conceding points in my less important goals while earning in the most important. I learned the most important lesson in the class, I am not alone in the negotiation and I always have to check that the other part is agree with each part of the agreement. At the end a big misunderstanding ruined the agreement and we couldn’t make it. At least, I had a good BATNA. I also learned to separate personal from professional. Mouse The last case was a big challenge between 4 majors, a Mouse and the Government. First of all, We prepared a good negotiation plan and between the majors, merging forces and creating

a strategy further than the paper, preparing each detail, different scenarios and offers. A longer negotiation with more buzz and more variables. Good final test and opportunity to observe the importance advantage of negotiate in a group, giving us more power to get a good deal. At the end we got the Lamborghini. Both the theory and the cases has been different to any other subject, now is our responsibility to take advantage of this a go further making a difference.

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WANT MORE? ONE VIDEO

Comparing American and Chinese Negotiation Styles: http://bit.ly/fwDh0X

ONE BOOK:

Freakonomics: http://www.freakonomics.com/

ONE WEBSITE:

The program on negotiation at Harvard: http://www.pon.harvard.edu/


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