BHMH2160 (lecture notes)

2022/23

CHAPTER ONE – INTRODUCTION OF NEGOTIATION

Overview

Friends, children, businesses, police, nations, everyone negotiates almost daily. Friends
negotiate to decide where to have dinner. Children negotiate to decide which television
program to watch. Businesses negotiate to purchase materials and to sell their products.
Lawyers negotiate to settle legal claims before they go to court. The police negotiate with
terrorists to free hostages. Nations negotiate to open their borders for free trade.
Negotiation is not a process reserved only for the skilled diplomat, top salesperson, or
ardent advocate for organized labor; it is something that EVERYONE does.

Negotiation is not limited to buy-and-sell situation. Negotiations may occur for any of
these reasons:
(1) to create something new that neither party could do on his or her own
(2) to resolve a problem or dispute between the parties.

Definition of Negotiation

Negotiation is a process* through which parties move from

their initially divergent positions to a point where agreement
may be reached.

*This process often includes offering and demanding

concessions from other parties.

1. CHARACTERISTICS OF A NEGOTIATION SITUATION

Sometimes people fail to negotiate because they do not realize that they are in a
bargaining situation. By choosing options other than negotiation, they may fail to
identify a good opportunity and not achieve their goals, or they may not manage their
problems as smoothly as they might like to.

A. Characteristics common to all negotiation situations:

1. There are two or more parties, individuals, groups or organizations.

2. There is a conflict of interest between two or more parties, and the parties
must search for a way to resolve the conflict. That is, what one wants is not
necessarily what the other one wants – and the parties must search for a way
to resolve the conflict. For example, Michael and Lancy are young married
couple, who are looking for a bigger house. Michael prefers an apartment
located at Kowloon side. However, Lancy strongly insists to find a house in
Sheung Wan which must be close to her office. Such difference of interests

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creates conflict within this young couple which may be resolved through
negotiation.

3. The parties prefer to search for agreement rather than to fight openly, to
permanently break off contact, or to take their dispute to a higher authority to
resolve it.

4. When people negotiate, they expect give and take. Both parties must have
something to offer, as well as something to gain. Don’t confuse the concept
of making a request with negotiation. An employee asking his manager for
salary increase is merely making a request; if he can offer something in
return, such as improved performance, then he is in a position to negotiate.

Golden Rule of Negotiation

Don’t confuse the concept of making a request with negotiation. Make sure
you have something to OFFER to the other party in negotiation.

5. We expect that both sides will modify or give in somewhat on their opening
statements, requests or demands. Usually, both sides will modify their
positions and each will move toward each other.

6. Negotiation may only occur when there is no system – no fixed or established

set of rules or procedures. E.g. It’s waste of your time to bargain at
Macdonald, Kentucky (KFC), Body Shop, etc.

7. The parties negotiate because they think they can use some form of influence
to get a better deal than by taking what the other side will give them.

Golden Rule of Negotiation

Don’t negotiate if there is very little chance to get a better deal.

2. WHEN TO NEGOTIATE
This is the first question you should ask yourself when a possible negotiating
situation arises. You are under no obligations to enter negotiations just because
someone else suggests it.

The timing of negotiation is very important. When should we consider opening up a

negotiation? Usually the following conditions will apply:

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1. Both parties are willing, in principle to do a deal. This indicates that there is at
least some common ground. If one party is initially reluctant to deal, the other
party may first have to promote the benefits which could arise from their
proposals in order to encourage the first party to consider dealing with them.

2. Both parties have the authority to vary their terms.

Establishing who on the other side has the authority to offer concessions is
therefore one of the important tasks to complete in the early exploratory stage
of any negotiation.

3. You have carefully planned your case.

Without sufficient preparation, you are preparing to fail in negotiation. If you
are not ready to negotiate, you had better to walk away and come back later.

3. WHEN YOU SHOULDN’T NEGOTIATE

There are times when you should avoid negotiating.

1. When there are rules and regulations.

You can’t change any term or condition through negotiation because of the
fixed rules or regulations. For example, you are required to attend the final
examination for the subject of Marketing. You cannot get the exemption from
the final exam through bargaining with the lecturer as this is a fixed
“requirement” specified in the course syllabus.

2. When you or the other party don’t care

• If you don’t care the outcome, don’t negotiate. You have everything to
lose and nothing to gain.
• When the other party doesn’t care about the outcome, the other party is not
likely to spend time to listen to you to achieve mutual satisfaction or to
search for better solution to resolve the dispute.

3. When you don’t have time

• When you’re pressed for time, you choose not to negotiate. If the time
pressure works against you, you’ll make mistakes, and you may fail to
consider the implications of your concessions. When under the gun, you’ll
settle for less than you could otherwise get.

4. When waiting would improve your position.

• Perhaps you’ll have a new technology available soon. Maybe your
financial situation will improve. You may gain more with a delay of the
negotiation.

5. When the demands are unethical.

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If you counterpart asks for something you cannot support because it is not
lawful or ethical, for example, accepting a bribe. If your reputation is
compromised, you will lose in the long run.

6. When your counterparts act in bad faith.

You should stop negotiation when your counterparts show signs of acting in
bad faith. As you cannot trust what they agree in the negotiation, the
negotiation is of little value to you.

7. When you’re not prepared

• Gathering important information is important for the success of
negotiation. If you’re not ready, just say “no”.

4. THE PROCESS OF NEGOTIATION

Fig 1.1 is a simplistic representation of process of negotiation.

Brief explanation of each step:

Prepare: gather information and doing assessment

Discuss: exchange objectives and needs

Propose: propose a deal on what to offer and demand

Bargain: offer and demand concessions based on the proposal

Agree: confirm the details of the deal

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5. MAJOR TYPES OF NEGOTIATION

A. Win-Lose or Distributive Negotiation (Slicing the pie)

Negotiation taking this approach assumes that one side will win and the other will
lose. When you choose this negotiation types, you decide that, whatever the cost to
the other person, you will go all out to get what you want. If you choose this
approach, you choose to ignore the feelings of others.

Negotiators assume that all negotiations involve a fixed pie. The more I gain, the
more you lose (see Fig.1).

Fig 1. Win-Lose Negotiation

Mary

John

B. Win-Win or Integrative Negotiation (Expanding the pie)

Both sides win when the conflict is resolved through cooperation or problem solving.
Both parties understand each other’s needs and interests through information sharing.
Through cooperation, the pie is expanded. In consequence, both sides get what they
want.

For example, the workers and management might have been able to cooperate in
developing a mutually satisfactory plan. For instance, they might have formulated a
pay increase tied to improved productivity or profitability of the company. That might
satisfy the workers’ need for more money and management’s need for additional
production or increased profit.

Fig 2. Win-Win Negotiation

John Mary

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Reference Book:
1. Think on your feet in negotiations – New approaches to creative thinking and
problem solving (2000). By Jane Hodgson. Prentice Hall. Chapter 1.
2. Essentials of Negotiation (2021). By Lewicki, R.J., Saunders D.M., Barry, B., &
Minton J.W. McGraw Hill. Chapter 1