AUTONOMOUS GROUP LEARNING

(AGL)

NO. 20 – NEGOTIATION

DRAFT FOR TESTING WITHOUT CASES11.12.12

DAILY WORK PACK - PART I

(Not retained)

UNIT I OF IV

Cases purchased and to be handed out by the Organizer:

Harvard Pond Copyright:

Multimode, Fish Pond, GE International

HBS & Thunderbird Copyright:

Quick Drying Paint Licensing Negotiation

Copyright: RGAB 2012/1

No copies of without written permission.

WELCOME TO THE PROGRAM

  1. Good morning. Welcome to AGL. Autonomous Group Learning.
  1. During the next two days you will achieve a rapid grasp of the basics of negotiation management. This is one of a series of six programs related to finance and accounting.
  1. AGL courses represent many years of development and testing in thirty countries around the world, in nine languages by thousands of participants. Their criticisms and suggestions have been incorporated into the program.
  1. After two days learning with the AGL method you will understand and use the information and reports issued by your negotiation, finance and accounting divisions; and you will retain the skills and knowledge accumulated for a long period.
  1. While you may be used to traditional educational methods, you will be agreeably surprised by your learning results of the next two days. We will provide you with a controlled environment for learning.
  1. It may seem strange for you to learn without an instructor, but be assured that we have structured the course to enable you to find the answers to all your questions in the learning materials provided.
  1. Your course organizer is trained to run the program and to help you obtain the most benefit from the course. You will have to work hard, but you will learn a great deal, and retain the knowledge. So now let us start with some abbreviations which follow ...

ABBREVIATIONS

AGLAUTOMATED GROUP LEARNING

INDINDIVIDUAL

SGSMALL GROUP

CSGCOMBINED SMALL GROUP

MGMAIN GROUP

ASS ACCOUNTING STEP BY STEP

L LECTURE

D DISCUSSION

CH CHAPTER

LRTLEARNING RECALL TAPE

CIACOMPUTER ASSISTED INSTRUCTION

PROGRAM - PART I

2-day course 3-day course

ActivityGroup Day 1 Day 1

  1. IntroductionIND08.00 - 08.3010.00 - 10.15

SG (new)

2.QuizIND08.30 - 09.1510.15 - 11.00

SG

Coffee

3.Study - ProcessIND09.15 - 10.1511.10 - 12.00

SG

Coffee

4.Lecture: MG10.15 - 10.3012.00 - 12.15

SG

5.Case: IND10.45 - 11.3012.15 - 13.00

MultimodeSG

Lunch

Case:CSG11.30 - 12.0014.00 - 14.30

6. Lecture: MG12.00 - 12.3014.30 - 15.00

CSG

Lunch

7. Study - CultureIND13.30 - 14.4515.00 - 16.15

SG (new)

Tea

8. Lecture: MG14.45 - 15.0016.30 - 16.45

9. Case:IND15.00 - 15.4516.45 - 17.30

Fish PondSG

Tea DAY II

Case:CSG16.00 - 16.4510.00 - 10.45

10. Lecture: MG16.45 - 17.1510.45 - 11.00

CSG

Coffee

11. Summry LectureMG17.15 - 18.0011.10 - 11.30

Homework: To be assigned

ASSIGNMENT 1.0 - INTRODUCTION (30 MINUTES)

1.1SPECIFIC OBJECTIVES

The program provides members with the opportunity to use negotiationtechniques and

skillsso that theybecome more complete managers.

The specific learning objectives are to:

a. To analyze the negotiation process to achieve goals

  1. To evaluate the impact of culture on negotiation.
  1. To practice international negotiation communication skills.
  1. To develop skills in achieving negotiation strategy.
  1. To motivate further study in the future.

1.2AUTONOMOUS GROUP LEARNING (AGL)

The AGL method is designed to achieve rapid individual learning using special material and the stimulus of group activity without a formal instructor. The groups use the material to find the answers to all problems and questions.

1.3GROUP ARRANGEMENTS

The work will be done:

(a) IND- Individually, or

(b) SG - Small Group (in small groups of four members which will change

twice daily), or

(c) CSG -Combined Small Group (two small groups together), or

(d) MG -Main Group (for short taped lectures on key learning points with

visual aids).

1.4SMALL GROUPS

Group names provided on name lists. Note the name of your SG and the names of the other members.

1.5LEARNING MATERIALS

(a)Retained by members

Textbook Practical solution to Global Business Negotiation (Cellich & Jain)

HBS text on negotiation

Notebook - for recording every key point

Daily Course Diary

Learning Recall Tape

Articles

(b) Used by not retained by members:

Daily work packs I and II, including: introduction, lectures, cases, exercises

and key learning points. Case guide & quiz. Harvard POND cases

NOTE:

Please use your notebook. Do not mark the Daily Work Pack which must be handed back at the end of each day. You receive all the materials in your SG. Don't look ahead in the work pack until you are specifically asked to do so! Be sure you only study ONE PARTY confidential note for each case. NOT BOTH!!!

1.6 METHOD

Try to complete every task in the time allowed. A pattern of learning methods will be

used including:

(a)HBS study notes

(b)Case analysis

(c)Lectures

(d)Quizzes

(e)Learning patterns

(f)Homework reading

(g)Learning Recall (LRT)

(h)Computer Assisted Instruction (CAI)

1.7LEARNING PATTERNS - REVIEW

OBJECTIVES

LEARNING

METHODS

SG CSG MG

1.8 INSTRUCTIONS (15 MINUTES)

(a) Assemble in SG's to introduce yourself, indicate your past experience in finance and

what you hope to contribute to and gain from the course.

(b) Complete the registration sheet in the Daily Course Diary.

NOTE: Please check that you have a full set of learning materials now.

ASSIGNMENT 2.0 - QUIZ (45 MINUTES)

2.1 INSTRUCTIONS SG WORK

(a)Assemble in SG

(b)Answer the quiz of 80 questions; mark your answers a, b, c, or d with a clear "x" on

the special form provided in the course diary

(c)Work as quickly as possible but don't guess - leave blanks

(d)Hand in your answer sheet to the Organizer who will mark it and give you a

quantitativemeasure of your negotiation KSA (knowledge skills and attitudes) at the

start of the course

(e)Reassemble in MG when the bell rings

ASSIGNMENT 3.0 - STUDY (60 MINUTES)

3.1INSTRUCTIONS – IND. WORK

(a)Re-assemble in SG

(b)Study the lecture and discuss in SG.

(c)Record significant points on the flip chart.

(d)Review the glossary for any difficulties with new words

(e)Record significant points in your notebook

(f)Reassemble in MG when the bell rings

ASSIGNMENT 4.0 - LECTURE ON THE NEGOTIATION PROCESS

4.1 METHOD

Read aloud, listen and respond verbally to any questions.

4.2OBJECTIVES

The key negotiation objective is to achieve win-win goals for both parties which establish trust for both a short and long term relationship.

The six P’s of effective negotiation are : Parties, Process, Power, Product, Problem and Prognosis (outcome).

The negotiation process includes: pre-negotiation planning, initiating first moves, reactions, concessions, creating value, resolving disputes, finding agreement, and closing the negotiation, In 2012 we must also plan for re-negotiation later as new issues appear..

4.3 INFRASTRUCTURE

Before proceeding to negotiation assess the current status of the parties, establish BATNA and agree upon infrastructure.

The current status is assessed using SWOT – Strengths, Weaknesses, Opportunities and Threats, to develop a negotiation strategy.

The negotiation environment may involve such complex factors as: power, instability, change, government control and policy, foreign exchange , political and legal change, external stockholders and parties, ideological and cultural differences.

The negotiation setting includes: levels of conflict, underlying potential negotiations, relationships before and during negotiation, desired outcomes, stockholder impacts, relative bargaining power, dependence and finally the negotiation style.

4.4 PLANNING & BATNA

BATNA is the concept of : Best AlternaTive with No Agreement. It is available when negotiation fails. We either close the deal or walk away.

BATNA both involves many factors : cash, culture, deadlines, interests, knowledge, and both party experience. We must assess our outset BATNA estimate the opposing BATNA.

Negotiation begins with pre-negotiation planning where each party, starting with a differentviewpoint, sets its minimum hopes to achieve. There is a continuing need for clarification, comprehension and credibility, in order to plan for creation of mutual value.

As negotiation continues the parties reach convergence of views, as discussions, lead to concessions, counter proposals and commitment and the final stage of conclusion.

4.5 GETTING INTO NEGOTIATION

For efficient and effective negotiation: avoid conflict, controversy and criticism of the other party; develop attitude of: communication, collaboration and cooperation; seek goals of: continuity, coherence, consensus, commitment and compensation.

In different economic, social and cultural environments, introduce options with an open mind for a cooperative relationship. Smooth negotiations leave the impression that ideas have indeed come from both sides.

The goal is mutually beneficial agreement by both parties, leading to reliable long run results and repeat business. Focus on the common interests of both parties, and then refocus, on the needs of each party.

Whether the objective is securing an order, appointment of a new agent, a joint venture, purchase or sale etc. etc., the key aim is to create a shared investment in a common future relationship, as a negotiated agreement which is DPS - doable, profitable and sustainable.

4.6 INITIATING

The initial offer should be confident with flexibility to enable the negotiator to learn the other party objectives and reformulate to meet specific needs. The initial phase is the opportunity to create trust and exchange strategic information, and is not the time to make concessions.

Making the first moved is critical, because first impressions may be difficult, but not impossible, to change. An initial first competitive offer should meet the context of the location, culture, language and setting, for a surrounding discussion. It must be defended with valid arguments.

In general, do not make concessions immediately. They may not be valued. Ask questions and listen actively with patience. Anticipate typical objections with prepared replies in advance, before meeting the other party. Listening not talking is the key to success.

The crucial initial phase is helped by: knowledge of the market, assessment of the competition and understanding the other party’s needs. Thus an opening offer may shape the negotiation outcome, because a good outset impression is critical.

In competitive markets, a higher initial offer may be lowered. In traditional less competitive markets, offers on the high side with concessions may be more acceptable.

For the buyer, in this initial phase, he keeps his goals in mind and is ready to say no; he may refer to competition; he may seek concessions or a better offer; or he may ask whether the proposal really achieves his needs.

For the seller, this initial offer helps to investigates buyer goals, key objectives, and values. Proposals of tangible and non-tangible benefits are critically important, and can ensure that the offer is DPS - do-able, profitable and sustainable.

For both parties this initial stage is the time to reflect cooperation.

4.7 PRICE NEGOTIATION

Price may or may not be the critical factor! Price determines the total revenue and profitability of the business by considering: objectives, cost, competition, customer and government regulations.

Price negotiations may follow a cost or market approach. The cost approach is computed as relevant costs and markup to determine the price. The market approach examines price setting from the customer’s viewpoint.Additional factors: transport, customs and currency risk are relevant.

Effective pricing requires an action plan to meet buyer wants, and ability to pay, and his objections to the initially quoted price. This requires response to objections, and counter proposals.

Need to highlight the business and product attributes, maintain flexibility and differentiate from the competition. To achieve closing, the factors of reliability, reputation and financial stability may be critical.

4.8 THE NEW NEGOTIATION WORLD OF THE INTERNET

Internet negotiation is the new world of 2012! National and international business negotiation may be completely restructured by internet unlimited resources and availability.

Potential of Internet? More power and unlimited information to buyers and sellers … and criminals!!! Greater opportunities for suppliers and exporters world wide.

Internet negotiations are competitive, impersonal, and adversarial with frequent business failures. Greater competition, price pressure, high client turnover and unpredictable market conditions. Problem? Ccan we believe internet data? High potential for crime and corriuption!

Internet is best for negotiating repeat business and confirming orders, initiating trade leads, testing markets, clarifying data, offering after sales service, shipping ands delivery data, communication with existing customers, checking competition, and …preparing for reliable face to face negotiation for SIGNIFICANT CONTRACTS (coconuts not peanuts).

Effective “negotiation requires: security, trust, audit and continual re-verification to avoid crime and corruption! See the video “INSIDE JOB” for the potential of internet fraud! (20 trillion dollars US in 2009).

4.9 OVERALL

The six P’s of effective negotiation are : Parties, Process, Power, Product, Problem and Prognosis (outcome).

The key objective is achieving a long term relationship of trust for mutual benefit and a “win-win” outcome.

BATNA is the alternative for a failed negotiation.

Much depends upon the negotiation: environment, process and the setting, which can be managed!! Internet is changing everything.

Success in business success negotiation may well depend upon many factors:

  1. Knowing our product, our customer and our competition.
  1. Effective business decision making.
  1. Finding our market niche with quality products.
  1. Creating diversity and finding expanding markets.
  1. Network contacts; trust and honesty; control of cash, outcomes and risk; diffusing

tension; customer loyalty.

  1. Creativity in our skills of negotiation … so many things to learn … now !

Study Exhibit A - The Effective Negotiator and Exhibit B – Negotiation Mistakes

EXHIBIT A - THE EFFECTIVE NEGOTIATOR

Are you an effective negotiator? Test yourself now 20 questions. Total 100 points? Your score for each 0 (poor) -5 (good).

Test yourself now and again at the end of the AGL and one month later.

  1. Shows patience
  2. Prepares agenda
  3. Has opening range
  4. Tests assumptions
  5. Maintains flexibility
  1. Listens and asks relevant questions
  2. Prepares negotiation strategies and tactics
  3. Knows which concessions to trade and obtain return
  4. Can withstand pressure
  5. Has developed arguments against possible objectives
  1. Has power to make decisions
  2. Knows the bottom line
  3. Has a good idea of the opposing BATNA
  4. Has multiple options and alternatives
  5. Displays creativity for mutually beneficial solutions
  1. Observes body language
  2. Is sensitive to cultural diversity
  3. Takes notes and summarizes frequently
  4. Is willing to walk away
  5. Knows how and when to negotiate.

Score now? … /100%?

EXHIBIT B – NEGOTIATION MISTAKES

  1. Neglecting the other side’s problem

Example: If you don’t understand the deal from the other side’s perspective, you can’t solve his problem or yours.

  1. Your gain isn’t necessarily your opponent’s loss.
  1. Searching too hard for common ground
  1. Neglecting BATNA

Example: A company hoped to sell a struggling division for $7 million.

It had two fiercely competitive bidders, speculating each might pay an inflated price to trump the other. The division’s was sold for $45 million.

  1. Failing to correct for skewed vision
  1. Solving the wrong negotiation problem

Need to understand the problem from the other side’s perspective.

  1. Failing to create and claim value for the long term
  1. If you want to change someone’s mind, first learn where his mind is.
  1. Letting price bulldoze other Interests
  1. Forgetting the: relationship, social contract, process and

interests of all the other players.

  1. Letting positions drive out our Interests

4.10 LEARNING PATTERNS - REVIEW

NEGOTIATION

Parties Process Power Product

Problems

Prognosis

(outcome)

4.11 INSTRUCTIONS (10 MINUTES)

(a)Reassemble in SG

(b)Study the lecture carefully

(c)Record key points in your notebook

(d)See the Glossary. Discuss outstanding questions

(e)When the bell rings, carry on with the case study which follows

ASSIGNMENT 5.0 CASE STUDY – MULTIMODE (120 MINUTES)

Case purchased from Harvard Pond Clearing House

5.1 INSTRUCTIONS

(a) SG: Read the case and study it carefully. Identify the key problems. Answer all the

questions on the SG flip chart provided (20 minutes).

(b) NEW SG - one side onlyArnold or Boyd.READ ONLY YOUR PNE

CONFIDENTIAL NOTE. Plan your pre-negotiation strategy (20 minutes).

(c) Break into 1:1. and negotiate anagreement (30 minutes).

(d)CSG - for debriefing discussion questions (20 minutes)

(e)MG - for the lecture on the case and discuss the ideas in the Guide (20 minutes).

(f)MG - List learning points on the flip chart (10 minutes).

EXHIBIT 1

Assignment 5.1

ASSIGNMENT 5.0 CASE STUDY – MULTIMODE

SG - PRE NEGOTIATION QUESTIONS ON THE CASE

  1. What is the story of the case?
  1. What the goals of the parties:

a. Arnold

b. Boyd

3. What are the BATNAs?

a.

b.

4. What are the cultures?

a.

b.

5. What are the powers?

a.

b.

6. What is the critical issue?

a.

b.

7 . What are the alternatives?

a.

b.

INSTRUCTION: NEW SG - SAME SIDE

Pre-negotiation(20 minutes) and then in small 1:1 teams: negotiation (30 minutes) for decision and justification

MULTIMODE CASE

See the full case purchased from Harvard Pond Clearing House with confidential instructions for each party when distributed by the organizer

BRIEF OUTLNE

T. Boyd, a new Vice-President for Budget and Finance is negotiating the annual budget, with orders from the CEO, Boyd to each department to keep cost increases below 5%.

J. Arnold, a Vice President for Human Resources, has been asked by an Executive Committee of top company managers to implement a reorganization strategy to competitiveness. After long negotiations within the HR department, Arnold submitted a budget with increase of 8%.

Negotiation between Arnold and Boyd over this budget.

6.0 LECTURE ON THE CASE (IN GUIDE)

ASSIGNMENT 5.1 CASE STUDY – MULTIMODE

DEBRIEFING QUESTIONS

INSTRUCTION: CSG

DISCUSS AND RECORD ANSWERS ON THE FLIP CHART

Focus the discussion on the process used to reach their outcomes, rather than on the outcomes themselves, with the following questions.

1. How did it go? What worked well and why? Difficulties encountered? What to differently next time?