EID-372 Negotiation Principles EID-372 -> Resources -> Negotiation 
      Principles 

BASIC INTERNATIONAL BUSINESS NEGOTIATIONS PRINCIPLES:
Negotiation is an art developed through study and practice. Effective 
negotiation requires and understanding of the social, cultural, political, and 
economic systems, as well as an expertise in technical, financial, accounting, 
and legal analysis. Negotiation is here defined as the use of common sense under 
pressure to achieve objectives. However, reaching explicit agreement on all 
points is not necessarily the only objective of negotiation; in fact, agreement 
may be reached on only some of the explicit proposals being negotiated. Even 
then agreements vary widely in their degree of specificity and in the extent of 
disagreement which is left unsettled. The outcome of negotiations is more than 
merely an explicit agreement.
  First, negotiation takes place within the context of the four Cs represented 
  in the second circle in figure 1-1. The four Cs stand for common interests 
  (something to negotiate for), conflicting interests (something to negotiate 
  about), compromise (give and take on points), and criteria or objectives 
  (determining the objective and the criteria for its achievement).
  Second, negotiation takes place within the context of an environment composed 
  of the political, economic, social, and cultural systems of a country. The 
  strategies and tactics of negotiation are directly influenced by the 
  environment which varies with each country.
  Third, the negotiators must develop a broad perspective that includes the 
  larger context within which they negotiate. Such perspective is developed 
  through answering such questions as "Besides the factors directly related to 
  the ongoing negotiation, what other developments influence the approach to 
  negotiation of the opposite group(s) and of various levels of the organization 
  we represent?" For example, in negotiation with a government, the 
  international corporation (IC) should recognize questions such as "What other 
  similar and related projects has the government negotiated in the past? What 
  has been the reaction of political and economic interest groups within the 
  host country to the terms of investment granted to foreign investors in these 
  projects? What pressures are being placed by external groups on the host 
  government for a particular pattern of development of the industry?" Such 
  question would need to be raised by the IC and other major groups involved 
  with or influenced by the negotiations. In essence, perspective requires that 
  the negotiators understand the characteristics of the broader framework within 
  which they negotiate and be able to interpret the framework for its 
  implications for the specific negotiations they are engaged in.
  Fourth, over time, the four Cs change and the information, know-how, and 
  alternatives available to the IC and the host country also change, resulting 
  in a fresh interpretation of the four Cs, the environment, and perspective.
  Fifth, the unique characteristic of international versus domestic business 
  negotiations is that international negotiations are influenced by a wide 
  diversity of environments that require changing perspectives which determine 
  the selection of appropriate negotiation tactics and strategies to be adopted. 
  Specific groups in different environments have their own concept of what is 
  "right," "reasonable," or "appropriate" in negotiations; each groups also has 
  its own expectations of the likely response of an opposing group to and issue, 
  event, or mood determined by its "self reference criterion" - that is, "the 
  unconscious reference to one's own cultural values."
A negotiation, both the process and outcome, is influenced by a vast range of 
issues, events, and personalities. Developing a list of "do's" and "don'ts" in 
negotiation is always fraught with dangers of simplification and oversight.
Briefly stated below are major aspects to be kept in mind during negotiations, 
organized into the four broad and interrelated categories of: empathy, role of 
governments, decision making characteristics, and organizing for negotiation.
A) Empathy
The environmental context (political, social, cultural, economic) is different 
between countries. Negotiators need to understand the nature and reasons for the 
differences. Some of the major setbacks in negotiations between the IC and the 
host government or company take place because of insufficient empathy of each 
other's environmental context. Try to:
  Place yourselves in the other persons' shoes. It is not sufficient to merely 
  know the position and approach of your opponents to a negotiation; even more 
  important is to understand the reasons which prompt them to adopt the 
  particular stance. This requires that the negotiators view the four Cs and the 
  particular environmental context in a country form the view point of the 
  individuals they are negotiating with. For example, a government official in a 
  developing country might place particular weight on the political influences 
  on him instead of emphasizing the economic dimensions of a project because the 
  official's power and continuity in office is determined by his ability to 
  satisfy individuals with political power. Such a context is significantly 
  different from what the American negotiator is used to, especially in the 
  United States.
  Understanding the different ways of thinking. Reaching the same conclusions is 
  important, but in negotiations it is even more important to know the thought 
  process by which individuals from different cultures reach the same 
  conclusions. The environmental factors have a direct influence on the ways of 
  thinking, outlook toward, and the manner in which problems are solved. For 
  example, bribes to government position and a means of supplementing very low 
  government salaries. Most IC executives, on the other hand, in keeping with 
  the values of their own country, view such a practice with disdain and 
  disfavor, and as illegal.
  Pay attention to saving face of the opponent. "Winning" in a negotiation 
  situation should not result in a loss of face for the opponent, especially in 
  countries where personal honor is a sensitive issue. Unlike the United States, 
  many countries typically possess hierarchical structures of society where a 
  superior-subordinate relationship exists between two individuals. Caste, 
  family name, and type of occupation are some of the determinants of status. 
  The "image" of "face" of an individual determines the extent to which he can 
  influence others.
  Improve your knowledge of host country. Often negotiators do not have 
  sufficient knowledge of the history, culture and political characteristic of a 
  country in which they are negotiating. Yet, host country nationals are proud 
  of their heritage and traditions and feel flattered when a foreigner reflects 
  some knowledge and understanding of their country. For example, in the mid 
  1960s when Singapore first started to attract foreign investments, host 
  government officials received letters from American companies addressed to 
  "Singapore, care of the Republic of China." Needless to say, they were 
  offended and did not feel that inquiries from such companies were worthy of 
  further exploration.
B) Role of the Government
Unlike the United States, governments in most emerging countries and in Japan 
play a major role in planning, regulating, and often participating in industrial 
ventures. Insufficient recognition of the important role of the host governments 
in economic matters results in serious setbacks in negotiations in emerging 
countries. Keep in mind:
  Recognition of the nature and characteristics of the role of government in 
  centrally planned economies. The desire for rapid development, distrust of 
  private enterprise, lack of indigenous entrepreneurial talent - these and 
  other considerations have prompted host governments in many countries to play 
  a major role in planning for the economic development of their countries. The 
  planning is often highly detailed, as in India, and at times it is general 
  administrative guidance, as in Japan. The planning process is based on both 
  economic and political considerations and the international company has to fit 
  in such a context. The IC executives, used to a far more laissez-faire context 
  of the United States, have to understand and interpret the environmental 
  context of a planned economy in undertaking a negotiation.
  Recognition of the relatively low status assigned to business people. Not only 
  are government officials in planned economies powerful, but they often look 
  down upon business people, who are viewed as being concerned only with 
  questions of profits and not the broader national aspirations of the society. 
  In many countries, broader environmental factors (historical, cultural, etc.) 
  have created such an attitude. For example, in India the business community 
  was viewed as being too closely associated with the British colonizers for 
  purposes of economic benefits. The Hindu religion does not stress material 
  achievements by deals more with the spiritual aspects of life. In Indonesia 
  the loyalty of the Chinese business community is questioned by the "pure" 
  Indonesians, resulting in distrust and suspicion of the Chinese businessman. 
  The IC business people, therefore, have to recognize the environmental factors 
  that have created the existing attitudes toward private enterprise and plan 
  their negotiation accordingly.
  Recognition of the role of the host government in negotiations. Negotiations 
  in emerging countries are generally tripartite in nature, involving the 
  foreign company, the local company, and the host government. The government 
  approves the terms on which the foreign enterprise is permitted to invest in 
  the country. Therefore, planning for negotiations by the IC must recognize at 
  least a triangular situation. For example, the IC often needs to develop 
  direct access to appropriate host government officials to learn firsthand 
  their views on the investment, instead of depending solely for such 
  information on the local partners who might be wish to promote a particular 
  orientation of the project that suits his interests but not necessarily those 
  of the IC. Again, the broader environmental context needs to be understood in 
  planning for this dimension of negotiations in developing countries.
  The perception in host countries of the role of the IC's home government in 
  negotiation. Regardless of what the reality of the situation is, the host 
  government believes that the foreign company uses the muscle of its home 
  government in negotiations with the host government. The broader environmental 
  context of many emerging countries largely explains such a perception. It is 
  consistent with theirs own tradition where indigenous businessmen seek the 
  protection of their government for economic benefits. Historically, especially 
  during the colonial period, foreign enterprise from the colonizing country 
  gained benefits in the colony because of protection of the government of the 
  colonizing country. Also, and to a far greater extent than is true for US 
  companies, European and Japanese governments play an active role in assisting 
  companies from their countries in dealing with host government. In Southeast 
  Asia, for example, host governments exposed to such behavior by the Japanese 
  government assume that US companies also engage in similar practices, although 
  in a more covert manner.
C) Decision Making Characteristics
The structure, orientation, human skills, objectives, and goals of and 
organization influence the approach to decision making. Governments, as 
organizations, are different in these respects form the IC. Insufficient 
recognition of the characteristics of decision making leads to setbacks in 
negotiations with host governments. Keep in mind to:
  Acknowledge the weights assigned to economic and political criteria in 
  decision making. Host government officials place particular stress on 
  political consideration in evaluating investment proposals in keeping with the 
  general orientation of the type of organization to which they belong. For 
  example, the central government in Indonesia first granted and then rescinded 
  a timber concession to an American company. The military governor of the area 
  where the concession was located had entered into an agreement with the 
  Chinese and Japanese interests. Given the delicate internal political 
  situation in the country, the central government did not with to challenge the 
  authority of the military governor.
  Understand the difference between approval at one level and implementation of 
  such approval at other levels of the government. Gaining approval of the 
  central government for and investment does not mean that other levels of the 
  government will automatically implement the approval. Internal organizational 
  problems, personality and jurisdictional conflicts and lack of trained 
  personnel, especially at lower levels of government, are some of the reasons 
  for delays between approval and implementation that must be understood by the 
  executives in negotiating with governments. The earlier example of timber 
  concession illustrates this dimension of negotiation. In Japan, different 
  ports of entry were charging different rates of import duty for the same items 
  because the responsible ministry in Tokyo had not adequately communicated the 
  duty schedule to the custom authorities.
  Understand the role of personal relations and personalities in decision making 
  by the host government. Host government officials possess considerable 
  discretion in interpretation of policies and regulation relating to foreign 
  investments. Often it is the individual who determines the power of and office 
  and not the other way around. Because of the importance of the individual, it 
  is necessary for the foreign negotiator to develop a personal relationship 
  with appropriate government officials.
  Allocate sufficient time for negotiations. It simply takes longer in certain 
  countries to present a proposal, to gain a reaction, and to offer a response 
  because of distance, mutual suspicion, different ways of thinking, and the 
  internal decision making structure of both the government and the IC. The 
  consensus approach to decision making in Japan and the hesitation of a 
  government official to assume responsibility, especially in projects which are 
  not keeping with precedents, are some of the reason for the delays in host 
  government decision making.
D) Organizing
Negotiation is a complex and time consuming activity involving a range of 
individuals from the IC and the host government company who negotiate to achieve 
their respective objectives within a changing environmental context. 
Insufficient attention to organizing effectively for negotiation results in 
delays and setbacks especially in negotiations with host governments. Pay 
attention to:
  Planning for changing negotiation strength. The negotiation strength of the IC 
  and the host country often changes over the duration of an investment; and 
  such changes in negotiation strength result in renegotiation of the terms of 
  the original investment. Therefore, both the IC and the host government should 
  explicitly recognize and integrate changes in negotiation strength in planning 
  for negotiation.
  Interference by headquarters. Headquarters personnel sometimes interfere 
  directly in negotiations, causing serious damage to the credibility of the 
  country level managers and the field negotiations. Host government officials 
  prefer to negotiate with executives who in their opinion have the power to 
  decide on behalf of the companies they represent. At times, headquarters 
  interference without sufficient communication to the country level results in 
  promoting an unfavorable government decision. For example, the American 
  Chamber of Commerce in Mexico was making representations to the host 
  government for greater clarity of policies on foreign investment. Senior 
  government officials of Mexico, on a visit to the United States, were 
  entertained by corporate level executives of US companies with operations in 
  Mexico. Corporate executives stressed the need for clarity of government 
  policies on foreign investment. This representation partially contributed to 
  codes on foreign investment. It was an outcome considerably different from 
  what the American Chamber of Commerce and its member companies were seeking to 
  gain from the Mexican government.
  Planning for internal communication and decisions. Several parts of an 
  organization have an interest in an ongoing negotiation and their views and 
  preferences have to be recognized in negotiating for a particular package of 
  terms of investment. Often in an ongoing negotiation a rapid response to 
  developments is required from the interested parties; a rapid response might 
  not be forthcoming. Of course, at times a response is purposely delayed 
  because of the need for additional review or because of disagreement with what 
  is being proposed by the field negotiators. In any event, in negotiation it is 
  just as important to develop effective channels of communication within one's 
  own group as it is to have effective channels of communication with the 
  opposing groups.
  The role of the negotiator in accommodating the conflicting interests of 
  his/her group with those of the opposing groups. The IC seeks certain terms of 
  investment in a country that might be greater than what the field negotiator 
  believes can be secured. Conversely, the host government might make demands on 
  the IC that are greater than what the field negotiator believes would be 
  acceptable to the IC. Therefore, the negotiator plays a crucial role as 
  interpreter, intermediary, and counselor both to his/her own group and to the 
  opposing group on what can be achieved in a particular negotiation.
  Recognition of the loci of decision making authority. Decisions are seldom 
  made by any one branch of government but are shared across agencies and 
  ministries because of the particular characteristics of government 
  organizations. Therefore, the IC must know the diverse centers of influence 
  within the government and be skilled in dealing with them. For example, in a 
  South American country, the IC recognized that the central government would be 
  strongly influenced by the wishes or a powerful state government. It therefore 
  make a special effort to inform the state government of the benefits it would 
  derive from the project in the hope of gaining its influence in dealing with 
  the central government.
  Recognition of the strength of competitors. The emerging countries have access 
  to a growing range of alternative sources of supply of the resources they 
  seek. Therefore, in planning for negotiation, the IC needs to recognize the 
  unique characteristics (including the terms of negotiation) that are likely to 
  be accepted by the competition emanating from Western Europe, Japan and 
  elsewhere. Note: The tendency to underestimate the competitive strength and 
  negotiation skills of non-American companies is a source of weakness in many 
  of the American companies' planning for negotiations.
  Attention to training executives in the art of negotiation. Negotiating, 
  especially with host government officials, consumes a growing amount of the 
  time of an American executive at the country level. Effective negotiations can 
  serve to promote and protect the interests if the IC. Yet executives are 
  seldom trained or encouraged to develop negotiating skills.
OTHER IMPORTANT NEGOTIATION TIPS:
  Do Not Bargain Over Positions

  Arguing over positions produces unwise agreements.
  Arguing over positions is inefficient.
  Arguing over positions endangers an ongoing relationship.
  When there are many parties, positional bargaining is even worse.
  Being nice is no answer.
  There is always another alternative.
  Basic Elements of Negotiation

  People:
  Always remember to separate people from the problem. Negotiators are people 
  first.
  Every negotiator has two kinds of interest: in the substance and in the 
  relationship.
  Identify when a relationship tends to become entangled with the problem and 
  when positional bargaining puts the relationship and the substance in 
conflict.
  Separate the relationship from the substance; deal directly with the people 
  problem.

  Perception:
  Always remember to put yourself in their shoes.
  Do not deduce intention from your fears.
  Do not blame them for your problem.
  Discuss each others perceptions.
  Look for opportunities to act inconsistently with their perceptions.
  Give them a stake in the outcome by making sure they participate in the 
  process.
  Face-saving: make your proposals consistent with their values.

  Emotions:
  First recognize and understand emotions, theirs and yours.
  Make emotions explicit and acknowledge them as legitimate.
  Allow the other side to let off steam.
  Do not react to emotional outbursts.
  Use symbolic gestures.

  Communication:
  Listen attentively and acknowledge what is being said.
  Speak to be understood.
  Speak about yourself, not about them.
  Speak for a purpose.

  Prevention works best:
  Build a working relationship.
  Face the problem, not the people.

  Interests:
  For a wise solution reconcile interests, not positions
  Interests define the problem.
  Behind opposed positions lie shared and compatible interests, as well as 
  conflicting ones.
  How do you identify interests?
  Ask "Why?"
  Ask "Why not?" Think about their choice.
  Realize that each side has multiple interests.
  The most powerful interests are basic human needs.
  Make a list.

  Talking about interests:
  Make your interests come alive.
  Acknowledge their interests as part of the problem.
  Put the problem before your answer.
  Look forward, not back.
  Be concrete but flexible.
  Be hard on the problem, soft on the people.
  Inventing Options for Mutual Gain

  Separate inventing from deciding:
  Brainstorm with your side.
  Consider brainstorming with the other side.

  Broaden your options:
  Multiply your options by shuttling between specific and the general.
  Look through the eyes of different experts.
  Invent agreements of different strengths.
  Change the scope of a proposed agreement.

  Look for mutual gain:
  Identify shared interests.
  Dovetail differing interests.
  Any difference in interests?
  Different beliefs?
  Different values placed on time?
  Different forecasts?
  Differences in aversion to risk?
  Ask for their preferences.

  Make their decision easy:
  Making threats is not enough.
  Insist on Using Objective Criteria

  Deciding on the basis of somebody's will is too costly.
  Principled negotiation produces wise agreements amicably and efficiently.

  Developing objective criteria:
  Fair standards and fair procedures.

  Negotiating with objective criteria:
  Frame each issue as a joint search for objective criteria:
  Ask "What's your theory?"
  Agree first on principles.
  Reason and be open to reason.
  Never yield to pressure.
Note: Based on "Getting to Yes" by Roger Fisher and William Ury


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