NEGOTIATION

Negotiation is the process of two individuals or groups
reaching joint agreement about differing needs or ideas.
Oliver (1996) described negotiation as “negotiators jointly
searching a multi-dimensional space and then agreeing to
a single point in the space.”
Negotiation applies knowledge from the fields of
communications, sales, marketing, psychology, sociology,
politics, and conflict resolution. Whenever an economic
transaction takes place or a dispute is settled, negotiation
occurs; for example, when consumers purchase automobiles
or businesses negotiate salaries with employees.
NEGOTIATION STYLES
Two styles of negotiating, competitive and cooperative,
are commonly recognized. No negotiation is purely one
type or the other. Instead, negotiators typically move back
and forth between the two styles based on the situation.
On one end of the negotiation continuum is the
competitive style. Competitive negotiation—also called
adversarial, noncooperative, distributive bargaining, positional,
or hard bargaining—is used to divide limited
resources; the assumption is that the pie to be divided is
finite.
Competitive strategies assume a “win-lose” situation
in which the negotiating parties have opposing interests.
Hostile, coercive negotiation tactics are used to force an
advantage, and prenegotiation binding agreements are not
allowed. Concessions, distorted communication, confrontational
tactics, and emotional ploys are used.
Skilled competitive negotiators give away less information
while acquiring more information, ask more questions,
create strategies to get information, act firm, offer
less generous opening offers, are slower to give concessions,
use confident body language, and conceal feelings.
They are more interested in the bargaining position and
bottom line of the other negotiating party, and they prepare
for negotiations by developing strategy, planning
answers to weak points, and preparing alternate strategies.
A buyer-seller home purchase transaction illustrates
competitive negotiating. The buyer gathers information
to determine home value, quality, expenses, and title status.
The seller gathers information to ensure that the
prospective buyer qualifies for the loan. The parties negotiate
concessions regarding home repairs, items to remain
in the house, closing dates, and price. The negotiations
stall as the buyer and seller disagree on a closing date; the
seller retaliates by keeping the buyer out of the home for
several days after the closing date. As a consequence of the
competitive strategies used, the relationship between the
buyer and seller suffers; however, the end result (sale and
purchase of a home) satisfies both parties.
On the other end of the negotiating style continuum
is cooperative negotiating, also called integrative problem
solving or soft bargaining. Cooperative-negotiation is
based on a win-win mentality and is designed to increase
joint gain; the pie to be divided is perceived as expanding.
Attributes include reasonable and open communication;
an assumption that common interests, benefits, and needs
exist; trust building; thorough and accurate exchange of
information; exploration of issues presented as problems
and solutions; mediated discussion; emphasis on coalition
formation; prenegotiation binding agreements; and a
search for creative alternative solutions that bring benefits
to all players. The risk in cooperative negotiating is vulnerability
to a competitive opponent.
Cooperative negotiators require skills in patience; listening;
and identification and isolation of cooperative
issues, goals, problems, and priorities. Additionally, cooperative
negotiators need skills in clarifying similarities and
differences in goals and priorities and the ability to trade
intelligently, propose many alternatives, and select the
best alternative based on quality and mutual acceptability.
Cooperative negotiating might be used, for example,
in a hiring situation. An employer contacts a candidate to
encourage the candidate to submit his or her credentials
for a job opening. Trust is built and common interests are
explored as the employer and candidate exchange information
about the company and the candidate’s qualifications.
Creative solutions are explored to accommodate the
candidate’s and employer’s special circumstances, including
work at home, flexible scheduling, salary, and benefits.
The two parties successfully culminate the negotiations
with a signed job contract.

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Negotiation
THE NEGOTIATION PROCESS
Stages in the negotiation process are (1) orientation and
fact finding, (2) resistance, (3) reformulation of strategies,
(4) hard bargaining and decision making, (5) agreement,
and (6) follow-up (Acuff, 1997). For example, a consumer
purchasing an automobile investigates price and performance,
then negotiates with an agent regarding price and
delivery date. Resistance surfaces as pricing and delivery
expectations are negotiated. Strategies are reformulated as
the parties determine motivation and constraints. Key
issues surface as hard bargaining begins. Problems surface,
and solutions—such as creative financing or dealer
trades—are created to counter pricing and delivery problems.
After details are negotiated, the agreement is ratified.
After the sale, the agent may follow up with the
buyer to build a relationship and set the stage for future
purchase and negotiation. The six stages of the process
would be approached differently depending on where the
negotiators reside on the style continuum.
Basic strategies, both cooperative and competitive,
that can be applied in the negotiation process are:
• Use simple language
• Ask many questions
• Observe and practice nonverbal behavior
• Build solid relationships
• Maintain personal integrity
• Be patient
• Conserve concessions
• Be aware of the power of time, information, saying
no, and walking away
• Pay attention to who the real decision maker is, how
negotiators are rewarded, and information sources
• Listen actively
• Educate the other party
• Concentrate on the issues
• Control the written contract
• Be creative
• Appeal to personal motivations and negotiating styles
• Pay attention to power tactics
• Be wary of such unethical tactics as raising phony
issues; extorting; planting information; and making
phony demands, unilateral assumptions, or deliberate
mistakes
The following summarize strategies that might be
used in various stages of negotiations.
Initial Stages
• Plan thoroughly
• Identify and prioritize issues
• Establish a settlement range
• Focus on long-term goals and consequences
• Focus on mutual principles and concerns
• Be aware that “no” can be the opening position and
the first offer is often above expectations
• Be aware of the reluctant buyer or seller ploy
Middle Stages
• Revise strategies
• Consider many options
• Increase power by getting the other side to commit
first
• Add credibility by getting agreements in writing
• Be wary of splitting the difference
• To handle an impasse, offer to set it aside momentarily
• To handle a stalemate, alter one of the negotiating
points
• To handle a deadlock, bring in a third party
• When asked for a concession, ask for a trade-off
• Be wary if the other party uses a “higher authority”
as a rationale for not meeting negotiating points
• Be aware of the “vise” tactic (“you’ll have to do better
than that”)
Ending Stages
• Counter the other party’s asking for more concessions
at the end by addressing all details and communicating
the fairness of the deal in closure
• Counter a persistent negotiator by withdrawing an
offer
• Do not expect the other party to follow through on
verbal promises
• Congratulate the other side
INTERNATIONAL NEGOTIATING
In international negotiations, obstacles arise when negotiating
teams possess conflicting perspectives, tactics, and
negotiating styles. Negotiators often assume that shared
beliefs exist when, in reality, they do not. Examples are
different uses of time; individualism versus collectivism;

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 541
Networking
different degrees of role orderliness and conformity; and
communication patterns, that differ widely worldwide.
These cultural factors affect the pace of negotiations;
negotiating strategies; degree of emphasis on personal
relationships; emotional aspects; decision making; and
contractual and administrative elements (Acuff, 1997).
The goal of the negotiator should be to “look legitimately
to the other side by their standards” (Fisher, 1997).
COLLECTIVE BARGAINING
Collective bargaining frequently requires a third party to
help the parties reach an acceptable solution. In these situations,
such strategies as mediation, arbitration, and conflict
resolution are used.
SUMMARY
Negotiation is the process of two individuals or groups
reaching joint agreement about differing needs or ideas.
Two styles of negotiating, competitive and cooperative,
are commonly recognized, with most negotiators moving
back and forth between the two styles based on the situation.
A number of strategies were discussed that negotiators
might use in negotiation stages. The effectiveness of various strategies can vary based on cultural differences