Negotiation Process and Its Five Stages

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Table of Contents

Introduction
Investigation Phase
Determining one’s BATNA OB Toolbox: BATNA Best Practices Phase
Presentation Phase
Bargaining Stage
Closure
Conclusion
Works Cited

Introduction

Different nations have different approaches to negotiation processes. However, seeking to do business with foreign partners or striking an agreement for mutual benefit as witnessed in the current case that involves the US and Iran on matters of nuclear weapons requires them to engage in negotiations with various parties. Such parties have different cultural and ethical approaches to negotiations compared to those that are prevalent in a company’s nation of origin. For example, in the western and Chinese civilization, the concept of social networking is essential for the success of business negotiation. However, in the two cultures, business relationships do not develop through similar mechanisms.

From the perspective of the Australian negotiation approaches, even though the major business is focused on Asia, Australian negotiation approaches and values are much similar to the Canadian, American, and even British approaches when compared to the Asian approaches and practices. This observation implies that doing business in Asian nations such as China requires an organization to adopt approaches for business negotiations consistently with the Chinese business culture, which is based on the Guanxi principle. However, this claim does not imply that relationships and networks are not important in Australia. Rather, issues such as the form of relationships and their impacts on striking business deals with the two nations are different. Irrespective of the norms and cultural differences between people who engage in negotiations, adopting a five-stage model of negotiation aids in arriving at good decisions. The five stages, which form the discussion of this paper, include the investigation phase, the BATNA best practices phase, the presentation phase, the bargaining phase, and finally the closure stage. Using relevant examples, this paper discusses these five stages of a negotiation process.

Investigation Phase

Parties can engage successfully in conflict resolution through negotiations. The process is also important in arriving at mutually beneficial business deals. How does the process begin? The investigation phase marks the first step in any successful negotiation process. The investigation process is the stage of gathering information on the agenda and the desired outcome of the negotiating parties. It also involves gathering information on the practices of negotiation for different people, organizations, and even nations. For example, when negotiating with the Chinese people for a possible manufacturing outsourcing deal, the negotiator needs to gather information on the expectations of the Chinese parties before striking a business deal through negotiation. Organizations that seek to do business in China need to understand the Chinese approaches to business, cultural norms, and concepts about business relationships such as Renqing, Guanxi, Xinyong, and Mianzi. These concepts mean reciprocity, tailored association, confidence, and appearance respectively (Wilson and Brennan 653). In the negotiation table, they help in determining whether an organization can strike a business deal with a Chinese-based organization and/or government.

The investigation phase involves gathering information on one’s priorities and the anticipated outcomes. In fact, before determining the expectations of the other party, it is incredibly important to begin by analyzing one’s expectations of the negotiation process. This process involves determining what one can concede and/or what he or she cannot bargain, setting goals, and deciding on possible compromises. For example, in the ongoing negotiations between the US and Iran, the US escritoire, John Kerry, came on the table with a clear goal of ensuring that Iran does not pursue its capability to develop nuclear weapons, which pose a major threat to both the US territorial integrity and the global security. Indeed, the US advocates a reduction of both facilities and equipment for nuclear power capability by a threshold at which Iran cannot develop a nuclear weapon or atomic bombs.

When the US agreed to engage Iran in negotiations, it had analyzed information on the interest of Iran. Currently, Iran faces international economic sanctions due to its continued pressure and investment in supplies that are likely to give it a capability for developing nuclear weaponry. Following the economic challenges that it is facing because of sanctions, the US is aware that Iran can respect the negotiation process and most likely agree to concede on the further development of nuclear capability. Can the US compromise this issue? In the most recent negotiation between Iran and the US, John Kerry came out indicating that the US would not compromise. Iran must consider having its sanction lifted in exchange for lowering its investment in nuclear facilities and equipment. Rather than compromising, an attack on Iran is even a possibility that forms part of the US BATNA.

From the above example of the investigative step in the negotiation between the US and Iran, it is evident that in the process of negotiation, parties are involved in making different decisions, each with its consequences. Therefore, parties need to be clear and honest with themselves, especially their desired goals and objectives. Knowing what one wants attracts the best decision in the heat of the negotiation debate. For example, upon successful recruitment, some organizations involve their employees in the negotiation processes.

While negotiating for a new job position, gathering information on what the organization values most in a person and/or what the applicant values most in the job is important to help in making vital decisions in the process of negotiation. A similar situation is critical while negotiating with people from different cultural contexts. For example, in the Chinese people case, honesty and trustworthiness are incredibly important in the negotiation process. Therefore, while preparing to negotiate with them, one must ensure that he or she will not only demonstrate optimal honesty, but also good faith.

In negotiation processes, no amounts of information or preparations are overly important. It is crucial to gather information on how to handle the concession topic, including the necessary communication attitude and mode. While setting objectives and the minimum acceptable concession and outcomes, gathering information on market trends is important. This goal can be achieved through consultation with experts, partners, and even colleagues. A party must also engage in the process with clear and fluent objectives. Thus, rehearsing the process of negotiation is important to ease the articulation of one’s goals to achieve the desired minimum outcomes. Therefore, before proceeding to the next phase, parties need to prepare a good agenda, enumerate discussion topics, and/or decide on the participants that it will come with on the negotiation table.

Determining one’s BATNA OB Toolbox: BATNA Best Practices Phase

BATNA is the acronym for the best alternative to a negotiated agreement. It defines the necessary course of action if parties that are engaged in negotiation fail to reach the desired goals. It constitutes an important force that underlines any successful negotiator. Parties in a negotiation should not accept any solution or concession that is worse than the BATNA. However, in establishing the best BATNA, Fisher and Ury advise that it is necessary to adopt precautions “to ensure that deals are accurately valued, taking into account all considerations such as relationship value, time values for money, and the likelihood that the other party will live up to their side of the bargain” (135). Nevertheless, some of these considerations may be difficult to value. Hence, they are generally uncertain.

Considerations while arriving at the best BATNA are normally based on some qualitative aspects as opposed to specific quantifiable factors. For example, while approaching negotiations between the US and Iran, it is perhaps difficult to measure and quantify the likely damage, should Iran fail to accept the US offers and decide to pursue its nuclear program. Additionally, in case the parties fail to reach an agreement and that war is declared on Iran, its effects may also be difficult to quantify. War influences different mutually supporting aspects of an economy. Thus, it produces spiral effects on an economy. This claim suggests that while the US and Iran get to the negotiation table, both parties cannot have a precise quantification of the implications for the failures of the parties to reach an agreement.

Even though various hypothetical options need to be undemanding and easy to examine and appraise, the substitute that best corresponds to each negotiating person’s BATNA is essentially not provided. Nevertheless, actions need to be valuable and actionable. As evidenced by the case of the ongoing negotiations between the US and Iran, failure to invest time in developing BATNA alternatives gives rise to options that may fail based on one of such criteria. Indeed, the US ensures adequate time for negotiation so that it does not express its dire need for a solution to the Iranian nuclear problem. When one party realizes that its BATNA is stronger in comparison with the suggested proposals by the other party, it gains the power to demand a more attractive proposal.

BATNA helps in clearing uncertainties on what can transpire if negotiations fail. Without a BATNA toolbox, a party will most likely feel an immense internal pressure to reach an agreement, even though such an agreement may not be in the best interest of the party. Proposals that are made by the party may also prove so optimistic to the extent that they overcrowd any related costs. For example, in the case of a job negotiation, if the employer fails to offer the desired salary, BATNA alternatives may include advancing one’s education or looking for an employment opportunity with different organizations. It is also important to think about possible BATNA for the organization. Can it consider employing someone else if it proves inflexible?

Part of determining BATNA entails identifying the goals of the party that one is negotiating with. Thus, it is important to ask questions such as, ‘what could the organization or the party be looking for? Does it have other alternatives? For example, for a person who is negotiating for a job, one of the most important aspects is fair remunerations. This aspect calls for a person looking for the job to know the remuneration levels of the job. The employee also needs to work without conflicts with other employees or the organization. Therefore, he or she needs to know the organizational culture of the company that is employing him or her while developing BATNA alternatives. An emerging question is, ‘how should an OB toolbox for BATNA best approaches look like?

Although it is difficult to prescribe an OB toolbox that is suitable for all negotiation situations, negotiators need to consider certain aspects while developing their BATNA best approaches. First, a negotiator needs to understand and brainstorm various conceivable negotiation alternatives to reach acceptable favorable outcomes. Improving the most promising alternatives together with their conversion into a set of actionable alternatives should then follow. Thirdly, the negotiator needs to identify the most important alternative and keep it in reserve as the most preferred substitute in case of negotiation failure. BATNA alternatives evolve. Hence, it is important to review them to ensure that they remain accurate and reliable. Lastly, the top confidentiality of BATNA alternatives is incredibly important, as it constitutes bargaining power. When other partners in a negotiation realize that one’s BATNA is more demanding than anticipated, they are forced to make attractive offers. This situation ensures that one emerges the major beneficiary upon the conclusion of the negotiation process.

Presentation Phase

The presentation phase encompasses the third phase in the negotiation process. In the stage, negotiators bring together all the gathered findings in such a manner that they substantiate their standpoints. For example, in the presentation phase, while negotiating for a job, a job seeker assembles and presents information showing one’s value in the organization. This process can involve the presentation of one’s contribution to the success of the organization or previous employers. When such contributions are consistent with the current negotiated job requirements, they help in weakening the negotiating potential employer’s alternatives such as employing somebody else in case one does not accept the (employer’s) proposal. Rather, the employer considers reviewing his or her proposal upward to arrive at a mutually beneficial deal. In the presentation phase, appropriate communication strategies become important to help in articulating one’s position.

Different organizations and people adopt diverse presentation styles during negotiations, depending on the negotiated situation. For example, Nolan-Haley asserts that most people adopt aggressive and ruthless approaches to negotiation (41). The goal of such an approach is to ensure that the negotiating party complies with one’s offers at the expense of his or her BATNA alternatives. However, as Fisher and Ury confirm, a negotiation presentation does not have to take an adversarial approach (92). For example, while negotiating with the Chinese people, an adversarial approach will always lead to the failure of the negotiations.

Foreign people negotiating with Chinese citizens consider various Chinese approaches in their negotiation presentations. One of the important approaches encompasses Confucian. It defines the approach to orientation and law guiding establishments of interpersonal relationships. Indeed, Chinese people pay more attention to people as opposed to respecting contracts (Ghauri and Fang 322). However, it is important for foreign people who negotiate with the Chinese citizens to understand that even if they (Chinese) believe in people concerning guanxi, they only pay key attention to persons with whom they have established relationships and personal networks. Thus, arriving at mutually beneficial agreements is impossible through adversarial presentation approaches. Ghauri and Fang advise foreign firms that seek to strike business deals with the Chinese people that they “need to take a people-oriented approach and try to establish high-level trust with Chinese partners” (322). The success of the Ericsson Company in the Chinese market perhaps reveals well the effectiveness of this advice.

In the presentation phase, parties present their respective starting positions. For example, an employer may state that he or she requires a person with excellent project management skills. The person who is looking for the job position then presents his or her position. He or she might state that he or she has the skill. However, such people will need to support this position as a strategy for carrying the negotiation process. Going back to the case of negotiating with the Chinese people, the first position may be to establish past relationships record with the negotiator. If such relationships are not identified and presented by the person who is seeking to have business relationships with the Chinese people, the next phase of negotiation, namely bargaining, may fail to take place. This claim suggests that the presentation phase forms the stage in which parties establish a ground for carrying out the bargaining phase after identifying that each party has something of interest for the other.

Bargaining Stage

Bargaining makes up the second-last stage in a conciliation scenario. In this stage, the negotiating people lay down their agendas and endeavors to get the other party to concur with them. An important aspect of the process entails concession, which involves abandoning something to acquire an additional one in return. For example, in the ongoing negotiation between Iran and the US, although the US represents interests of many nations across the globe, the parties have considered some concession, despite the negotiation having not been concluded. Iran must reduce its current nuclear facilities by 20% or more in exchange for lifting economic sanction that has been imposed by the international community under the representation of the US in the negotiations.

Concessions are critical in a negotiation that involves unions. However, this claim does not mean that one party is weaker concerning the other. Concessions are important indicators of forwarding movement of negotiations, as they signify cooperation. In the context of labor unions, concessions may take the form of bargaining for work time, salaries and wages, job responsibilities, and even employee autonomy. They also apply to other kinds of negotiations. For example, when negotiating for manufacturing outsourcing, one can accept paying slightly higher prices for products to receive them in a shorter time. Alternatively, one may compromise the time of delivery by accepting to pay lower prices when the manufacturer wants more time to ensure flexibility and fulfilling other orders. However, when bargaining, it is important to consider the negotiation styles that the other party adopts to guarantee like-mindedness.

People from different cultural contexts adopt different negotiation styles. However, some contexts may have similarities. For instance, the negotiation styles and attitudes that characterize the Australian negotiation approaches are similar to those that are inherent in the Chinese guanxi techniques. Australians engage in friendly debates with the principal objective of arriving at agreeable solutions of mutual benefits to the negotiating parties. This style of negotiation constitutes cooperation of the parties together with compromising where necessary in the effort to propel negotiation processes forward. Compared to the Chinese approach to negotiations, as prescribed by guanxi, Australians believe in win-win negotiation results. Hence, similar to one of the impacts of guanxi on business and business relationships, Australians anticipate reciprocation of trust and respect for business relationship contractual terms. In China, “guanxi interaction is the exchange of rewards and benefits for focal actors” (Chen, Chen, and Huang 176). These similarities reveal why it is easier for Australia to strike business relationships with China than other western nations. The two parties easily get into a consensus due to their flexibility in arriving at a concession.

The bargaining phase involves asking numerous interrogatives. Indeed, it is inappropriate to state that one cannot do something and maintain rigidity. Rather, the best approach is seeking to understand why the negotiating party has a given constraint. For example, in the case of manufacturing outsourcing, the primary goal of the party that is seeking manufacturing services is to receive goods the soonest time possible and at the lowest possible price. However, the producer aims to charge the uppermost possible fee while taking the largest time possible to fulfill the service.

Instead of maintaining rigidity on the delivery and price preferences, the party that is seeking manufacturing services needs to consider options such as slightly higher cost for much quicker delivery or slightly extended dates of delivery at lower prices. The option that best suits a given bargainer depends on the arithmetic computations of costs that are related to each alternative. For example, supposing market forecasts indicate a high demand for t-shirts in summer. A delay by one month into summer causes the prices to go down by $2. The manufacturer states his or her position during bargaining that an early delivery by 1 week into the summertime will require $1.5 more. In this situation, the party that is seeking manufacturing outsourcing services is better off paying $1.5 per t-shirt for an early delivery to have an overall gain of $0.5 when the market is at a peak during summer. This strategy exemplifies a win-win situation in bargaining during negotiations. The manufacturer makes more money by delivering early while the person who is seeking outsourcing services makes higher profit margins by selling during the peak season.

Closure

During the closure, it is important to reflect on the negotiation process and various decisions that are made to establish what could have been done for the offers to be accepted by the other party. For example, consider a situation where an organization negotiates with a potential customer for the supply of hospital equipment. The negotiation fails while the bargaining process is sealed. Now, the organization has nothing remaining to lose by engaging the customer to know why its offer is not accepted. The organization’s CEO may learn that the offers for the supply of the equipment will fail since a competitor might offer higher prices and/or free after-sales services. Surprisingly, the offered cost of after-sales service may be met by the higher prices of equipment. Thus, the organization whose offers are not accepted may learn to include additional offers apart from the price when negotiating in the future.

Signals for negotiations closure emerge when parties revisit their objectives and goals to realize that an offer has been struck. However, they are only pushing for a better deal. This situation may be indicated by lowering the intensity of arguments, body language that can indicate tired negotiators, or when positions for negotiating have converged. Closure occurs when concessions are made together with pacts and commitments. When the offers are acceptable, closure of the negotiation can be marked by expressions such as ‘where can I approve’, ‘the proposal can truly work’, and ‘the tender works’ among others. These expressions signify the time to make legal agreements in the shortest time possible to signify legally binding contractual terms. After closure, it is also important to follow up on the other party’s commitment to delivering the agreed-upon terms. This procedure helps to determine the other party’s capacity to deliver or the intentions of contract frustration.

Conclusion

In business relationships, parties engage in negotiations. Nations also negotiate with others in the interest of encouraging direct foreign investments or enhancing their territorial integrity. Organizations also negotiate with employees to reduce incidents of turnover. Their goals for negotiation include addressing employee issues that negatively influence their productivity. Irrespective of the nature of negotiations, different parties adopt different negotiation approaches akin to differences in their cultural contexts or the nature of issues under negotiation, the success of a negotiation process depends on the extent of its investigation and preparation. Negotiators must approach the negotiation process with effective plans, strategies, and methodologies for bargaining their positions. This claim underlines the importance of understanding the goals and objectives of the negotiators. This way, it becomes possible to make safe concessions and agreements. Failure to understand the process of negotiation and following it with precision may translate into acceptance of offers simply because they seem attractive. This situation might lead to the signing of contracts that may be inconsistent with one’s goals, especially based on his or her poor understanding or setting of BATNA.

Works Cited

Chen, Chao, Xiao-Ping Chen, and Shengsheng Huang. “Chinese Guanxi: An Integrative Review and New Directions for Future Research.” Management and Organization Review 9.1(2013): 167-207. Print.

Fisher, Roger, and William Ury. Getting to YES. New York, NY: Penguin Books, 2011. Print.

Ghauri, Pervez, and Tony Fang. “Negotiating with Chinese: A Social-Cultural Analysis.” Journal of World Business 36.3(2000): 303-325. Print.

Nolan-Haley, Jaqueline. Alternative Dispute Resolution in Nutshell. London: Thomson West, 2001. Print.

Wilson, Jonathan, and Ross Brennan. “Doing Business in China: is the Importance of Guanxi Diminishing?” European Business Review 22.6(2010): 652-665. Print.

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