IMPORT-EXPORT CONTRACT

NEGOTIATION
CHAPTER 7
1. Preparation Step
 Preparation step can be classified into
two stages:
◦ General Preparation
◦ Specific preparation
General Preparation
 Factors considered:
◦ Language and interpreter
◦ Information
◦ Capability of the negotiation team
◦ Time and place of negotiation
Language and Interpreter
 Negotiation team members should master and professionally
use several languages such as: English (a must), French,
Chinese, Russian, Japanese, etc.
 If the negotiation team needs an interpreter, they should:
◦ Talk to the interpreter the topic and purpose of the negotiation
before the meeting.
◦ During the negotiation, speak clearly and slowly for the
translation purposes
◦ Avoid using slangs, idioms, or local languages
◦ Explain the main ideas in two or three different ways to ensure
appropriate interpretation
◦ Speak not longer than 1 – 2 minutes every time
◦ When speaking, allow the interpreter to take notes
◦ Give the interpreter enough time to explain unclear points
◦ Not interrupt the interpreter when he/she is speaking
Language and Interpreter
◦ Avoid using negative sentences, use affirmative ones
◦ Use body language to support your speaking
◦ Keep eye contact to the clients not the interpreter
◦ During the negotiation, write down main points of
discussion
◦ After the negotiation, confirm what have been agreed in
writing forms.
◦ Let the interpreter take a break if it is a long negotiation
(more than 2 hours).
◦ Use two interpreters if it is a whole day negotiation.
◦ Not be angry and show sympathy if the interpreter makes
a wrong interpretation.
◦ Talk to the interpreter after the negotiation to catch up
important information that he/she has heard from the
other party during the negotiation
Collecting Information in the
preparation step
 The more you get accurate and relevant
information the more you are likely to
win in the negotiation.
 Types of information needed before the
negotiation:
◦ Information about the products
◦ Information about the local market
◦ Information about the other party/ client
◦ Information about the foreign market
Information about the products
 Product names, codes
 Product levels
 Product brands, benefits
 Product attributes
 Product levels (core, actual, augmented
levels)
 Production capabilities: availability of
materials, labor, technology, skills, etc.)
 Product Life Cycle
 Prices of competitors
 Price of the products in USD.
 Levels of Product
Augmented Product

Installation

Packaging
Brand Features
Name Core After-
Delivery
Benefit or Sale
& Credit
Quality Service Design
Service
Level

Warranty

Actual Product Core Product

8
 Product Attributes

Developing a Product or Service Involves Defining

the Benefits that it Will Offer Such as:

Ability of a Product to Perform Its

Product Quality
Functions; Includes Level & Consistency

Help to Differentiate the Product from

Product Features
Those of the Competition

Product Style Process of Designing a Product’s Style &

& Design Function

9
Information about the local market
 Demographic changes
 Political/Legal forces
 Socio-cultural forces
 Economic indicators
 Infrastructures (especially ports, roads, rail
roads, etc)
 Trade policies
 Banking system, credit conditions
 Transportation system and rates
Information about the other party
 Capabilities of the client in terms of:
◦ Historical establishment
◦ Social position and credibility
◦ Financial state
◦ Technological degree
◦ Business fields
◦ Future plans
 Why does the client want to do business
with us?
 Who participate in their negotiation team
◦ Names, individual preferences, personality, traits,
etc.
Information about the foreign
market
 Sources of information:
◦ Secondary data (desk research)
◦ Internet
◦ Internal sources at your company
◦ Government publications
◦ Banking publications
◦ Professional publication, etc.
 Topics of research: the same as that of
local market.
Characteristics of a successful
negotiator
 Master knowledge of :
◦ An international and local business
man/woman
◦ A lawyer
◦ An international negotiator
◦ A Psychological expert
 Speak foreign languages fluently
 Understand clearly techniques, cultures,
etc.
Organizing a negotiation team
 Personnel: need at least experts in three
fields:
◦ Laws and regulations
◦ Techniques
◦ Trading (team leader)
Arranging time and place
 Time as agreed by two parties
 Need an alternative plan
 Place of negotiation should be equipped
with necessary facilities.
Key Negotiation Principles
 Best Alternative To a Negotiated Agreement
(BATNA)
 Reservation price
 Bargaining zone
 Aspiration level
Key Negotiation Principles
 Best Alternative To a Negotiated Agreement
(BATNA)
 Reservation price
 Bargaining zone
 Aspiration level
Best Alternative to a Negotiated Agreement

 What is the difference between a

“bottom line’ and your BATNA? Example:
selling your home.

 Why should we know our BATNA?

Your BATNA is the standard against
which any proposed agreement
should be measured.
 Negotiating without determining your
BATNA is negotiating with your eyes
closed.

 Too optimistic or too desperate.

 Trip wires – provides you with some

margin in reserve.
 The better your BATNA, the greater your
power.

 How attractive to each party is the

option of not reaching agreement?

 Power balance.
 Develop Your BATNA

 Invent a list of actions you might take if

no agreement is reached;

 Improve some of the more promising

ideas and convert them into practical
alternatives; and

 Select, tentatively, the one alternative that

seems best.
 Knowing your BATNA gives you
additional confidence in the negotiating
process.

 It is easier to break off negotiations if you

know where you are going should the
negotiation fail.
BATNA Tips
 Know your BATNA
◦ Do not think of your BATNA in aggregate terms

 Improve your BATNA before you negotiate

◦ “Fall in love with three” rule

 Youwant your counterpart to think you have a

good BATNA
Key Negotiation Principles
 Best
Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level
Reservation Price
 Reservation Price is your bottom line
◦ If you are buyers, it is the point at which you are indifferent to whether
you achieve a negotiated agreement or walk away. Beyond the reservation
price, you prefer no agreement.

 Reservation Price is equal to your BATNA +/- other issues

that make you want to do the deal
◦ e.g., opportunity costs, switching costs, ego, miscellaneous preferences

 Define your reservation price before negotiating

 Learn your opponents’ reservation price, if possible

Should You Reveal your BATNA and Reservation
Price?
 Do not reveal your reservation price!!!
◦ One of the critical pieces of information in a negotiation
is the other party’s reservation point. If it becomes
known to one party, the negotiator can push for a
resolution that is only marginally acceptable to the other
party.

 Do not state ranges

 Reveal your BATNA only when:

◦ You are nearing an impasse (be tac)
◦ You have a strong BATNA
◦ You want to make an agreement in the current negotiation
Key Negotiation Principles
 Best
Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level
 The Negotiation Bargaining Zone

Buyer’s Reservation Price (BR)

Buyer’s Target Price (e.g., $25M)

Seller’s Reservation Price (SR) Seller’s Target

(e.g., $17M)

• The bargaining zone is the space between the buyer’s reservation price (BR)
and the seller’s reservation price (SR) – that is, the zone of possible agreement.
• If BR > SR, then a Positive Bargaining Zone exists.The zone of agreement is
from SR to BR (e.g., $8M).
 A Negative Bargaining Zone

Seller’s Reservation Price (SR)

(e.g., $25M)

Buyer’s Reservation Price (BR)

(e.g., $17M)

If BR < SR, then there is no zone of possible agreement.

Key Negotiation Principles
 Best Alternative To a Negotiated Agreement
(BATNA)
 Reservation price
 Bargaining zone
 Aspiration level
Distributive Bargaining Tactics

 First offers

 Concessions

 Persuasion
First Offers

 Who made the first offer?

 How did the first offer affect the

negotiation?
 First Offers in Synertech-Dosagen

Final Price (in millions)

• There is a high
$25 correlation between
$24 the first offer and the
$23 final price
$22
$21 • Counteroffers and later
$20 concession behavior
$19 less predictive of final
$18
price
$17
Buyer
Buyer makes
made firstfirst
offer Seller made first offerfirst offer
Seller makes
offer
 The First Offer
 How high should the first offer be?
◦ “As high as you can go without embarrassing yourself in front
of a respected 3rd party” (Fisher & Ury, 1991)
◦ What’s embarrassing? What’s optimistic? Learn the market!

 Only let the other party make the first offer when
◦ You have no information
◦ It is inappropriate to do so (e.g., job negotiations)

 Immediately re-anchor if your counterpart makes the first offer

 Concessions & Persuasion

 Allow yourself room to make concessions

◦ Don’t go in with a “first and final offer”

 Make bi-lateral, not uni-lateral concessions

 Make your concessions smaller as you approach your

goal

 Use objective rationale to support your argument

◦ Again, learn the market
 Distributive Negotiation Strategies
 Know your BATNA
◦ Strengthen your BATNA whenever possible

 Know your reservation price

◦ Do not reveal your reservation price

 Research the other party’s BATNA/reservation price

 Define your aspiration level and focus on that

 Make first offers whenever possible

◦ If they make the first offer, immediately re-anchor

 Watch how you are making concessions

 Prepare objective rationale for your arguments

If both sides have attractive
BATNAs, the best outcome of the
negotiation, for both parties, may
well be not to reach agreement.