Managerial Skills Assignment

MANAGERIAL SKILLS ASSIGNMENT TOPIC- Negotiation and its Process

ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher who gave me the golden opportunity to do this wonderful project on the topic “negotiation and its process” which also helped me in doing a lot of research and I came to know about so many new things. I would also like to thank my parents and friends who helped me a lot in finalizing this project.

NEGOTIATION

MEANINGNegotiation is an open process for two parties to find an acceptable solution to a complicated conflict. There are some specific conditions where negotiation will achieve the best results: 

When the conflict consists of two or more parties or groups

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A major conflict of interest exists between both parties

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All parties feel that the negotiation will lead to a better outcome

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All parties want to work together, instead of having a dysfunctional conflict situation.

In any disagreement, individuals understandably aim to achieve the best possible outcome for their position (or perhaps an organisation they represent). However, the principles of fairness, seeking mutual benefit and maintaining a relationship are the keys to a successful outcome. In today’s loosely structured organizations, in which members work with colleagues over whom they have no direct authority and with whom they may not even share a common boss, negotiation skills become critical. Negotiation often takes place in these business situations: 1. Company A and Company B wants to merge but must agree on price, financing, and management changes. 2. John Doe wants a job with Company XYZ but must negotiate his salary and benefits. 3. Company A wants to purchase supplies from Company B on certain payment terms. 4. Company A wants Company B to become a customer. 5. Union ABC wants higher wages and pension contributions from Company XYZ.

EXAMPLE- The Ninja Corporation has one of the largest factories on the East Coast. Every five years, the company puts out a request for bids for businesses to clean and paint the factory floor. Once a contractor is selected, Ninja Corporation starts a negotiation process in order to facilitate the best price and service on this massive undertaking.

PROCESS OF NEGOTIATION

Ninja Corporation has received numerous bids for the factory painting job. The company has decided to enter negotiations with Wet Paint Biz. There are five steps to the negotiation process, which are: 1. Preparation and planning 2. Definition of ground rules 3. Clarification and justification 4. Bargaining and problem solving 5. Closure and implementation

1. Preparation and planning: Preparation and planning is the first step in the negotiation process. Here, both parties will organize and accumulate the information necessary to have an effective negotiation. Ninja Corporation and Wet Paint Biz both need to prepare fully for the negotiation. Information can be powerful in negotiations and help add validity to claims. Both companies should investigate each other's history and try and figure out what the opening offer will be for the paint job. Wet Paint Biz needs to uncover the highest amount Ninja Corporation is willing to pay for the factory paint job, while Ninja Corporation needs to figure out the lowest Wet Paint Biz will take for the job.

2. Definition of ground rules: The second step in negotiation is the definition of ground rules. In this step, rules and procedures will be established for the planned negotiation. Consideration will be given to questions, such as: 

Where will negotiations take place?

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Will time constraints exist?

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Will there be any issues that are off limits?

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What happens if there's not any agreement?

In addition, both parties will try and figure out what price should be the starting point for the negotiation. Also, demands and expectations should be disclosed up front. Lastly, the bottom line, which is the lowest price that Wet Paint Biz will provide services to Ninja Corporation for, will need to be uncovered by Ninja Corporation. Ninja will start the negotiations with an opening offer, or starting price, suggesting a price of $25,000 for the job. Both parties also agreed that the negotiations would last one day and if a price for the job was not agreed upon, then Ninja Corporation would consider a different vendor.

3. Clarification and justification: Now that the rules have been established, a discussion needs to take place regarding the specifics of the job price. In the third negotiation step, clarification and justification, the positions of both parties are discussed at length. Clarification and Justification: When initial positions have been exchanged both you and the other party will explain amplify, clarify, bolster and justify your original demands. This needn’t be confrontational. Rather, it’s an opportunity for educating and informing each other on the issues, why they are important and how each arrived their initial demands. This is the point at which you might want to provide the other party with any documentation that helps support your position.

4. Bargaining and problem solving: The essence of the negotiations process is the actual give and take in trying to hash out an agreement. It is here where concessions will undoubtedly need to be made by both parties.

5. Closure and implementation: The final step in the negotiation process is formalizing the agreement that has been worked out and developing any procedures that are necessary for implementing and monitoring.

FATORS AFFECTING NEGOTIATION Given its complexity, several factors affect the process of negotiation. We may broadly group them into six—authority, credibility, information, time, and emotional control and communication skills.

1. Authority: The first key factor affecting any negotiation is authority. Negotiation may start with deliberation but to be effective, it has to end up in a conclusion or settlement. For this, both the parties should have the power or authority to conclude the deal. 2. Credibility: Trust and mutual confidence are very relevant in any process of negotiation. People who are known to be honest, sincere, steady and reliable have an edge when they enter the process of negotiation. 3. Information: Negotiation often proceeds on the basis of facts, figures, past data, future trends and outlook, studies, empirical data and calculations. Information, to repeat a

cliché, is power. Adequate and reliable information about the various issues involved is essential for ensuring the success of a negotiation exercise. 4. Time: The time frame within which the negotiation should be completed is another important factor affecting the process of negotiation. One of the parties may have a certain urgency as a result of which they may be in a hurry to conclude the negotiation. It is due to time constraints that negotiations cannot go on endlessly and both the parties should agree on a time frame within which the process has to be completed. 5. Emotional control: Human beings are not just rational, they are also emotional. Every person has his or her qualities of the head and heart. It is true that in business situations, people take decisions based on thinking and reasoning and after a careful evaluation of choices before them. Yet, if we scratch the surface, we do find emotions at play. Good negotiators are aware of the play of emotions and are responsive to them. Apart from assessing the emotional state of the people in the other party, the negotiator should himself display the appropriate emotional state. Sometimes, it would be appropriate to come on strong with forceful points. 6. Communication Skills: As we have already noted, negotiation is an intense process involving exchange of messages. These messages are not necessarily bits and pieces of information. What needs to be shared with others during the process of negotiation would be a complex mix of ideas, attitudes and even emotions. The negotiator needs to state, articulate, explain, reason out, appeal, concede, persuade, persevere and even remain silent depending upon the situation. Good negotiators use silence effectively.