7 Steps to Master the Art of Negotiation
Negotiation is a skill that can help you achieve your goals, whether in business, personal, or professional settings. Negotiation involves finding a mutually acceptable solution to a conflict or disagreement, while preserving the relationship and creating value for both parties. In this article, we will show you how to negotiate effectively, using some practical examples and tips.
Key Takeaways
Prepare: Do your homework and define your BATNA.
Build rapport: Establish a positive and respectful relationship.
Explore: Understand the issues and interests of both parties.
Generate options: Brainstorm possible solutions that create value for both parties.
Evaluate options: Choose the best option based on objective criteria.
Bargain: Exchange offers and counteroffers, and make concessions if needed.
Close: Confirm the agreement in writing and follow up on the implementation.
What is negotiation?
Negotiation is a process of communication between two or more parties who have different interests, needs, or preferences, and who seek to reach an agreement that satisfies everyone. Negotiation can be used to resolve disputes, make deals, manage projects, or influence others.
Negotiation is not a zero-sum game, where one party wins and the other loses. Rather, it is a collaborative and creative process, where both parties can benefit from the outcome. Negotiation is also not a one-time event, but an ongoing relationship that requires trust, respect, and cooperation.
How to negotiate effectively?
There is no one-size-fits-all formula for successful negotiation, as each situation is unique and requires different strategies and tactics. However, there are some general principles and steps that can guide you through any negotiation process. Here are seven steps to master the art of negotiation:
1. Prepare
Before entering a negotiation, you need to do your homework and gather as much information as possible about the situation, the other party, and your own interests and goals. You also need to define your best alternative to a negotiated agreement (BATNA), which is the most favorable option you have if the negotiation fails. Your BATNA gives you leverage and confidence in the negotiation, as you know what you can walk away with if you don’t reach a deal.
2. Build rapport
The first impression you make on the other party can have a lasting impact on the negotiation outcome. Therefore, you need to establish a positive and respectful relationship with them, by showing genuine interest, empathy, and appreciation. You can also use small talk, humor, or compliments to break the ice and create rapport.
3. Explore
The next step is to explore the issues and interests of both parties, by asking open-ended questions, listening actively, and acknowledging their perspectives. You need to understand not only what they want, but why they want it, and what are their underlying motivations and concerns. You also need to share your own interests and needs and explain the rationale behind your position.
4. Generate options
Once you have identified the common and conflicting interests of both parties, you can start brainstorming possible solutions that can satisfy everyone’s needs. You need to be creative and flexible and avoid judging or criticizing any idea at this stage. You can also use techniques such as expanding the pie (creating more value for both parties), logrolling (trading off issues that are more important to one party than the other), or bridging (finding a new option that meets both parties’ interests).
5. Evaluate options
After generating a list of options, you need to evaluate them based on objective criteria, such as fairness, feasibility, efficiency, or legality. You need to avoid using subjective or emotional criteria, such as ego, pride, or power. You also need to avoid anchoring (focusing on the first offer or demand) or splitting the difference (compromising in the middle), as these can lead to suboptimal outcomes.
6. Bargain
The bargaining stage is where you exchange offers and counteroffers and try to reach an agreement that is acceptable for both parties. You need to be assertive and confident in presenting your offer, but also flexible and willing to make concessions if necessary. You also need to use effective communication skills, such as framing (presenting your offer in a positive or negative way), mirroring (reflecting back the other party’s words or emotions), or silence (creating pressure or suspense).
7. Close
The final step is to close the deal and confirm the agreement in writing. You need to summarize the main points of the agreement, clarify any details or terms that are unclear, and express your satisfaction and appreciation for the other party’s cooperation. You also need to follow up on the implementation of the agreement and maintain a good relationship with the other party for future negotiations.
Tips
- Negotiation is a skill that can be learned and improved with practice.
- Negotiation is a process of finding a mutually beneficial solution, not a battle of winning or losing.
- Negotiation is based on interests, not positions.
- Negotiation requires creativity, flexibility, and cooperation.
- Negotiation depends on trust, respect, and rapport.
Statistical Report on an Example of Negotiation
Negotiation is a process in which two or more parties try to reach an agreement through bargaining. Negotiation can take place in various contexts, such as business, politics, sports, and personal relationships. Negotiation can have different outcomes, such as win-win, win-lose, or lose-lose, depending on the interests and strategies of the parties involved.
In this report, we will examine an example of negotiation in business that occurred in 2013 between Starbucks and Kraft Foods. We will analyze the background, the issues, the strategies, and the outcome of this negotiation. We will also discuss how this negotiation affected the global demand in the coffee industry.
Background
Starbucks and Kraft Foods had a partnership since 1998, in which Kraft distributed Starbucks packaged coffee to grocery stores in the United States and abroad. The partnership was profitable for both companies, generating about $500 million in annual revenue for Starbucks and $100 million in annual profit for Kraft.
However, in 2010, Starbucks decided to end the partnership and take over its own distribution. Starbucks claimed that Kraft had breached the contract by mismanaging the brand, failing to promote it adequately, and losing market share to competitors. Kraft denied these allegations and argued that Starbucks had no right to terminate the contract without paying a fair compensation.
The two companies could not reach an agreement and filed lawsuits against each other. The dispute lasted for three years and involved multiple rounds of negotiations, mediation, and arbitration.
Issues
The main issue in this negotiation was the termination fee that Starbucks had to pay to Kraft for ending the contract. Starbucks initially offered $750 million, while Kraft demanded $2.9 billion. The parties also disagreed on other issues, such as the ownership of customer data, the transition period, and the future distribution rights.
Another issue that influenced this negotiation was the global demand for coffee. According to the International Coffee Organization (ICO), the global coffee consumption increased by 2.5% per year from 2010 to 2013, reaching 145 million bags in 2013. The United States was the largest consumer of coffee, accounting for 16% of the global demand. The packaged coffee segment was growing faster than the overall market, as more consumers preferred to brew their own coffee at home or at work.
The growth of the coffee industry created opportunities and challenges for both Starbucks and Kraft. On one hand, it increased their potential customer base and revenue. On the other hand, it intensified their competition with other players, such as Nestlé, J.M. Smucker, and Green Mountain Coffee Roasters.
Strategies
Both Starbucks and Kraft used various strategies to gain leverage and influence the outcome of this negotiation. Some of these strategies were:
- Anchoring: Both parties started with extreme offers that were far apart from each other. This created a large bargaining zone and set high expectations for each side.
- BATNA: Both parties tried to improve their best alternative to a negotiated agreement (BATNA) by exploring other options and partners. For example, Starbucks signed a deal with Green Mountain Coffee Roasters to sell its K-Cup pods, while Kraft partnered with McDonald’s to distribute its McCafé brand.
- Framing: Both parties tried to frame the negotiation in their favor by emphasizing their strengths and minimizing their weaknesses. For example, Starbucks highlighted its brand value and customer loyalty, while Kraft emphasized its distribution expertise and market share.
- Coalition: Both parties tried to form coalitions with other stakeholders who could support their position or pressure their opponent. For example, Starbucks enlisted the support of its retail customers, who preferred to buy directly from Starbucks rather than from Kraft. Kraft appealed to its shareholders, who expected a high return from the termination fee.
- Emotions: Both parties used emotions to influence each other’s behavior and decisions. For example, Starbucks expressed anger and frustration at Kraft’s alleged mismanagement of its brand, while Kraft expressed disappointment and betrayal at Starbucks’ decision to end the partnership.
Outcome
The outcome of this negotiation was determined by an arbitrator, who ruled in favor of Kraft in November 2013. The arbitrator ordered Starbucks to pay Kraft $2.75 billion as a termination fee, which was close to Kraft’s initial demand. The arbitrator also decided that Starbucks would not get any customer data or distribution rights from Kraft.
The outcome was a win-lose situation for both parties. Starbucks lost a significant amount of money and a valuable partner, while Kraft gained a large compensation but lost a major source of revenue. The outcome also had implications for the global demand in the coffee industry. Starbucks had to invest more resources and time to rebuild its distribution network and regain its market share. Kraft had to find new ways to diversify its portfolio and compete with other brands.
This report has presented an example of negotiation in business between Starbucks and Kraft Foods over the distribution of Starbucks packaged coffee. We have discussed the background, the issues, the strategies, and the outcome of this negotiation. We have also examined how this negotiation affected the global demand in the coffee industry.
This example illustrates some of the challenges and complexities of negotiation in business, such as multiple issues, high stakes, legal disputes, and emotional involvement. It also demonstrates some of the skills and techniques that can help negotiators achieve their goals, such as preparation, communication, persuasion, and problem-solving.
Frequently Questions
What are some common negotiation mistakes?
Some common negotiation mistakes are: not preparing enough; not building rapport; not exploring interests; not generating options; not evaluating options; not bargaining effectively; and not closing properly.
What are some negotiation styles?
Some negotiation styles are: competitive (focusing on winning and maximizing one’s own outcome); collaborative (focusing on finding a win-win solution that benefits both parties); accommodating (focusing on preserving the relationship and satisfying the other party’s needs); avoiding (focusing on avoiding or postponing the conflict); and compromising (focusing on finding a middle ground that partially satisfies both parties).
What are some negotiation skills?
Some negotiation skills are: research; communication; listening; questioning; empathy; creativity; problem-solving; decision-making; persuasion; assertiveness; flexibility; and cooperation.
How to negotiate salary?
To negotiate salary, you need to: research the market value of your position and skills; determine your target salary and BATNA; prepare your value proposition and achievements; initiate the negotiation with confidence and enthusiasm; present your offer and justify it with objective criteria; handle objections and counteroffers with tact and diplomacy; and close the deal with gratitude and professionalism.
How to negotiate a car price?
To negotiate a car price, you need to: research the fair price of the car model and features you want; determine your budget and BATNA; visit multiple dealerships and compare offers; negotiate the total price of the car, not the monthly payments; ask for discounts, incentives, or extras; avoid unnecessary fees or charges; and close the deal with a written contract.
References:
http://www.psych.nyu.edu/gollwitzer/771.pdf
https://calhoun.nps.edu/bitstream/10945/40295/6/thomas_conflict_1992.pdf
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