US-Korea-Mexico Nego

Korea Gov.

SamsungElectronics

USDOC

MexicanGov. S.S.

Mexico

TV

FDI

Export

NAFTA

CircumbandDumping

Alliance

Nego

push

push

Nego

US ElectronicParts&Comp. Union

• Hyundai Heavy Co.: Forklift

• Indonesian Construction Co. “A”

-100units, Price-negotiable

-Payment term : a lot of credit

• First time

• official price : 12,000 $/unit

• -last week: 8,000$

Four stages of negotiation- R. Shell -

Four stages of negotiation- R. Shell -

1. Assess the situation & Preparing your strategy

2. Exchanging information

3. Opening & making concessions

4. Closing & gaining commitment

Q4. You want to sell your yacht for $50,000. You were thinking about placing an ad in the paper when a yachting-enthusiast named Garrett, whom you don't know, approaches you and offers $65,000 in cash for the yacht. What would you do?

a) Accept his offer without hesitation

b) Tell him to wait until the ad is running

c) Haggle with the person to get a better deal

(-10)

(-10)

(+15)

Q5. You want to sell your yacht for $50,000. You were thinking about placing an ad in the paper when your close friend, Kim, approaches you and offers $65,000 in cash for the yacht. What would you do?

a) Accept his offer without hesitation

b) Tell him to wait until the ad is running

c) Haggle with your friend to get a better offer

d) Tell him that you'll sell it to him for $60,000

(+5)

(-15)

(-20)

(+15)

Perceived Importanceof Relationship

Importance of Outcome HighLow

Low

High

Accommodating

Avoiding

Compromise

Collaborative

Competitive

Lose-lose

Lose to win Win-win

Win to lose

Split the difference

1

2

3

4

5

Importanceof Relationship

Importance of Outcome HighLow

Low

High

Accommodting

Avoiding

Compromise

Collaborative

Competitive

Relationship Situation

R. Shell’s Nego Situation

Transactional SituationTacit coordination

Balanced concerns

The priority of these two negotiation concerns will direct the strategy you choose for a particular negotiation.

★ Buy an used car from

- a dealer

- your neighbor

- your close friend

- your director

- strange on the street

Importanceof Relationship

Importance of Outcome HighLow

Low

High

Accommodting

Avoiding

Compromise

Collaborative

Competitive

strange on the street a dealer

your directoryour neighbor

your close friend

1 2

3

4

5

• Your director asks you if you have an intention/willingness

to by his car. He wants to sell his car because he will be dispatched to oversea mission in next month.

• What kind of negotiation strategy will you conduct in the context of the Lewicki-Hiam's Five Types of negotiation strategies?

• And explain the reasons Why?

# Quiz Nt : Your director’s used automobile

Q11. As the head of the negotiation team for a large conglomerate in Korea, I arrived in Beijing to negotiate a possible joint venture with the Chinese state-owned oil company. We had scheduled the trip for six days and arrived here on Monday, planning to wrap things up by Saturday. However, today is Thursday, which is four days into the negotiation, and so far the Chinese counterparts have not shown any real or serious intention of negotiating. All they've been doing was to invite us for drink every night since our arrival here on Monday. The Chinese have once again invited us for drink tonight. I should...

a) Flatly refuse their invitation

b) Make a polite excuse (e.g. an important meeting with the Korean diplomats) and decline their invitation

c) Accept to having dinner together but not drinks

d) Accept their invitation wholeheartedly

(-15)

(+5)

(-5)

(+10)

Step2. Exchanging information

Information exchange depends on effective interpersonal relationship

How?

1. Build relationship

1. Entertainment

2. To find some common interest or background experience, unrelated to the negotiation

3. Relationship-building moves * Armand Hammer, CEO of occidental

petroleum

- Tied with ribbons bearing the Libyan national colors, green and black

* “Green Book” (Dea Woo)

2. Build Credibility

• To make your CP have a good perception/image of you.

Two kinds of Credibility ▷ Initial Credibility

·Your partners perception of you before you begin to communicate ·This credibility comes from the perception of "who you are“ decent-- "what you represent" bad company--

▷ Acquired Credibility -created on the process of Nego.

A. U.S.: Hard-Positional Negotiation strategy* Korea unfairly limits US access to Korean auto market Market share of imported car → below than 1% Imbalance in US-Korea Automobile Trade * Intentional tax audits on foreign car owner * Consumer misperception on foreign cars• * police : traffic ticket (tinted window)

3. Not “Blabber mouth” negotiator

• First listening (listening skill)

- let the opponent become talkative and disclose information first

• And then ask questions

• Finally, disclose my information

Communication research

Talker Listener

Speak at a rateOf 2 words per

second

Hear a rate of 8 wordsPer second

Give plenty of time to a listener To think/investigate physical action

Of others while “talkers” are Consumed by the act of speech

Information-gathering behavior as a % of all behavior observed – Rackham & Carlsle

17.9%38.5%total

4.2%7.5%summarizing

4.1%9.7%Testing for understanding

9.6%21.3%Asking questions

Skilled negotiators average negotiators

• Monitored the negotiation behavior of English negotiators in labor-management negotiation

• Skilled negotiators spend 38.5% of their time arguing and clarifying information

- 17.9% for average negotiators

Rackham & Carlsle

Step 3. Concessions Making Process1,2th preparatory

• Shut your mouth, let the other make a first offer

• “you first-No! No !you first”

Q1. Should I be the first to open?

1. “Never Open Rule”

Two contrasting answers -anchoring effect

2. “Anchoring Effect” ZOPA Theory

• By making a first offer(price), you have a chance to set the Zone of Possible Agreement (ZOPA)

• Social scientists have discovered

- “A Human Tendency” to affected

by “first impression” price offered

by the other

- Tend to unconsciously negotiate from that starting point (first offered price)

- first offer : anchoring effect

Conclusion Information

(1) If you are confident that your information Is better than your counterpart’s

Feel free to offer first Enjoy “anchoring effect”

(2) Unless “Never open rule”

• Try to let the other offer first

• But, be careful for “the anchoring effect”

Q2. Should I open aggressively(High-Ball) or reasonably(Low-Ball)

1. Relationship situationReasonable

opening (Low-Ball)

2. Transaction Situation (Bazaar, competitive)

• 34 case-study between 1960 and 1980

- aggressive offering is the best

* carpet store

- especially if direct communication between the parties is limited

* home sale medicated by a agent (broker)

aggressively(High-Ball)

Why aggressive opening(High-Ball)?

• Target price

• Aggressive one

1. Contrast principle

50$

45$

30$

10$

Reasonable first opening

? Outrageous one

Seller’s Walk-away price(wap)40$

Buyer’s WAP60$

• If I opened at 30$

- moved up 20$ (my concession)

- stopped at 50$

the seller would feel both greater relief and satisfaction more willing to say “yes”

• If opened at 45$ only 5$ concession

- seller would are really willing to say yes.

2. Reciprocity principle

• Person A – Aggressive

• Person B – Rejects

--repeat-----

• Person A – moderates his demand by making a significant concession

• Person B Feel pressure imposed by the Reciprocity principle to make A reasonable response(to say “yes”)

Does an Aggressive(High-ball) always work in a transaction?

Exception1. You lack leverage and

the other knows it

Fish vendor on The street in themorning

Aggressive

Fish vendor on The street in theevening

- No leverage (no refrigerator)- People know it

Exception 2. When the other won’t haggling

• Roughly 15% of American hate bargaining (haggling)

You : seller of neck-tie

Young student

Fifty years – lookingWealthy gentleman

Aggressive

Reasonable

From consumer’s standpoint, What negotiation strategy?

1. Resist at the initial offer(price)but, identify yourself as a serious buyer

- show your cash or checkbook

2. The declining “size of hagglers” (sellers’) concessions sends a powerful signal that they are getting close to a resistance point (walk-away point, bottom line)

20,000$18,000$17,000$16,500$16,300$

+2,000$+1,000$+500$

+200$What his resistance price?

16,000

3. Keep insisting on your price until you hear shopkeeper say “no”

4. Politely but firmly head for the door

If they stop you Otherwise

Willingness to makeA future concession

Not so great concession

Last price-his real resistance price (bottom line)

Step 4. Closing & Gaining Commitment

• Research shows “concession rates skyrocket as the parties perceive that they are under a deadline”

• “Tomorrow noon is a deadline, after that time, we will sell to (buy from)the other who has expressed interest”

-Your counterpart--under pressure

** Yongsan

1. Deadline

2. WalkoutHow to break the deadlock?

• “take it or “leave it”ultimatum get out of the table

• Leverage equation :

Bargaining Power

>

Buyer Seller

When your-walkout tacticsWatch your partner’s “personality”

Apologize or change your negotiation attitude toget negotiation back on track

2. Competitive negotiator - Tactics

1. Cooperative negotiator – Real walkout

Evaluate the leverage equation

If you-more leverage

If you-less leverage

He-back

To get them back to nego

3. “Nibbler”- Last minute demands -

• Request small favor just before a deal closes

- most negotiators fear to spoil negotiation or relationship by reject such small items

• Research

- add as much as 3 to 5% in additional value to their deals

How react to ?

Reciprocal concession

-Nibbler : 5% DC-Seller : No delivery

4. Shall we split the difference?

• Research - the most likely settlement point is the

mid-point between the two opening offers

so popular, Why?1. Appeals to the Sense of Reciprocity -fifty-fifty2. Simple to understand3. Quick – in a hurry

Compromise Strategy

Not split

Seller’s Aggressive opening

Buyer’s WA Price

Buyer’s Reasonable Opening

Seller’s WA Price

split Settled price : 34 million $

Who win?Seller wins

38 million $35 million $

30 million $20 million $