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US-Korea-Mexico Nego US Electronic Parts&Comp. Union Nego US DOC Korea Gov. push Allianc e US-Korea-Mexico Nego US Electronic Parts&Comp. Union Nego US DOC Korea Gov. push Allianc e Samsung Electronics TV Circumband Dumping NAFTA Nego Mexican Expor Gov. pusht S. S. FDI Mexico

Four stages of negotiation - R. Shell • Hyundai Heavy Co. : Forklift • Four stages of negotiation - R. Shell • Hyundai Heavy Co. : Forklift • Indonesian Construction Co. “A” -100 units, 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 1. Assess the situation & Preparing your Four stages of negotiation - R. Shell 1. Assess the situation & Preparing your strategy 2. Exchanging information 3. Opening & making concessions 4. Closing & gaining commitment

Q 4. You want to sell your yacht for $50, 000. You were thinking Q 4. 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 (-10) b) Tell him to wait until the a) Accept his offer without hesitation (-10) b) Tell him to wait until the ad is running (-10) c) Haggle with the person to get a better deal (+15)

Q 5. You want to sell your yacht for $50, 000. You were thinking Q 5. 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 (+5) b) Tell him to wait until the a) Accept his offer without hesitation (+5) b) Tell him to wait until the ad is running (-15) c) Haggle with your friend to get a better offer (-20) d) Tell him that you'll sell it to him for $60, 000 (+15)

1 High Lose to win Accommodating Perceived Importance of Relationship Lose-lose 2 Avoiding Win-win 1 High Lose to win Accommodating Perceived Importance of Relationship Lose-lose 2 Avoiding Win-win Collaborative 4 Split the difference Compromise 3 5 Win to lose Competitive Low Importance of Outcome High

R. Shell’s Nego Situation High Relationship Situation Accommodting Importance of Relationship Compromise Balanced concerns R. Shell’s Nego Situation High Relationship Situation Accommodting Importance of Relationship Compromise Balanced concerns Collaborative Transactional Situation Tacit coordination Avoiding Competitive Low Importance of Outcome High

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

High your director 3 Accommodting Importance of Relationship a dealer Competitive Low 4 Collaborative High your director 3 Accommodting Importance of Relationship a dealer Competitive Low 4 Collaborative your close friend Compromise 5 strange on the street 1 Avoiding your neighbor Importance of Outcome High 2

# Quiz Nt : Your director’s used automobile • Your director asks you if # Quiz Nt : Your director’s used automobile • 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?

Q 11. As the head of the negotiation team for a large conglomerate in Q 11. 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 (-15) b) Make a polite excuse (e. g. an a) Flatly refuse their invitation (-15) b) Make a polite excuse (e. g. an important meeting with the Korean diplomats) and decline their invitation (+5) c) Accept to having dinner together but not drinks (-5) d) Accept their invitation wholeheartedly (+10)

Step 2. Exchanging information 1. Build relationship Information exchange depends on effective interpersonal relationship Step 2. Exchanging information 1. Build relationship Information exchange depends on effective interpersonal relationship How? 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 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. 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 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 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 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 rate Of 2 words per second Hear Communication research Talker Listener Speak at a rate Of 2 words per second Hear a rate of 8 words Per 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 Skilled Information-gathering behavior as a % of all behavior observed – Rackham & Carlsle Skilled negotiators average negotiators Asking questions 21. 3% 9. 6% Testing for understanding 9. 7% 4. 1% summarizing 7. 5% 4. 2% total 38. 5% 17. 9%

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

Step 3. Concessions Making Process 1, 2 th preparatory Q 1. Should I be Step 3. Concessions Making Process 1, 2 th preparatory Q 1. Should I be the first to open? Two contrasting answers -anchoring effect 1. “Never Open Rule” • Shut your mouth, let the other make a first offer • “you first-No! No !you first”

2. “Anchoring Effect” ZOPA Theory • By making a first offer(price), you have a 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 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 • (2) Unless “Never open rule” • Try to let the other offer first • But, be careful for “the anchoring effect”

Q 2. Should I open aggressively(High. Ball) or reasonably(Low-Ball) 1. Relationship situation Reasonable opening Q 2. Should I open aggressively(High. Ball) or reasonably(Low-Ball) 1. Relationship situation Reasonable opening (Low-Ball)

2. Transaction Situation (Bazaar, competitive) aggressively(High-Ball) • 34 case-study between 1960 and 1980 - 2. Transaction Situation (Bazaar, competitive) aggressively(High-Ball) • 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)

Why aggressive opening(High-Ball)? 1. Contrast principle 60$ Buyer’s WAP • Target 50$ 45$ 40$ Why aggressive opening(High-Ball)? 1. Contrast principle 60$ Buyer’s WAP • Target 50$ 45$ 40$ Reasonable first opening Seller’s Walk-away price(wap) • Aggressive one 30$ 10$ price ? Outrageous one

 • If I opened at 30$ - moved up 20$ (my concession) - • 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---- 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? Exception 1. You lack leverage and Does an Aggressive(High-ball) always work in a transaction? Exception 1. You lack leverage and the other knows it Fish vendor on The street in the morning Aggressive Fish vendor on The street in the evening - No leverage (no refrigerator) - People know it

Exception 2. When the other won’t haggling • Roughly 15% of American hate bargaining Exception 2. When the other won’t haggling • Roughly 15% of American hate bargaining (haggling) You : seller of neck-tie Young student Aggressive Fifty years – looking Wealthy gentleman Reasonable

From consumer’s standpoint, What negotiation strategy? 1. Resist at the initial offer(price)but, identify yourself 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 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$ +2, 000$ 18, 000$ 17, 000$ 16, 500$ 16, 300$ 16, 000 +1, 000$ +500$ +200$ What his resistance price?

3. Keep insisting on your price until you hear shopkeeper say “no” 4. Politely 3. Keep insisting on your price until you hear shopkeeper say “no” 4. Politely but firmly head for the door If they stop you Willingness to make A future concession Not so great concession Otherwise Last price -his real resistance price (bottom line)

Step 4. Closing & Gaining Commitment 1. Deadline • Research shows “concession rates skyrocket Step 4. Closing & Gaining Commitment 1. Deadline • 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

2. Walkout How to break the deadlock? • “take it or “leave it”ultimatum get 2. Walkout How to break the deadlock? • “take it or “leave it”ultimatum get out of the table • Leverage equation : Bargaining Power Buyer > Seller

When your-walkout tactics Watch your partner’s “personality” 1. Cooperative negotiator – Real walkout Apologize When your-walkout tactics Watch your partner’s “personality” 1. Cooperative negotiator – Real walkout Apologize or change your negotiation attitude to get negotiation back on track 2. Competitive negotiator - Tactics 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 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 How react to ? Reciprocal concession -Nibbler : 5% DC -Seller : No delivery

4. Shall we split the difference? • Research - the most likely settlement point 4. Shall we split the difference? • Research - the most likely settlement point is the mid-point between the two opening offers Compromise Strategy so popular, Why? 1. Appeals to the Sense of Reciprocity -fifty 2. Simple to understand 3. Quick – in a hurry

Not split 38 million $ Seller’s Aggressive opening 35 million $ Buyer’s WA Price Not split 38 million $ Seller’s Aggressive opening 35 million $ Buyer’s WA Price 30 million $ Buyer’s Reasonable Opening 20 million $ Seller’s WA Price split Settled price : 34 million $ Who win? Seller wins