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Successful Negotiations

Online Activities: M P 3 P o d cast:

BEP 401 – Negotiation Strategy (Part 1)

This is the beginning of a new series on the skills and

language of negotiating in English.

Over the coming months we’ll explore the topic in a

series of podcasts that examine several typical business

negotiations and the language used in each stage of the

process.

Today’s show is the first in a two-part sequence on the

fundamentals of negotiation strategy. We will be

hearing an interview with experienced management

consultant Brian Fields. Brian discusses key concepts

and important strategic considerations. The dialog

teaches us both useful vocabulary and helpful skills.

As you listen, try to answer the following questions.

Listening Questions

1) What are the top mistakes people make in a negotiation?

2) What is a BATNA, or “best alternative to a negotiated agreement?”

3) What does Brian think about the idea of “win-win” negotiations?

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Vocabulary

Overemphasis: Too much emphasis. The verb form is to overemphasize. “In my

discussions there is an overemphasis on price, in my opinion.”

Bargaining chips: Something you give away in a negotiation to get something in

return. (“Chip” originally refers to the round plastic coins used in betting during

card games such as poker.) “We have to think of a few things that we can give

away as bargaining chips during our talks.”

Tactical questions: In many contexts, tactics refers to details and specific

concerns whereas strategy may refer to general principles and the bigger

picture. “How to get a larger discount on this order is more of a tactical question

whereas how to build a long-term relationship is more of a strategic one.”

Coherent strategy: A logical and consistent method of approaching a game,

battle, war or negotiation in order to protect one’s interests and act in one’s

benefit. “We should build a coherent strategy for dealing with this market.”

BATNA: Short for “best alternative to a negotiated agreement.” This is what you

will do if you don’t reach an agreement. “Before you go into a negotiation, you

should have an idea of what you will do if talks break down – this is called your

BATNA, and it should be better than your bottom line; otherwise, you have

nothing to gain from the negotiation.”

Bottom line: The worst possible result we are prepared to accept before we walk

away from the talks. “I’m already at my bottom line – I can’t accept a lower

price than this.”

To have/put sth on the table: To put sth. on the table refers to making an offer;

to have sth on the table refers to an offer that is already made. “He put $3

million on the table, but I though it wasn’t enough.” “We have a lot of offers on

the table, but none of them meet our expectations.”

To structure the deal: To organize the contract or arrangement, including, for

example, credit terms, ownership, payment, and so on. “How you structure a

deal can be just as important as the actual price.”

Potential buyers: People who may wish to buy what we are selling, but who have

not yet made offers. “We should contact a range of potential buyers.”

Deal sweeteners: Things used to make a potential deal more attractive. “Good

credit terms can be a great deal sweetener.”

Win-win agreement: An agreement in which both parties benefit. “Actually, in

most cases negotiations are win-win – otherwise, how do people reach a

compromise?

Cliché: A word or expression that has become meaningless from overuse. “The

idea of a ‘win-win’ agreement has almost become a cliché.”

Zone of possible agreement: The range of overlap between two negotiation

parties bottom lines that represents a possible area of agreement. (If no such

overlap exists, agreement is impossible.) “If I am buying, and you are selling,

then our zone of possible agreement is the range between the highest price I am

willing to pay and the lowest price you are willing to accept.”

Reach a compromise: To reach an agreement based on making concessions, i.e.,

based on all parties to a negotiation being willing to give up something in order

to make a deal. Compromise can also be used as a verb, in which case it means

something similar to: to make a concession. “We reached a compromise after

many days of hard talks.”

To swap concessions: Swap means to trade, so swapping concessions means

both parties to a negotiation giving up things in turn to reach an agreement. “To

reach a compromise, it’s usually necessary for both sides to swap concessions.”

© 2009 All rights reserved: www.business english pod.com 7

Successful Negotiations

Dialog

Interviewer: What do you think are some of the top mistakes people make

going into a negotiation?

Brian: Well, a lot of the most common mistakes usually start before the

negotiation even begins.

Interviewer: How do you mean?

Brian: For example, in the planning stages there is often an overemphasis on

price … things like, “Should I put the first number on the table, or wait for them

to make the first move?” “Should I tell them what we really need, or should I

include some bargaining chips that we can give away later.”

Interviewer: Aren’t those things important?

Brian: Yes, of course, but they are just tactical questions. None of them can

be answered without developing a coherent strategy first.

Interviewer: So what goes into building a strategy?

Brian: There are several factors to consider. The first one is what you’ll do if you

don’t come to an agreement… this is often called your BATNA, or “ best

alternative to a negotiated agreement .”

Interviewer: Isn’t that the same as your bottom line?

Brian: Not necessarily. Your BATNA is what is already available, so your bottom

line should be better. Otherwise there’s nothing to be gained from negotiation.

Interview: That makes sense.

Brian: And in determining the best alternative, we have to look at more than

just the offers that we currently have on the table, and we have to take other

factors into consideration than just the price. For example, there may be other

ways to structure the deal, more potential buyers out there, or deal

sweeteners, such as payment in cash instead of credit.

Interviewer: Is it all about maximizing your own benefit? Or do you think

there’s anything to the idea of a win-win agreement?

Brian: Well, win-win has become a bit of a cliché. But let’s take a look at the

original meaning of the word: Of course we are both trying to get the best deal,

but consider this: If I am selling, and you are buying, and my bottom line is

lower than the highest price you are willing to pay, then we call that overlap the

zone of possible agreement. Reaching a compromise anywhere in that

zone is a win-win solution. It’s just a matter of swapping concessions to get

there.

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Debrief

Let’s review the vocabulary and concepts that Brian uses to introduce the topic

of negotiations.

How does the dialog begin? The interviewer asks Brian about the top mistakes

people make in a negotiation. Surprisingly, Brian replies that the most common

mistakes actually start before the negotiation begins. What are those mistakes?

Listen again.

Brian: For example, in the planning stages there is often an overemphasis on

Price

Brian says people have an over emphasis – that is, too much emphasis – on

price. The verb form is to overemphasize. This word is useful for describing

situations in which someone pays too much attention to something, often to the

neglect or detriment of something else. Let’s listen to a few more examples of

this expression in use.

 In my opinion, there seems to be an overemphasis on price in our

discussions.

 If you ask me, we’re overemphasizing delivery time – we should be more

focused on quality.

 We have to be careful not to overemphasize minor factors.

Brian then goes on to provide two examples of an overemphasis on price.

Brian: … things like, “Should I put the first number on the table, or wait for

them to make the first move?” “Should I tell them what we really need, or

should I include some bargaining chips that we can give away later.”

What are bargaining chips? In a game of cards, such as poker, we often bet

“chips” – little round plastic discs – instead of cash. Each chip represents a

certain amount of money. Idiomatically, a “bargaining chip” is anything that you

can bet or give away in return to something else. (For example, you may be able

to use delivery time as a bargaining chip in order to get a concession on price.)

Let’s practice this idiom by listening to some more examples:

 Since he was very flexible on warranty period, he used this as a bargaining

chip to get concessions on delivery time.

 They are obviously using their good relationships with local government as a

bargaining chip to try to negotiate exclusive rights to sell our product in this

market.

 It’s too early in the negotiation to throw away bargaining chips – never give

something up without getting something in return!

How does the interviewer respond to Brian’s statement that people often

overemphasize price?

Interviewer: Aren’t those things important?

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Successful Negotiations

Brian: Yes, of course, but they are just tactical questions. None of them can

be answered without developing a coherent strategy first.

Brian’s point here is that price is merely a tactical question, which can’t be

answered until we first develop a coherent – that is logical and consistent –

strategy. What is the difference between tactics and strategy? They are often

used the same way. But here’s one way to think of the difference: Tactics are

what we need to win the battle, whereas strategy is what we need to win the

war. Tactics usually refers to details, whereas strategy often refers to general

principles.

Let’s listen to some more examples of tactics and strategy:

 We always have to keep in mind our long-term strategy of building a good

relationship.

 Tactical concerns include discount and delivery; using this client to establish

a relationship in this new market is more of a strategic concern.

 It’s time to go beyond just thinking about short-term tactics and start

considering long-term strategies.

Next, Brian discusses an important factor in building a strategy: Your best

alternative to a negotiated agreement or BATNA. The interviewer asks about the

difference between a BATNA, or best alternative, and a bottom line, which is also

know as your “walk-away point,” the minimum offer you are prepared to accept:

Interviewer: Isn’t that the same as your bottom line?

Brian: Not necessarily. Your BATNA is what is already available, so your bottom

line should be better. Otherwise there’s nothing to be gained from negotiation.

Brian is saying that our BATNA is what we will do if we don’t reach an

agreement, so our bottom line – the worst possible agreement we can accept –

should be better than that.

Now, listen to some example phrases using BATNA and bottom line.

 To determine our BATNA, we have to consider not just the other offers on the

table, but also potential buyers that we haven’t yet talked to.

 Before you can determine your bottom line, you need to put a value on your

best alternative.

 Sometimes your best alternative is to do nothing at all.

 Several not-so-obvious things go into deciding your BATNA, including the

timing of the deal – a bird in the hand may be worth two in the bush.

The last example includes an idiom – a bird in the hand is worth two in the bush.

This means that gains we have gotten now should be valued more highly than

greater gains that are merely promised for the future.

The difference between BATNA and bottom line should now be clear. But how do

we determine our BATNA?

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Brian: And in determining the best alternative, we have to look at more than

just the offers that we currently have on the table, and we have to take other

factors into consideration than just the price. For example, there may be other

ways to structure the deal, more potential buyers out there, or deal

sweeteners, such as good timing or payment in cash instead of credit.

As Brian points out, our best alternative is not necessarily just the best offer we

have on the table, that is, our BATNA is not necessarily the best offer we have

received so far. Also, to decide our best alternative, we have to actually consider

a number of factors besides just price. What are these other important

considerations?

The first one is how the deal is structured, that is, for example, credit terms,

payment periods, legal aspects, and so on.

Second, we may want to think about other potential buyers – not just the ones

we have already contacted.

Finally, there may be some deal sweeteners, which refer to factors beyond mere

price that make an arrangement “sweeter,” that is, more attractive.

Let’s look at some example phrases with this last idiom, deal sweeteners.

 If we’re going to get them to agree to our offer, we’re going to have to think

of some ways to sweeten the deal.

 Why don’t I sweeten the deal a little by increasing our discount by 1%?

 There’s a variety of deal sweeteners that we can use to make buying our

company more attractive.

Next, the interviewer asks Brian what he thinks about the idea of a win-win

negotiation. Brian replies that win-win has become a cliché, that is an expression

that is used so much that it becomes meaningless. But then he encourages us to

think about the actual meaning of win-win:

Brian: …Of course we are both trying to get the best deal, but consider this: If I

am selling, and you are buying, and my bottom line is lower than the highest

price you are willing to pay, then we call that overlap the zone of possible

agreement. Reaching a compromise anywhere in that zone is a win-win

solution. It’s just a matter of swapping concessions to get there.

What Brian is saying is that all negotiations – to be successful – must be win-

win: If you are buying, and I am selling, the lowest price I am willing to give you

must be under the highest price that you are wiling to pay. This area of overlap

between our bottom lines is referred to as the z one of possible agreement. Any

compromise we reach in that zone benefits both of us. We reach an agreement

in this zone by swapping – that is, trading – concessions: First you make a

concession, than I make one, until we make a deal.

Let’s review agreement, compromise, and concessions with some example phrases.

As you listen, pay attention to collocations – word partnerships between nouns and

verbs.

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Successful Negotiations

 If there’s going to be any agreement, it’s necessary for one of us to make a

concession.

 The only way to reach a compromise is to make a concession.

 The negotiation was finally successful when the other party backed down and

compromised on a key issue.

From these examples, we notice a couple things: First, we usually say to make a

concession and to reach a compromise. A compromise is a kind of agreement,

and a concession is something we do to reach it. Note, however, that in the last

example compromise is used as a verb. In this case, to compromise basically

means to make a concession. (For this reason, sometimes we also say to make a

compromise with a similar meaning as to make a concession.)

Now, it’s your turn to practice. First, we’ll review some of the verb collocations

we just learned. In a moment, you’ll hear a series of sentences with a verb

blanked out or replaced with a beep. Repeat the whole sentence, supplying the

missing verb in the correct form. For example, if you hear:

The only way forward is if one of us <beep> a concession.

You will say,

The only way forward is if one of us makes a concession.

Let’s give it a try.

Cue 1: By trading concessions, we will eventually <beep> a compromise.

Learner 1:

Cue 2: I think we can <beep> our strong brand name as a bargaining chip.

Learner2:

Cue 3: In last week’s negotiation, I <beep> a concession on price.

Learner 3:

Cue 4: I think that an overemphasis on price is keeping us from <beep> an

agreement.

Learner 4:

Answer 1: By trading concessions, we will eventually reach a compromise.

Answer 2: I think we can use our strong brand name as a bargaining chip.

Answer 3: In last week’s negotiation, I made a concession on price.

Answer 4: I think that an overemphasis on price is keeping us from reaching

an agreement.

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Next we’ll use the same method to review key vocabulary. In a moment you’ll

hear another series of cues. As before, one word is blanked out with a beep.

Repeat each sentence, putting in the missing word.

Cue 1: In our discussions, there seems to be an <beep> on price.

Learner 1:

Cue 2: It’s too early in the negotiation to throw away <beep> chips.

Learner 2:

Cue 3: We always have to keep in mind our long-term <beep> of building a

good relationship.

Learner 3:

Cue 4: There’s a variety of deal <beep> that we can use to make buying our

company more attractive.

Learner 4:

Answer 1: In our discussions, there seems to be an overemphasis on price.

Answer 2: It’s too early in the negotiation to throw away bargaining chips.

Answer 3: We always have to keep in mind our long-term strategy of building

a good relationship.

Answer 4: There’s a variety of deal sweeteners that we can use to make

buying our company more attractive.

That concludes the first in this two-part series on negotiation strategy. In this

episode, we’ve learned both a variety of useful language and a range of helpful

skills.

Thanks for listening, and see you next time!

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Successful Negotiations

Language Review

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