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  • Topic 5 (cont) Managing International Business Negotiations

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     Managing International Business Negotiations

    Things you need to do for this topic:

     Read these Topic Notes from Ahstrom & Brunton (2010) Chapter 10 Chapter 10: Influence and Negotiation

    I.      PERSUASION

    1. 1.     Key Concepts

    It is important to distinguish between persuasion and influence.

    • Persuasion and Influence: Persuasion is a change in a private attitude or belief resulting from the receipt of a message. Influence is an action that leads to a change in behavior. Persuasion is a deeper form of change than influence. The two approaches, persuasion and influence, can work together. Nowadays, more emphasis is placed on understanding what encourages people to change their attitudes and beliefs. This draws on the cognitive response model and focuses on communication and the understanding of individuals’ wants, beliefs, and the problems they need to have solved. This understanding is referred to as self-talk of the target audience. It is important to comprehend the most basic reasons why people may respond to a persuasive message.

    1. First, many people would like to build a more accurate view of the world and how it works.
    2. Second, people would like to be consistent with their own values. This principle is known as the consistency principle.
    3. 2.     Key Terms

    • Influence - Seeking to change people’s behaviors.
    • Persuasion - Seeking to change people’s beliefs or attitudes.
    • Cognitive response model of persuasion - A model of persuasion that views the most direct cause of persuasion as the self-talk of the target audience, not the persuasion method itself or its deliverer.
    • Cognitive dissonance - The negative feeling caused by holding two contradictory ideas simultaneously.

     

    1. INFLUENCE

     

    1. 1.     Key Concepts

    Social influence is defined as encouraging a change in behavior that was caused by real or imagined external pressure. There are three behavior outcomes deriving from a successful influence attempt:

    1. conformity,
    2. compliance, and
    3. obedience.

    • Six Universal Principles of Influence

    Social psychologist Robert Cialdini has identified six universal principles of influence.

    • Social proof: People are influenced to act when they think many others are behaving in a certain way or buying a certain product. The use of the influence principle of social proof is but one of several examples of how these principles can be used ethically to influence others. People faced with strong group consensus sometimes go along even though they think the others may be incorrect. In cultures with high group cohesiveness, such as those in East Asia, social validation is extra important. Another important point to remember is that if you want to discourage a behavior, it is best not to say, ‘‘Many people are doing this, but don’t you do it.’’
    • Authority: People are also influenced by authority and expertise because it gives them a shortcut to an assessment or decision—if the authority says so, it must be ok. The authority principle is helpful to some extent because we do not have time to evaluate every decision we make. The authority principle is a powerful influencer. Reliance on expert authority, however, can lead us to respond to the trappings (symbols) of authority rather than the substance of genuine authority or expertise. People are more influenced by those who display their credentials and awards as a signal of their authority.
    • Liking: People also seek opinions from and are thus influenced by those who they like, are similar to, or feel connected with in some way. Two striking factors that increase liking are: similarity and praise. Similarity increases liking: The converse is also true. Managers can also use similarities to build relations with customers external to the firm and internally. Praise can also establish liking and increase the probability that someone will say yes to a request. While praise can increase someone’s liking of you, criticism can have the opposite effect.
    • Consistency: A personal commitment ties an individual’s identity to a position or course of action, making it more likely that he or she will follow through. This is because most individuals prefer to be consistent with statements and beliefs that they have made public so as to reduce cognitive dissonance.
    • Reciprocation: People are more willing to comply with requests from those who have provided something to them first. All societies subscribe to a norm that obligates individuals to repay in kind what they have received. Westerners may deem balanced reciprocity, or the asking of something in return right away for a favor done as inappropriate and too materialistic.
    • Scarcity: People find objects and opportunities more attractive to the degree that they are scarce, rare, or dwindling in availability. Reactance basically states that when we are told that we cannot have or do something, then we want it more. This psychological reaction common to all people helps to explain why scarcity operates as an influence principle. Scarcity does not just influence consumers but also can be influential inside firms as well.

    1. 2.     Key Terms

    • Conformity - Changing one’s behavior to match the responses or actions of others, to fit in with those in proximity.
    • Compliance - The act of changing one’s behavior in response to a direct request.
    • Obedience - A special type of compliance that involves changing one’s behavior in response to a directive from an authority figure.
    • Social proof - A principle of influence that states people are more likely to want to do something if they believe that many others are doing the same thing or buying the same product.
    • Authority - A principle of influence that states people are more likely to say yes to a request or purchase a product if an authority says it is good to do so.
    • Liking - A principle of influence that holds that people are more likely to be influenced by those who they like or with whom they have similarities.
    • Consistency - A principle of influence that indicates how people are influenced by showing how their previous statements or stated values fit with a recommendation or request.
    • Reciprocation - A principle of influence that states people are more likely to say yes to a request when the requester has done something for that person in the past.
    • Scarcity - A principle of influence that argues that people are more likely to buy a product or want to do something that they perceive as scarce, unique, or dwindling in availability.
    • Balanced reciprocity - Securing a promise of a near-immediate return for a favor done or a gift given;
    1. I.       THE NEGOTIATION PROCESS

     

    1. 1.     Key Concepts:
    • Heuristics and Biases Revisited: Some of decision-making heuristics are quite useful because they reduce the amount of time and effort needed to make a decision.
    • Unrealistic Expectations: Negotiators need to recognize that unrealistic expectations can include those that are too high or too low.
    • Anchors: Anchoring is a cognitive bias that describes the common human tendency to rely too heavily, or anchor, on one piece of information when making decisions. During the negotiation process, individuals may anchor on a specific topic or value such as a starting price, and then discussion may proceed around that value or topic.
    • Escalation of Commitment: Pressure caused by the threat of failure or not reaching an agreement in a negotiation can be significant leads managers to sometimes escalate their commitment during a negotiation until they end up accepting a deal that they should have walked away from.
    • The Best Alternative to a Negotiated Agreement (BATNA): Decisions should not be evaluated in isolation, but must be assessed in the context of what other reasonable alternatives may be at hand. In particular, negotiators must be fully aware of their BATNA.
    • The Importance of Information: Significant value can be left in the negotiation room if the two sides do not have the tools and information by which agreement can be reached. The more information open to the negotiators, the more likely the ‘‘goods on the table’’ can be identified and made useful to both sides, creating an integrative, win-win negotiation.
    • Reservation Price: Reservation prices are most easily defined in single-issue, distributive negotiations and are more difficult to establish in more complex, integrative negotiations. It is always useful to establish a set of conditions that describes the reservation price.
    • Target Price: Negotiators should also set targets for what the price they wish to pay or receive. This is the value that you would like to have—your preferred, or ‘‘blue sky,’’ agreement.
    • Framing: Negotiators can react very differently to identical proposals when the perspective, or framing, changes. The way a situation is framed or presented also greatly influences the action taken. If a frame is poorly constructed, a negotiator may unwittingly make a money-losing choice.
    • Fairness and Trust: Most people are very sensitive to fairness issues. Negotiators often will walk away from an economically rational agreement if they believe they have been unfairly treated or deceived in some way. They will do this even if this agreement is above the reservation price and should be accepted. Therefore, it is essential that a negotiator be cognizant that fairness is an issue.
    • Impasses in Negotiations: Several strategies can help restart stalled negotiations. First, try to focus on underlying interests or values rather than only on positions. Second, as the reciprocation principle recommends, make an initial small concession, then suggest one in return. Third, the arbitrator also suggested that it may be helpful to bring in a third party. In cases where you cannot reach an agreement, always terminate a negotiation cordially. An ultimatum is an attempt to break an impasse and force a deal.
    • Positive Emotion

    Negotiators who are in positive moods are more likely to achieve integrative agreements. Emotions can be very important in negotiation and decision making, and it is important to account for them and not to ignore them.

    • Culture in Negotiations

    A negotiation becomes cross-cultural when the parties involved belong to different cultures and therefore do not share the same values and behaviors. Many negotiations are cross-cultural as are some domestic negotiations that include multiple ethnic groups. Effective cross-cultural negotiations contain all of the complexity of domestic negotiations with the added dimension of cultural diversity.

    1. 2.     Key Terms
    • BATNA - The Best Alternative to a Negotiated Agreement
    • Reservation Price - A reservation price is the absolute bottom price that is acceptable.
    • Impasse - When a manager and his or her negotiating partner cannot reach an agreement.
    • Ultimatum - Requiring someone or a group to do specific thing in a specific way in order for negotiations to continue.

    Copyright © 2017 South-Western Cengage Learning. 

    Adapted for MBA BUSS 5251 International Business

    for the purpose of individual study and course preparation

    1. Readings:
      Ahlstrom, D. & Bruton, G.D. 2010 International Management: Strategy and Culture in the Emerging World.  South-Western CENGAGE Learning, Mason OH.  
      Continue with the readings set out in the Topic 5 panel (above).

       
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