What are the steps in the negotiation process? What should international negotiators consider at each step?

Question

What will be an ideal response?

Answer 1

The process of international business negotiation presented here is divided into five different stages. A stage of the process refers to a specific time and includes all actions and communications by any party pertaining to negotiations made during that period. Parties communicate with each other to exchange information within each stage. A particular stage ends when parties decide to proceed further into the next stage or to abandon the communication if they see no point in further negotiations. In the offer stage, parties attempt to understand each other’s needs and demands and decide either to proceed with the following stage (informal meetings) or not to proceed further due to incompatibility of each other’s demands, whereupon the negotiations end without agreement.

Offer stage
The offer stage begins with the first contact between parties concerning a particular venture and ends when the vendor submits a final offer. During this stage, some negotiations take place, and counter-offers are made, often resulting in a revision of the vendor’s offer. The dynamism of the process can be observed at this early stage, when parties begin to understand one another’s needs. It is important that vendors realize that in submitting an offer, they are committing themselves to their part of the deal. It may be necessary to make concessions on many issues.

Informal meeting
Parties meet to discuss the offer and to get acquainted. After the buyer receives the offer, informal meetings take place as the parties examine each other’s positions. Whether the parties continue to the next stage of the negotiation process will depend on the perceived level of cooperation or conflict, power or dependence, and the degree of distance. The process often ends in failure if excessive conflict or distance is sensed or if a successful future relationship seems doubtful. In this stage, the parties should truly see how they are going to solve the problem, whether it is realistic to achieve the objectives of both sides, and identify the obstacles that have to be overcome to achieve the objectives.

Informal meetings are often more important than formal negotiations in many emerging markets. Social, informal relationships developed between negotiators at this stage can be of great help. Trust and confidence gained from these relationships not only increase the chances for agreement but also decrease the psychic distance between parties. One method of establishing such contacts is to invite individuals from the buyer’s side to visit the seller’s office/factory in an attempt to develop trust. The prime objective here is to discover each other’s priorities. It is important to understand what the other party wants, why they want it, and their underlying interests and objectives, because this information helps the parties find solutions that are acceptable to both sides.

Strategy formulation
Parties begin to formulate their strategy for face-to-face negotiation if Stage 2 has ended in success and they decide to continue the process. By strategy, we mean a complete plan regarding problems, the solutions available, and preferred choices relative to the other party’s choices and preferences. At this stage, parties try to build up their relative power. The buyer compares the offers submitted by different vendors, makes checklists, and assigns pro and con arguments or competitive advantages to all competing vendors. The seller decides on possible points of concession and their extent. A volatile environment can severely upset established relative power positions. It is essential that negotiators continue to monitor changes in the environment to protect their power position in this stage.

Face-to-face negotiation
The parties should be aware that each side views the situation, or the matter under discussion, in its own way. Not only do they have a different perception of the process, they also have different expectations for the outcome. It is therefore important to start face-to-face negotiations with an open mind. At this stage, the parties should evaluate the alternatives presented and select those that are compatible with their own expectations. The best way is to determine criteria for judging the alternatives and then rank each alternative against these criteria. Here, the parties can even help each other in evaluating these alternatives and discussing the criteria for judgment. The main issue is to explore differences in preferences and expectations and then try to reach an agreement.

Implementation
At the implementation stage, all terms have been agreed on. The contract has been drawn up and is ready to be signed. Experience has shown that writing the contract, and the language used, can be a negotiation process in itself, because meaning and values may differ between two parties. In cases involving Western firms and emerging-economy parties, the language used and the writing down of issues previously agreed on can take considerable time. This stage can lead to renewed face-to-face negotiation if there is negative feedback from background factors and atmosphere.

Discussion should be summarized after negotiations to avoid unnecessary delays in the process. The terms agreed on should be read by both parties after concessions are exchanged and discussions held. This is facilitated by keeping minutes of meetings. This is helpful not only in writing and signing the contract but also in its implementation. Trouble may arise later during implementation of the contract if parties are too eager to reach an agreement and don’t pay enough attention to details. The best way to solve this problem is to confirm that both sides thoroughly understand what they have agreed on before leaving the negotiating table.