As part of our "mini-series" on international negotiation, in the last article we discussed the goals of negotiation as well as effective preparation and argumentation. Today we will look at other essential aspects of international negotiation with the help of a case study.
Peter H. is negotiating today with representatives of the Australian company Smith Ltd, a competitor in the V-belt sector. Smith Ltd. wants to improve its product quality and is negotiating with Peter H. about a know-how licence. As it is not worthwhile for Peter H.'s company to produce in Australia itself for various reasons, he is also interested in granting a manufacturing licence.
Smith Ltd. is seeking an exclusive manufacturing licence for Australia. They have to invest a lot to implement the know-how and therefore want to be protected in Australia. Peter H. is concerned about a secure income from licence fees. He fears losing money because if Smith Ltd. cannot implement the know-how as intended, his royalty income, which is linked to Smith Ltd.'s turnover, will remain low. Peter H. intends to grant a licence without exclusivity in order to be able to sell a licence to another company if necessary.
Failure seems preprogrammed. Both parties insist on their positions and the negotiating atmosphere deteriorates. The problem is reduced to the position of whether the production licence should be exclusive or non-exclusive. Even if the parties agree on the other issues, the licence becomes the core issue. A position-oriented approach to negotiation leads not only to disagreement on the substance, but also to a mixing of the factual and relationship levels.
How can this problem be solved? Peter H. must try to negotiate in a factual and interest-oriented way. First of all, the unresolved issue of the "licence" should be declared a common problem by both parties. Furthermore, a structure should be developed that shows where interests and common points of intersection lie. Ideally, this structure has already been developed by one of the parties and could look like the following figure:
A closer analysis of these structures reveals that the interests of both parties overlap at a certain point: Peter H. grants Smith Ltd. an exclusive licence with the proviso that a certain minimum turnover per year is achieved after a fixed start-up period. This secures a minimum licence fee. As long as Smith Ltd. achieves this minimum turnover, which may also be staggered over the years, the licence may not be granted to third parties in Australia. The exclusivity is thus linked to a minimum turnover - the licence is thus quasi-exclusive and Smith Ltd. remains unrivalled in its country.
As a rule, both parties grant each other concessions in the course of the talks and converge in their positions. One should also negotiate on the individual concession. A wise negotiator only makes a concession if the other party is willing to make a concession in return. The better one knows one's own interests and those of the other side, the greater the possibilities for making concessions.
Relevant aspects of international negotiation:
Analyse the other side's understanding of the language, i.e. how deep and detailed is their knowledge of the language and how much overlap there is between what you say and what the other side says in reply. The more accurate your analysis, the better you can assess whether the statements of both parties are congruent.
Active listening and questioning
Interests must be explored through interested listening and enquiry. The ability to listen is a trump card in the age of internationalisation! If you let your negotiating partner finish, put yourself in his place, ask specific questions and refrain from lecturing, you have a good chance of getting the most comprehensive picture possible of the other side. Because listening and understanding does not mean agreeing with a specific opinion. Besides, one gets the chance to expose contradictions based solely on the other party's presentation. Then you beat them with their own weapons, i.e. with their own arguments.
Definition of key terms
In many negotiations, it is a good idea to define key business terms together in advance. This reduces misunderstandings right from the start and structures the negotiation process.
Interests instead of positions
Positions are often associated with negative determinations and reflect personal attitudes. It is difficult to move away from such a position without losing face, at least partially. It is better to explore the interests hidden behind the obvious positions and discuss them.
Interest-based negotiation has a de-escalating effect and shows how to recognise the underlying ideas of both parties and find possible points of intersection.
If you know the interests, it is more possible to respond appropriately and effectively. Those who manage to successfully summarise the position of the other party and then explain their own point of view significantly improve their chances of success.
Broadening the scope of negotiations
When one has explored both one's own interests and those of the other side, new, previously unrecognised possibilities for a solution arise - the negotiation material is thus expanded.
It often helps to appoint a contract coordinator on both sides. If such an approach has been unusual with your business partner so far, you should make the advantages of a functioning working level clear to him. While respecting all intercultural realities, also emphasise his duties to cooperate in order to ensure necessary preparatory work for the contract negotiation. Suggest the further procedure and work out the individual implementation steps or milestones together with your partner: Who? When? With whom? In what way? Also determine who is responsible for meeting the milestones. This way you ensure that the euphoria after a jointly achieved negotiation result does not fizzle out, but that the further procedure proceeds efficiently, quickly and purposefully with the help of a contract coordinator.
To the last article Rules of the Game for International Negotiation (Part 1)
To last article Rules of the Game for International Negotiation (Part 3)