Negotiations

Practice
Role plays
Practice 1. Divide into two groups, A and B. Read the notes for A or B below. In
groups prepare a negotiation position. Then choose a partner from the other group to
negotiate with. Try to reach a better solution than the one in the cartoon above.
Group A
You are sales managers in a large automotive components manufacturer. You are
having a meeting with the leader of your team of sales representatives to negotiate new
contracts. Sales have not increased in the past year and so you do not want to increase
either the reps' pay or their commissions.
Group B
You are the leader of a team of sales representatives. Your pay and commission have
not increased for three years. You have a meeting with your sales manager to try to
renegotiate your contracts.
When you have finished, report the results of your negotiation.

Practice 2. 1) Suggest phrases for each of the following list to start a negotiation.
a) Welcome the other side.
b) Develop small talk (trip, weather).
c) Mention plans for lunch - make your visitors feel welcome (see city centre / local
restaurant).
d) Suggest you start talking about the main subject of your meeting.
e) Introduce a colleague (Luke Fox, Marketing Department).
f) Explain general aim or purpose of the meeting. (preliminary / exploratory)
g) Say what your side wants from the meeting. (Establish beginnings of a
partnership / learn about supply systems / price variations and supply costs.)

2) Try to bring all the phrases above together in a single opening statement.
Practice 3. Choose one of the following two situations to prepare an opening
statement in a negotiation.
Remember to include welcoming remarks and some general comments on your
expectations for a successful meeting and an agreement which leads to a lasting
partnership.
Situation 1
Your company, Ural Compo, is meeting representatives of OLLA Inc. from Tokyo.
OLLA Inc. wants to set up an agency in your country to distribute its electronic
components.
Objective
Exploratory talks to:
1) know more about the products
2) find out about OHTA's existing international distribution network
3) discuss in general the terms under which the two companies could cooperate.
Independent objective: to internationalise your own company's activities and extend
your product range.
Situation 2
You are interested in buying some land in a suburb of Lima in Peru, where you want
to establish a distribution warehouse to serve the Andean Region of Latin America.
You have a meeting with the lawyers acting for the landowner, Puertos Callao S.A., a
port authority in Lima.
Objective
Exploratory talks to find out:
1) more about the land, its exact location relative to the port, airport, city centre, etc.
2) the cost of the land
3) the present condition of the land - existing buildings, etc.
Independent objective: to secure the land on the lowest possible terms, either by
buying it now for cash, or getting a deal spreading costs over a longer term at low
interest, or to lease the land.
Role play 1

This role play has three parts: to prepare for a negotiation; to prepare an
opening statement; to make an opening statement.

You will work in teams. Everyone should contribute to the first two parts and
agree on one or two people to actually present the opening statement prepared by
the group.

Divide into teams of up to four people, Team(s) A and Team(s) B.

In your preparation, you will need to think about how to establish a good
working relationship with the other side from the very start.

Team A. You are representatives of Аrgo, manufacturers of prefabricated

industrial buildings.

Team A: Аrgo. You are representatives of Аrgo, manufacturers of

prefabricated industrial buildings. You are planning to launch a major sales drive
in Italy, a new market for your company.
The market. The Italian market for prefabricated industrial buildings is
very competitive, and since you are based in London and the Netherlands you
have transport costs to add to your manufacturing costs. However, you know that
on average your prices are 10% lower than Italian competitors, though at the top
of your product range, your prices are a little higher than the average, but the
quality is also better.
The product. Your buildings are highly functional, and can be adapted to a
range of industrial needs. They are built according to strict Scandinavian design
quality and use the best available materials.
You supply all materials.
You also take care of the actual construction, including connections for
electricity, water systems, insulation and heating.
You can also supply the buildings at finished quality, in other words, fully
decorated according to the customer's wishes.
Different qualities are available: basic, standard and ultra, which includes a
full range of services at residential quality.

Team B. You are representatives of Fratus Tavani, an Italian agricultural

feeds manufacturer.
 Team B: Fratus Tavani. You are representatives of Fratus Tavani, an
Italian agricultural feeds manufacturer. You have a meeting with Аrgo, a
London-based Anglo-Dutch company.

Your requirements. You need to build a new office and storage

buildings at your Astir plant in Piedmont, in Northern Italy. There are many
suppliers of prefabricated industrial buildings.

You need two standard quality storage buildings with electricity, water
and air conditioning systems. You also need an office building of the highest
quality. You expect to have the buildings decorated at extra cost by a local
decorator.

You want the buildings to be supplied and erected within 30 days,

but you could allow 60 days.

The market. You would like to use a local supplier, Danielle Elide,
who supplied some of your existing buildings. Unfortunately they are on
average 10% more expensive than Аrgo. Аrgo products are also better
quality. On the other hand, Аrgo is a new company and you need assurances
on their quality and ability to meet deadlines.

Practice 4. Work with a partner.

a) Choose an item that one of you owns and the other would like to buy, for example,
a house or a car. Work separately to prepare a negotiation based on the sale of the
item you choose.
b) Decide on various bargaining points, including price, extra benefits, guarantees,
payment terms, delivery time, part exchange of other item(s), etc.
c) After brief preparation, begin your negotiation, each making an opening statement
before beginning bargaining over the details of the agreement.
Note: You must reach agreement!

Practice 5. You and a partner are representatives of Barbara Instruments and Olga
Inc., a machine tool maker.
Olga is in discussion with Barbara Instruments to buy a machine, the BI25.
Use the flow chart below to negotiate some aspects of an agreement for the sale of the
BI25.

Olga Barbara Instruments

Offer to buy the machine if
BI can give you a good price. Say that your prices are very
competitive.
Ask for a discount.
Say a discount could be possible if
Olga agrees to pay for shipping costs.
Agree, if the discount is attractive.
Offer 4% discount.
Ask for 6%.
Unfortunately, you can't agree, unless
Olga pays for the installation.
Agree.
Confirm your agreement.

Practice 6. Imagine you are a participant in a subsequent meeting between Galena

Trust Ltd. and government officials responsible for the sale of the former railway
station. You have made the following notes during your meeting.
Use them to summarise and conclude your meeting, looking ahead to future steps.

1. Station Renovation and Use

* approve plans to renovate station as a museum-links to local City Museum
* Museum-operated by government / all year round
* Gift shop
* Study Centre-supported by University and City Library
2. Other land
to be developed by Galena Trust / agreed commercial 50% and residential
50% - specified in the contract
Next steps: Finish contracts
Next meeting: exchange contracts-June 20 t.b.c.
 Role play 2

Conduct a negotiation, involving bargaining and making concessions and

accepting and confirming. Work in pairs, A and B. With your partner, choose one of
the following topics:
a) negotiating advertising space at football matches (2)
b) negotiating purchase of a luxury flat in Tokyo's Shinjuku district (3).
If you choose the first topic, look at File cards 2A and 2B.
If you choose the second topic, look at File cards 3A and 3B.
When you have finished one role play, either switch roles and repeat the exercise
using the same topic, or change A and B and do the other topic. This way, both parties
in the pair can practise buying and selling. See who gets the best deal.
2A You are a sales representative for an advertising consultancy. You are
responsible for selling perimeter advertising for sports arenas in Italy. You sell 25
metre electronic advertising at Italian Serie A (first division) football matches.
• Price: on live television:
— corner position: $120 per flash (one minute)
— halfway line or behind the goal $240 per flash (one minute)
• You can offer discounts of up to 20%, but only for deals of three matches or more.
• You can offer two free flashes at non-televised games instead of a discount.
Notes:
You have no space on the halfway line (middle of the playing area) in January and
February.
A deal must be for a minimum of 10 flashes per match.
2B You represent an international fashion house with a major youth market,
especially in Italy and Spain. You want to advertise at Italian Serie A (first division)
football matches. You have a budget of $10,000. You would like the following:
• electronic advertising at matches on live television only
• a minimum of ten flashes in every game (a flash = one minute)
• you prefer halfway line positions (they are most often seen by the TV cameras)
• you don't want behind the goal unless you get a good discount
 • you would like to advertise at between four and six matches in the early part of
the year (January—March).

3A You represent an international company with business links in Tokyo. You

urgently need to buy a brand new luxury apartment in Tokyo's Shinjuku district.
You could spend up to Y250m, but you would prefer to spend only about Y150m
because you would also like to buy a second, smaller apartment in Hachioji - but this is
not essential.
Notes:
• Shinjuku is one of the most famous and prestigious districts in downtown
Tokyo.
• You would like the apartment to be near Shinjuku Gyoen Park, or close to
Shinjuku station.
• Hachioji is a suburb - you are not sure exactly where.
• You need the apartment to be ready in less than three weeks.
• You want the inside decorated to your specific requirements - you will pay
extra for this.
• You would like an apartment with a swimming pool and tennis courts.
• You want a large apartment - about 200 sq.m.
• If you cannot have any of the above, you would like to pay less.

3B You represent an international property company. You are selling luxury

apartments in Tokyo.
Costs: Shinjuku district = Y100mtoY200m
Ueno = 70m to Y80m Chofu = Y80m Hachioji = Y60m
Notes:
• Apartments in Tokyo are small: land is very expensive.
• Special interior designs can be arranged - cost about Y20m.
• 70 sq.m is normal, 100 sq.m is large by Tokyo standards.

• It is virtually impossible to provide a swimming pool or tennis courts.

• You have two new apartments in Shinjuku:
- 100 sq.m at Y120m
- 150 sq.m, near the Shinjuku Gyoen Park, Y200m.
• Shinjuku is one of the most famous and prestigious districts in downtown Tokyo.
• Prices are negotiable - but no more than 20% less.
• Hachioji is a suburb, about 40 minutes by train from the centre.
• You have an excellent apartment in Chofu (nearer the centre) for sale atY120m.
• The apartments could be ready in 5 to 6 weeks.

4. Team A: Argo
The negotiation. Clearly you would like to supply all three buildings to Fratus
Tavani, but be sure not to give away too much in terms of discount. Against this, it is
very important that you enter the Italian market.
There are certain extras that you can provide at little extra cost: you can decorate
the finished buildings and you can agree to an extended warranty of up to ten years.
This means total building replacement in the event of structural faults developing.
Ordinary maintenance and wear and tear is not included.
Discount 2% 4 points
5% 3 points
8% 2 points
10% 1 point
≥10% 0 points
Delivery and Completion of Work 30 days 0 points
60 days 1 point
90 days 3 points
To pay all of delivery costs 0 points
To pay half of delivery costs 1 point
To pay no delivery costs 2 points
Payment over 12 months -1 point
Payment over 6 months 2 points
Payment on completion 3 points
To offer complete free decoration - point
Extended 10 year warranty - point
4. Team B: Fratus Tavani
The negotiation. You would like to buy all three buildings from the one supplier, but
if you do this you expect a good discount and favourable delivery and payment terms.
You have received the following confidential information:
Discount 2% 1 point
5% 2 points
8% Fratus Tavani s.p.a. 3 points
10% 4 points
INTERNAL MEMO—CONFIDENTIAL
Delivery and Completion of 30 days 3 points
Work 60 days 1 point
90 daysDA
To: Purchasing Dept From: 0 points
To pay all of delivery
Daniele Edilecosts 0 points trend
prices are up 10% on last year — a common
To pay half of Italian
in the deliveryprefabricated
costs 1 point
building sector. Consider buying
To pay no delivery
outside costs
Italy - quality guarantees must equal those 2available
points in
PaymentItaly
over- 12
i.e.months 3 points
3 years' free maintenance. Suggest looking for this in
Paymentany
over 6 months
contract agreed with Argo. 2 points
Payment on completion -1 point
1 year warranty
0 points
2 year warranty
1 point
3 year warranty
2 points
10 year warranty
3 points
Practice 7. Alla Ltd. is an automobile parts distributor. They want to buy exhaust
pipes from Opel Auto GmbH, a German manufacturer. Construct a dialogue based on
the following flow chart.

Alla Ltd. Opel Auto GmbH

Ask for 200 exhaust pipes -
part number DR5789032. No problem! Ask when they are
needed.
Immediately.
Ask for 10% discount.
Refuse. Prices are already
discounted.
Ask for unit price.
DM150.
Offer DM 135.
Suggest 2.5% discount if payment is
made at time of order.
Refuse.
Ask for 5% with 60 days to pay.
Refuse. Say margins are very tight.
Comment.
Say you will call again
tomorrow.You expect a better offer.
Your prices are very competitive.
Say goodbye.
Practice 8. Suggest what you could say in the following situations.
Situation 1
After a long negotiation, you have reached agreement and now plan a meal in a
local restaurant with the other party in the negotiation.
Situation 2
Your efforts to reach agreement have been unsuccessful. It is late. End the negotiation
but offer some hope that in the future you might manage some cooperation with the
other side.
Situation 3
A colleague has asked you to cooperate on a project, but after long discussion you feel
you cannot participate because of fundamental disagreement. It is important that you
continue to work together in other areas.
Situation 4
You want to repeat an order with a supplier but they are trying to increase prices
by 20%. You cannot agree to this. End your discussions.
Situation 5
A customer is asking you to supply goods in a month. This is physically
impossible. End the discussion.

Role play 3
Work in pairs, A and B. Each File card contains four different negotiating situations.
Negotiate each of them. Let each negotiation follow its course and see if they are
successful or not. Use some of the language you have heard for ending negotiations.
5A
Situation 1
You work for a translation agency. You can translate legal contracts into any
language:
• Cost $300 per 1,000 words
• a job of more than 5,000 words will take a week
• if it is more urgent than a week, the cost will be a lot higher.
Situation 2
You are in Hamburg. You urgently need to rent four vans from a local car and van
rental company:
• you expect to pay about DM180 per day per van
• you have to have the vans today or tomorrow.
Situation 3
Tfou are the Conference Organiser for Lake View Hotel. You rent conference space:
• cost normally $1,000 per day for facilities for five people
• 50% non-refundable deposit six months before the conference date (this is
negotiable)
• bed and breakfast conference rate — another $1,000 per day for five people
• no deposit required for bed and breakfast.
Situation 4
Team A: HBT Rexis Ltd - a subsidiary of HBT Inc.
Your company has recently developed an anti-inflammatory drug to treat arthritis.
You plan to market the drug within two years. You want to include your sister
company, HBT Short Ltd., in the project because they have more experience in testing
and marketing this type of drug. They already produce Arpan, an anti-arthritis drug
with a large market share.
You:
• would like to set up a Project Team, based at Rexis. You think the team should
consist of three members from Rexis and two from Short.
• expect the final development of the drug, including the trials and salaries (calculated
in employee-hours) of Project Team members, will cost US$900,000.
• have to apply for a patent for the drug and for it to be licensed by the American
Food and Drug Administration. You expect approval within two years,
Note If you cannot reach agreement, you plan to develop the drug alone.
5B
Situation 1
You want a legal contract translated into English:
• it is 6,000 words long
• you expect to pay between $1,200 and $1,500
• you need it in two days - three days maximum.
Situation 2
You are a car and van rental company in Hamburg:
• van rental costs DM200 per day
• 10% discount for orders over DM1,000
• no vans are available today and only two tomorrow.
Situation 3
You want to rent conference space at the Lake View Hotel:
• find out the cost for ten people for your two day sales conference in eight months'
time
• ask for a discount
• ask if you have to pay a deposit
• insist that it is refundable.
Situation 4
Team B: HBT Short Ltd. - a subsidiary of HBT Inc.
Your colleagues in a sister subsidiary, HBT Rexis Ltd, have asked you to
participate in the development and marketing of a new drug to treat arthritis.
You:
• are experienced in this sector of the drug industry
• presently market Arpan, which has 25% of the domestic market and a growing
export market
• would like to cooperate with Rexis, because you do not want to compete with them
in the arthritis drug market
• need to be flexible in negotiating with them
• do not believe a single Project Team is required. You think there should be one
team in charge of the tests, based at Rexis, and one team in charge of marketing,
based at Short
• think that US$500,000 dollars is the absolute maximum that should be spent on
developing the drug
• are sceptical about its market potential. You feel that it could simply take sales
away from Arpan. The following memo was written following a meeting of your

HBT Short Ltd.: Internal Memo

CONFIDENTIAL
Re. Arpan/New Rexis Anti-inflammatory drug
This Rexis product could be a threat to ARPAN.
Development should avoid high investment,
especially by Short. Some commitment is
acceptable, but...
keep costs down!
 Product Development Executive:
 think further tests will take at least three years before the American Food and
Drug Administration give approval
 would prefer that Short take responsibility for the trials and in exchange you will
provide information about potential markets once the tests have been completed.

Role play 4
Team A: World Health Authority (WHA)
1. You are generally happy about the draft clauses but you wish to include one further
clause in the agreement. You are still a little worried about reaching its full
specification performance. To protect yourself against this eventuality, you wish to
insert a clause which will allow you to cancel the entire contract should this happen.
2 .You do not wish to make any large advance payments for the project but if
necessary would agree to 5% of the project value.
Team B: VATRA
1 You are generally happy about the draft clauses but you wish to include one further
clause in the agreement. It is normal in projects of this size to require an advance
payment ahead of first deliveries. In this case you think that 20% of the project value
would be appropriate. You will bring this up at the final meeting with the WHA.
2 You will resist any further penalty clauses being imposed upon you. You already
believe that a 33% penalty payment is excessive.
World Health Authority (WHA) VATRA
Role 1 Commissioner Role 1 Chief executive
1 Welcome the VATRA team informally. 1 Greet the WHA team informally.
2 Introduce the draft contract. 2 Indicate that you have studied the draft
3 Open the discussion about the draft contract.
contract. 3 Suggest that both sides go through the
4 Hand over to team members when draft point by point.
appropriate. 4 Hand over to team members when
appropriate.
Role 2 Procurement officer Role 2 Marketing director
1 Check the main articles with your 1 Check the main articles with your
opposite number. opposite number.
2 Bring up any points of disagreement or 2 Bring up any points of
misunderstanding. misunderstanding or disagreement.
3 Hand over to other team members when 3 Hand over to other team members when
necessary. necessary.
Role 3 Technical officer Role 3 Technical director
Attempt to introduce a final clause in 1 Avoid committing yourself to the extra
which WHA reserves the right to cancel clause which the WHA is seeking.
the contract if the prototype fails to meet 2 Delay the decision by conferring with
specifications. other team members.
Role 4 Financial officer Role 4 Financial director
1 Avoid committing yourself to the extra Attempt to introduce a final clause by
clause which VATRA is seeking. which WHA would make an initial
2 Delay decision on this clause. payment of 20% of contract value prior to
first deliveries.