Archive for the ‘negotiation’ Category

« Older Entries

No Ha, Ha At Tata – Negotiation Over Land & A Car Plant

Tuesday, September 16th, 2008
The Tata Nano Auto Plant Needed To Be Negotiated

The Tata Nano Auto Plant Needed To Be Negotiated

Negotiation is a skill that is used everyday, all around the world. There’s a great example of just how careful one must be when negotiating – remember, as Yogi Berra said “It’s not over until it’s over”. Tata Motors thought that they had successfully negotiated a deal until it started to come undone. Let’s take a look at what happened and see if there are any lessons to be learned here.

Tata Motors Ltd is part of the enormous Indian Tata Group company. The eyes of the world are on Tata Motors right now because they have announced that they are going to be building a car called the Nano which is expected to be the world’s most inexpensive car priced at $2,500. The car is scheduled to be launched in October.

Tata Motors had decided to build their car in India’s state of West Bengal which is located in eastern India. West Bengal is a economically poor part of India and the arrival of a large car manufacturing operation was viewed by many as a very good thing. Tata Motors negotiated with the West Bengal government in order to obtain the 1,000 acres of land that was needed to build the plant and the shops for their suppliers. The local government obtained the land, signed a deal with Tata Motors and construction was started. End of story right? Nope, not by a long shot.

It turns out that the land for the auto plant used to be farmland. The West Bengal government says that they paid the affected farmers in most cases and legally seized the land in a few cases. The issue is that the farmers don’t see it that way! In fact about 400 of the 1,000 acres are in dispute. So what did the farmers do? Simple, they demonstrated and got violent. Construction on the auto plant came to a halt. As though this wasn’t bad enough, Tata Motors said that if the issue was not resolved, then they would move their auto plant to a different Indian state.

What’s a local government to do? The West Bengal Governor sat down with the leader of the protests (who also happens to be the head of a local political rival to the current West Bengal government) and started to negotiate. After three days of negotiation, a compromise was reached. The exact deals of the compromise have not been released yet; however, the government has stated that they will try to return some of the land that had been forcibly taken from the farmers.

So what is to be learned from all of these international events? Ultimately, you need to do your homework and make sure that the parties that you are negotiation with have the power to deliver what they are promising. In this case Tata Motors relied on the West Bengal government to deliver land and it turns out that the land was not theirs to give. What could Tata Motors have done differently? They could have split the negotiations into two parts: various permissions and incentives from the local government and buying the land directly from the farmers. This would have been more time consuming; however, it would have prevented the turmoil and the delays that resulted from assuming that the local government had the power to provide the land.

What would you have done if you were the CEO of Tata Motors and no compromise had been reached? Would you have moved the plant and lost the $100M that you had already invested or would you have done something different? Leave a comment and let me know what you think.

Tags: , , , , ,
Posted in negotiation | 3 Comments »

It’s Krunch Time!

Friday, August 22nd, 2008

The Krunch negotiating technique is used by buyers to get lower prices from sellers

What the heck is a Krunch? In a nutshell, it’s a negotiating technique that a buyer can use to squeeze a lower price / better terms out of someone who wants to sell them something. I’ve seen this technique used most often when I’ve been buying a house – it’s a classic. I guess that I should confess that I’ve also used it when I’ve been selling a house…

How Does It Work?
Here’s how the Krunch technique works. The buyer has to have more than one person who wants to sell to them. When the buyer has collected prices from each of the sellers, then the buyer can go back to every one of them and tell them “Your price is to high, you can do better.” Generally speaking, each of the sellers ends up lowering their price.

Why Does It Work?
To understand why the simple Krunch technique works so well, you’ve got to look into the mind of the seller and see what goes on when the buyer tells them that their price is too high:

  • Yeah, I built some give into my pricing just in case this happened.
  • I knew that what I was selling was too expensive.
  • The buyer must have a lower price.
  • Hey! The buyer is talking with me so they must like me.
  • Oh, oh – does the buyer know something that I don’t?

What Are The Drawbacks To Using It?
It doen’t take a rocket scientist to realize that sellers who keep getting Krunch’ed will eventually start to build up defenses to it. Specifically, what you can expect them to do is:

  • Boost their prices because they know that they’ll be asked to lower them.
  • Reduce the quality of the product being offered because they know the price will be lower.
  • Drop some services that used to be given.

What Countermeasures Can You Use?
What good is knowing about a negotiating tactic if you don’t know how to defend yourself against it? Here are three things that you can do when someone tries the Krunch on you:

  • Defend or describe your value. It’s not all about price so take some time to tell the buyer about why your offer is better than anyone elses.
  • Ask them how much better you have to do. There’s no need to lower your price more than they are expecting you to.
  • Buy yourself some time by starting to respond by saying “Hmm…” This will buy you time and will make the buyer feel obligated to fill the blank space with an explanation as to why they want you to lower your price.

Hopefully you’ve learned to set your negotiating goals high enough so that you will achieve more than you ever dreamed possible. Now that you know how to deal with the Kurnch tactic, next time we’ll have to talk about the “nibble”…

When was the last time that someone tried the Krunch on you? Have you built up defenses against it? Have you ever used the Krunch on someone? How did things turn out? Leave a comment and let me know what you think.

Tags: , , , , ,

Posted in negotiation, negotiation skills, negotiation style, negotiation tactics, pricing strategy | 7 Comments »

Real Life Negotiating Lessons: Verizon vs. The CWA & IBEW

Tuesday, August 12th, 2008

Verizon had a real life negotiation with the CWA and IBEW

In case you haven’t been watching the news lately, the telecommunications giant Verizon has been locked in labor negotiations with the Communication Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW). Both sides of this negotiation are run by professional negotiators who have done this countless times before. What this means for us is that it offers a great chance to learn from the masters.

What I’d like to draw your attention to today is the use of deadlines as a negotiating technique. We’ve talked about deadlines here before; however, it’s always even more instructive to see it at work in the real world.

The two sides had been going at it for several weeks when on 8/8/08 (Friday, and somewhat interestingly the day that the summer Olympics in China started) the CWA and IBEW announced that if an agreement was not reached by Monday, 8/11/08,…strike action then becomes possible….

Verizon’s Chief Communications Officer, Peter Thonis, then was quoted as saying that the company was …very surprised, given the situation. So what was going on here?

An interesting clue can be found in a comments that the CWA/IBEW made to the press in which they stated that progress had been “slow”. What we are seeing here is a classic negotiating end game move – the unions are signaling to Verizon that they want to wrap up negotiations. By all accounts, progress on the key issues had been made and things were drawing to a close anyway. By issuing this ultimatum, the unions were sure to get the attention of Verizon’s senior management.

It’s a good guess that the senior management on both sides were probably not involved in the long hours of nitty gritty negotiations that were taking place between the two sides. This this the type of task that is best left to lawyers and other professional negotiators. However, by sending this signal, the unions clearly communicated that it was time for senior management on both sides to return to the table.

Without actually being at the table it’s hard to say exactly where things stood. However, a good guess would be that the nitty gritty workers had gotten as far as they could. What could be resolved had been and what was still unresolved could not be resolved at their level. By calling the senior management back to the table, the hope was that the last few items could be resolved and the negotiations could be wrapped up.

What should you take away from all of this? Simply that a deadline has another role in negotiations – as a communications tool. Note that neither side appeared to be very angry with the other side, instead they were using the deadline as a way to mark the end of one phase of the negotiations and the start of the end game.

Now that you have another way to use a tool that’s already in your negotiating toolbox, how will you use it? Have you ever been given a deadline by the other side that was not what it appeared to be on first glance? Have you ever used a deadline to send a message to the other side? Leave me a comment and let me know.

Tags: , , , , , ,

Posted in art of negotiation, CWA, deadline, IBEW, negotiation, strike, Verizon | No Comments »

The James Bond Approach To Negotiating

Tuesday, August 5th, 2008

Sometimes you have to act like James Bond during a negotiation

The other day I happened to drop in on my friend Mike only to discover him hard at work on some mysterious project. He had a list of local electronics stores and he was checking them off with a pencil one-by-one all the while he was surfing a seemingly endless set of web sites and performing a cut and paste operation from each one of them to an Excel spreadsheet that already looked like a day trader’s tracking system.

When I asked him what he was up to, he told me that he had finally broken down and was going to buy the Panasonic 50″ TV of his dreams that evening and he was going to buy it at the Best Buy located close to his house so that he could get it home and start watching it that night. When I inquired as to why all of the frantic action was taking place, he just stared at me for a moment and said “…if I want to get the best price, then I’ve got to do some espionage to find out how low they can go…“

Ok, so I guess that I should have seen that one coming. Mike did bring up a very good point: often the outcome of a negotiation is determined before the talking even starts and the winner is the side that collected the BEST information. Note that I didn’t say the MOST information, because this is a case where quality definitely triumphs over quantity. Getting more information on the other person’s situation, constraints, and motivations will increase your power while allowing you to do a better job of defending your important issues.

You can’t view information gathering as a one-shot activity. It is a process that continues even after the negotiations start and that will require you to shift in and out of multiple modes during the negotiations. You should look at information gathering as a process that will continue throughout the entire negotiation session. This means that you’ll need to establish a personal connection with the other side before you jump into the heart of your negotiation. The ability to see and understand the other side’s viewpoint is critical to understanding their negotiating position.

In business to business negotiations one of the most often overlooked sources of information is your staff no matter what department they are in. Often times we have employees who used to work for the other side, or employees who have close personal connections to the other side’s staff. These are great resources to draw on in order to learn more about the set of environmental drivers that will be shaping the other side’s negotiating position.

I gave Mike a call yesterday in order to find out how his purchase had turned out. He was beside himself with glee. “When they saw me come in with my stack of research papers, they turned me over to the manager right away. He and I talked for about 45 minutes and in the end I had gotten $400 off of the list price and a free 1 year warranty.” It looks like you can put a price tag on the value of gathering information.

So what’s your story? Have you ever had a chance to “go undercover” and collect information that ended up helping you during a negotiation? Have your friends ever asked you to do some sleuthing in order to help them get a better deal…?

Tags: , , ,

Posted in deals, espionage, information gathering, negotiation | No Comments »

Three Secrets That Have Been Missing From Negotiation Training

Tuesday, July 29th, 2008

Good negotiators use the same secrets to communicate that cheerleaders do

This is going to be a bit of a rant, so I should probably apologize for that in advance.

Over the past 10 years I have have read countless books on negotiating, attended training course after training course, and in the end I was left feeling that something very fundamental was missing — there were secrets to being being a successful negotiator that weren’t being talked about. There is nothing more frustrating than knowing that you don’t know something. I knew that I needed to find somebody who knew these secrets and who would be willing to share them with me.

When in doubt, talk to Sales. So that’s what I did – I started going out on customer visits with every salesperson that would let me tag along. What I saw was that there were good sales people and bad sales people. The good sales people would dive into a negotiation with a customer, tussle about the details, and in the end they would emerge with an agreement that was good for their company and with a satisfied customer no matter what they had gotten or given up. The bad sales people would enter a negotiation as though they were jumping into a street fight, have a knock-down-drag-out with the customer, and finally emerge bruised with a bad agreement and an angry customer. So what were they doing differently?

The bad sales people had clearly gone to the same negotiating classes that I had attended. They used the same negotiating vocabulary that I used and they stepped though a negotiation using the basic steps that I was currently using. They couldn’t really teach me anything. It was the good sales people who held the negotiating secrets that I was looking for.

As I focused on what the good sales people were doing, it very slowly dawned on me that they were being successful because of things that they were doing that weren’t taught in any negotiating course that I had ever taken. This clearly called for some serious beer conversations in order to gain access to these secrets.

Over way too many beers, I was eventually able to tease the answers out of the really good sales people about how they were so successful in negotiating with their customers. At a very high level, what they told me was that I had been missing the other side of the negotiation coin: persuasion. What they said is that negotiating is basically convincing someone to do something. What the bad sales people are missing is the other half of the process: persuading the customer that this is what they want. In fact, if you are good at persuasion then the customer will be falling all over themselves to buy what you have.

As I took all of this in, it started to become clear that what the good sales people were doing could be broken into three main sets of skills:

  • Rapport: they developed a sense of bonding with their customers that allowed the customers to treat them not like “the other side of the table”, but rather like an old friend that they were meeting once again.

  • Body Language: just like a cheerleader, the good sales people realized that in addition to the words that were coming out of their mouths, their bodies were also talking to the customer and they made sure that what their bodies were saying matched what their mouths were saying.
  • Knowing What To Say & When To Say It: the bad sales people always seemed to have periods of awkward silence when they met with customers. The good sales people, on the other hand, always seemed to have something to say and it always seemed to get a positive response out of the customer.

There is a lot more to this persuasion stuff and we’ll talk more about it. However, for now understand that even if you think that you know everything about negotiating, if you don’t have the persuasion skills that you need, then you still have a lot to learn!

Tags: , , , ,

Posted in deals, negotiation, persuasion, sales, success | 12 Comments »

« Older Entries