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Euro Bailout Fund Vote a missed Negotiating opportunity by Slovakia?

The votes in the Slovakian Parliament this week show how even though you may be a small player, you may have a lot of “niche” bargaining power.

Slovakia was the last one of 17 nations to vote on the proposed Eurozone extension of the bailout fund, in a context where all 17 countries had to approve it. This, in spite of its size (the country produces just 1% of the Eurozone’s total output) gave it a lot of bargaining power as it was in a niche of “one” – no other government could give this approval and the approval itself was essential for progress to be made.

The initial vote was apparently opposed for local, tactical reasons, the result of which was to bring the existing coalition government down. With this government removed and a massive amount of “push” negotiating behaviour coming from other Eurozone Governments, it wasn’t surprising that on Thursday night a 2nd vote by the Slovakian parliament eventually passed the EFSF bill. It is not difficult to imagine how forcefully expectations were stated and pressures exerted on Slovakia – both of which are typical “push” negotiation tactics.

I wonder though, if the Slovakians realised just how much bargaining power they had? On the face of it, it is slightly absurd that one of the poorest countries in the EU should apparently be required to shoulder an extra €7.7 billion of debt just to bail out the Greeks. If I were them I would have been tempted to use my bargaining power to negotiate an amelioration of their share of the bail-out burden.

The benefits would need to have been subtle so it didn’t look like Slovakia was taking advantage of the situation. […]

By |October 15th, 2011|Blog|Comments Off on Euro Bailout Fund Vote a missed Negotiating opportunity by Slovakia?

What Makes an Effective Negotiator?

Negotiation and deal making is much more complex than many people think. You might be surprised to learn that with any deal there are seven different stages that the negotiation goes through, twelve possible behaviours and nine different sources of bargaining power.

An effective negotiator needs to be able to understand and practice the 3 angles of successful negotiation: Attitude (or ‘state of mind’), Process and Behaviour. For each of these angles, I will now outline 4 key points to help you manage your negotiations effectively.

Have a Positive Attitude to Negotiating

1) Know what you want – it’s important to keep your ideal outcome (or outcomes) in mind throughout a negotiation.
2) Believe you can get what you want – confidence is everything in negotiation. If you go into a negotiation lacking self-belief that will leak to the other side and your anxieties will be self-fulfilling.
3) Be interested in the needs of the other party – if you do a deal where the other side’s needs are not taken into account at all, they will seek to disrupt the deal either explicitly or covertly, even if they felt obliged to agree to it in the first place
4) Acknowledge that the use of negotiating skills is more important than the exercise of power. Again, if you force people into deals through the use of power, they will have no commitment to the bargain.

Understand the Process of a Negotiation

1) What is going on in the negotiation? – Are the 6 key ingredients in place for a negotiation to happen? Which stage are we at? Are we exploring the needs on both sides? Are we setting the appropriate climate for the deal? Are we bidding? Bargaining? Or […]

By |October 13th, 2011|Blog|Comments Off on What Makes an Effective Negotiator?

Dexia collapse highlights a lack of ‘Preparation’ by European Banks

Well, the negotiation adage says that “if you fail to prepare you prepare to fail” and the unfolding story surrounding Dexia Bank illustrates this.

The ongoing Eurozone crisis has now turned the spotlight on the capitalisation of European Banks and a “negotiation” is going on between Eurozone institutions and the financial markets as to whether the Banks are strong enough to withstand expected defaults on sovereign debt from Greece, and possibly other states.

This negotiation is not unexpected. It has been apparent for some time that Greece in particular could not hope to pay its debts. So, there has been plenty of time to “prepare”, for the resulting negotiation with the markets – preparation being the first stage of any negotiation.

So, in July the European Banking Authority conducted stress tests on some 90 European Banks. Good idea except that the tests used outdated metrics and were widely derided by the markets. Indeed so inadequate were the tests that the now-collapsing Dexia came 12th out of the 90 banks assessed. This was despite the fact that it used a dangerous method of securing short term lending from banking wholesale markets to underpin its long term funding requirements – exactly the technique which caused Northern Rock to collapse as its access to short term funding disappeared.

If you skimp on preparation you will not win most negotiations – preparation is an investment of time. Having not used that time wisely, Belgium, France and Luxembourg have had to move hurriedly to prop up Dexia. Despite the protestations of Francois Baroi, the French Finance Minister, that no more banks will need to be rescued, it seems inevitable that there will be more to come. The Eurozone governments have […]

By |October 11th, 2011|Blog|Comments Off on Dexia collapse highlights a lack of ‘Preparation’ by European Banks

Merkel and Sarkozy ‘alliance’ masks underlying Eurozone negotiating Faults

In any negotiation, people have to believe that you mean what you say. The enduring problem in the on-going “negotiation” between the Eurozone governments and the financial markets is that the markets do not believe that the Eurozone governments have the will or the capacity to address the sovereign debt crisis.

Prevarication and avoidance have marked the response of the Eurozone Governments so far which simply deepens market scepticism. The Markets now assume there will be a sovereign debt default in Greece and so attention has switched to the stability of the Banks which would suffer in any such default.

Unfortunately in this context it is almost irrelevant that President Sarkozy and Angela Merkel stand shoulder to shoulder and say that “everything necessary” will be done to recapitalise Banks in the Eurozone. This also does not provide any credibility that the issue will actually be addressed – in legal terms it has all the persuasiveness of “an agreement to agree”.

If one side in a negotiation feels the other side lacks credibility then they are likely to push harder for what they want. So it is that in these circumstances it’s no surprise that after initial mutterings of support, the markets decided that the message from Merkel and Sarkozy meant virtually nothing. Indeed Moody’s warned that “since any recapitalisation initiative will not address the underlying driver of Europe’s Bank crisis (mounting sovereign debt concerns) it is unlikely to achieve more than a temporary respite from Banks sovereign debt woes and we expect investor sentiment to remain fragile”….

This is a crisis arising out of poor negotiating technique as much as underlying economics. Until the Eurozone musters the negotiating skill to negotiate with the markets effectively, […]

By |October 11th, 2011|Blog|Comments Off on Merkel and Sarkozy ‘alliance’ masks underlying Eurozone negotiating Faults

UK Economic Recovery dependent on wider Negotiating drive – ‘Positvity’only part of the picture

David Cameron’s appeal to “optimism” as a part of the UK’s recovery programme, is spot on. However, what he could have appealed for is an improvement in the negotiating skills of ‘UK Plc’.

Having a positive mindset is part of the toolkit of a successful negotiator, but UK Plc needs more than that. In all the discussion about the imperative to generate economic growth I never hear effective negotiating technique being mentioned as an agent of that growth. Yet every day, negotiated deals are underpinning UK economic activity – both for domestic and exported goods and services. If UK Plc could get 10% more value out of all those deals through effective negotiation then recovery would be assured.

Effective negotiators are able to manage successfully;

1) Their own mindset and the mindset of those around them
2) The process of the negotiation
3) Their own behaviour and that of others.

Negotiating mindset is critical and David Cameron is right to refer to a more positive outlook as being a pre-requisite of success. This applies at the level of everyday general experience (which is the sense in which he meant it). If we allow ourselves to be panicked by jittery, doom-laden headlines; if we are paralysed by fear into economic inactivity then a negative outcome is assured.

If we can instead believe that every disrupted current business model presents an opportunity for discovering new ways of being successful and new forms of commerce, then we stand a much better chance of economic recovery arriving quicker. If we believe it ourselves we influence those around us – if we influence enough of them it makes the difference between “sogginess” and “success” (see article in guardian.co.uk here).

But this also […]

By |October 9th, 2011|Blog|Comments Off on UK Economic Recovery dependent on wider Negotiating drive – ‘Positvity’only part of the picture

Can Competitors use Bargaining Strengths to capitalise on Tesco Setback?

The latest stats from Tesco showing a dip in revenues are interesting from a negotiating point of view.

First they show that when it comes to bargaining power “size” isn’t everything. Second they remind us that the rules of the negotiation game have changed, and that if you don’t negotiate equitably – including with consumers, you can get yourself into trouble.

Tesco is of course a “giant” among supermarkets, with a market share of over 30% – nearly twice that of its nearest rivals. However, there are at least 9 sources of bargaining power and Tesco doesn’t have an exclusive grip on all of them. “Niche” market power can still be very important even if you don’t have scale. “Expertise” and “Information” are important sources of bargaining power. So are “network” power and “authority” power. The latter can stem from seniority or other forms of reputational enhancement – e.g. integrity. As Asda and Sainsbury begin to make inroads into Tesco’s market share this can be re-framed as Tesco’s rivals beginning to utilse their bargaining power more effectively than Tesco in the ongoing negotiation for consumers’ attention and custom.

Secondly it is interesting to note Tesco being tripped up by making what seem to be somewhat economical statements with regard to price cuts – with publicised price cuts of some goods being matched by unpublicised price hikes for other goods. One of the more dramatic features of the democratisation of the web caused by social media, such as Twitter and Facebook, is the impact that it has on negotiations between big public-facing organisations and the public upon whose support they rely. This applies to Governments and also big brands. If these big organisations don’t treat their […]

By |October 9th, 2011|Blog|Comments Off on Can Competitors use Bargaining Strengths to capitalise on Tesco Setback?

Poor Negotiation Skills Contribute to pitch failures in the ‘Den’

Dragons’ Den provides fascinating insights into the modern art of negotiation.

On Monday’s episode of Dragons’ Den (3rd Oct, BBC2) only one pitch was successful. All the rest failed. Some of that was down to lack of quality of the product or service. A lot of it was down to inadequate negotiation skills.

The Dragons are investing their own money, somewhat blindly, in products and people that have only just been introduced to them. They’ll be thinking: “Is it going to be ok? Can I trust this person? How risky is the investment? Am I going to look like a fool if I invest?” They need reassurance.

In this context, there are certain key negotiating behaviours to avoid, and others to use.

Step forward James Eden and Chris Olivier with their toy, Culicka – the first pitch on last night’s Dragons’ Den. One tip here: the more you say as a negotiator, the more you give away. You should spend at least as much time listening as talking. James, however, talked for England.

My second tip: demonstrate expertise. Expertise is an acknowledged form of bargaining power. If you’re not expert enough to know what will constitute a successful level of sales for your product, you’re not likely to reassure potential investors – and so it proved here.

Rob Ford and John Blenkinsop made the mistake of “bidding” too early on Dragons’ Den. Good bidding in the negotiating process is all about timing. Bid too late and people will assume you lack confidence in your offer; bid too early and people won’t be in a state of readiness to receive your proposal well. In this context, bidding for £75k when you only […]

By |October 5th, 2011|Blog|Comments Off on Poor Negotiation Skills Contribute to pitch failures in the ‘Den’

Article highlights why ‘Content’ should not be the only focus in deal-making

The reporting by Reuters here on the apparent bid by NBNK for the bank branches of Lloyd’s Bank tells us a lot about how deal making is viewed by the media.

We are told that NBNK has reputedly bid up to £1.5 billion for the 630 branches, and that’s about it. This reflects a common misconception that the only thing that is important about getting a deal done is the “content” of the deal (in this case the price). In fact the content is often the least important factor in getting the deal done. Other factors are much more important, none of which are covered in this piece. What is the state of mind of both parties? For example do they want to negotiate? Do they care what the other side wants? Are they negotiating from a position of confidence?

How about the process of the negotiation? There are normally at least 4 stages of a negotiation before the “bidding” stage which is reported here:

1. Have both sides “prepared” properly? What are their likely bottom lines? Who is on the teams and what roles are they likely to play? What is the balance of bargaining power between the parties? What are their styles as negotiators?

2. What is the “climate” of the negotiation? Is it warm, cold, hostile or wacky? Different types of climate suit different negotiations.

3. What are the emotional “needs” on both sides? – Reassurance? Respect? Achievement? A sense of belonging? Desperation? These needs underpin the outcome of any negotiation. If they are not met there is no deal.

4. What is the “coinage” available on both sides? These are concessions which have a low value to one party but a very high […]

By |October 3rd, 2011|Blog|2 Comments

Will Apple be able to extinguish Amazon’s re-Kindled Fire?

The launch of the Amazon Kindle Fire is attracting attention, with commentators suggesting its low price point may supply meaningful competition for Apple’s iPad in the tablet market.

Certainly in the “negotiation” for the consumer’s wallet, Amazon does enjoy certain advantages. An attractive price can provide “market” bargaining power as it does in a range of consumer products from electronics to cars, and the price differential here is significant – US$199 versus US$499. Moreover Amazon are able to link the device to content offerings in relation to digital books and latterly digital videos and digital music. Being able to link products in this way offers another type of “market” bargaining power and indeed this is exactly the way that Apple first generated breakthrough sales for its iPod – spinning out of its iTunes content offering.

However, Apple still has some enormous bargaining power with consumers which should not be under-estimated. Firstly it has 80% of the current market for tablets – a huge source of “market” power. Equally Apple brings “expertise” to the table, another potent source of bargaining power. It also has tremendous “network” bargaining through its access to its massive base of existing users. In addition Apple is working hard on bringing the power of “rules and regulations” to bear in its favour through its concerted legal campaign to enforce its patents against the likes of competitors such as Samsung. This may not be sustainable as a source of power, but it is clearly a form of bargaining power to which they attach great importance.

These sources of bargaining power suggest that Apple is not going to be eclipsed just yet in the tablet market. There is one Achilles Heel though which may yet […]

By |October 3rd, 2011|Blog|Comments Off on Will Apple be able to extinguish Amazon’s re-Kindled Fire?

Palestinian UN bid will not solve Israeli dispute but Mediators’ approach also flawed

President Obama is of course absolutely right in saying that the Middle East peace process can only be addressed by direct negotiation between Palestinians and Israelis, and that there are “no shortcuts”. Whilst the Palestinian attempt to secure state recognition at the UN is borne of understandable frustration, it is not a way to solve this enduring dispute. Indeed by seeking to paint the Israelis into a corner it probably decreases the prospects for progress. Furthermore, making the US veto the decision is embarrassing for Obama and will not be forgotten – in any negotiation it is very important not to offend players of influence.

So, marks awarded for recognising that the UN is not the place to resolve the dispute. However, relying on the Quartet of Mediators to resolve it may not achieve anything either. This Quartet of representatives from the UN, the US, Russia and the EU is already in the news. It is reported that it may issue a statement requiring Israel to accept a return to its pre-1967 borders, an end to settlements and a two state solution as a basis for settlement discussions, whilst the Palestinians are required to recognise the right of existence of a Jewish state.

If this is true, I see some clear problems with this approach:

1. Mediators would not normally set out the parameters of a deal – that is the responsibility of the parties, and it is not for the Mediators to tell them what to do. Mediators should not have a “position”.

2. Mediators would not normally set preconditions of this kind. The most important thing is to get the conversation going, not to pre-determine the outcome before it has even started.

3. […]

By |October 3rd, 2011|Blog|Comments Off on Palestinian UN bid will not solve Israeli dispute but Mediators’ approach also flawed