Negotiation: Definition, Elements And Importance
This essay will talk about negotiation and its importance. It will include one of the negotiation elements, Reciprocity and using a personal experience to explain how the ability to reciprocate can affect the outcomes of the negotiation.
Negotiation is an important process and can occur in many situations in our daily lives as well. People negotiate when there are differences, as it is a process where people engage in discussions to resolve the dispute over the allocation of scarce resources.
Hence, there is conflict and competition involved and negotiating parties must try to generate corporation as there is a need to resolve their differences. The negotiating process usually involves negotiators exchanging offers and stating their positions. Hence, it consists of a sequence of offers and counter-offers.
During the negotiation process, the outcome will largely depend on the negotiators’ feelings and how they are able to add value. Negotiators can either be cooperative or competitive, or a balance of both. When the negotiation has reached an agreement, it does not necessarily mean a positive outcome as some parties might contend in a reluctant manner due to the pressure to resolve differences.
There are several elements also known as the ‘DNA’ of negotiation. Research shows that the DNA represents a special unique structure in the negotiation process.
The process of negotiation is then dependent on these elements. The elements help to reach an agreement and make the negotiation work, so understanding it will help to manage the process more effectively.
The elements include reciprocity, information exchange, trust, power, ethics and outcome. These elements, especially Reciprocity, are important as they are not mutually exclusive during a negotiation process
Take for instance my 21st birthday was approaching and my parents suggested I throw a party and invite a few of my friends and family for a celebration. Turning 21 years old was a significant turning point for me as it also meant I am going to be legally an adult. To throw a big party, there were many things to prepare. Most importantly, my priority was to get a cake that was nice and big enough for everyone but still within my budget. I also had to get 50 cupcakes as a gift for guests. A bakery where I frequently visited came to my mind, keeping in mind that I only had a budget of $300.
The cake costs $230, it means I only have $70 left for 50 cupcakes. However, each cupcake costs $2 which means I am most likely to exceed $30 beyond my budget. In addition, the delivery fee was an extra $15 to have it delivered to my party venue. The total cost sums up to $345.
After much discussion with the owner, he agreed to provide free delivery which costs $15. He also charged me $220 for the cake instead of $230 as well as 20% discount on the 50 cupcakes that totalled to $80. Overall, he maxed out my budget of $300 but I got what I really want, plus free delivery to my party venue. After the negotiation, I realise I forgot my wallet when I wanted to make payment for my order.
It was an important learning process as there was exchange of information so that both parties gain an understanding of interest and true situation. This is because negotiating parties naturally assumes that their interests are opposed to each other, where this is also referred to as a fixed pie perception. Once negotiating parties understood each other’s position and interest, value was created and helps in the emergence of a solution.
In this case, as I explained my situation and reasons in asking for a discount for the cake. The bakery owner reciprocated this form of information exchange by being truthful about why he was unable to give me a big discount, but was able to ensure I was within my budget instead. We also used an integrative bargaining approach where there was also an absence of power play. The owner could have insisted on his stand by not giving me any discount but instead, he expressed support that was aimed at generating new options in order to reach a consensus.
The art of negotiation includes an integrative bargaining strategy, where there is full information exchange to understand each other in order to effectively achieve a cooperative outcome that favours both the owner and I.
There is also a joint and open consideration of circumstances of both parties. There is a high level of trust involved where both parties believe the negotiation. This type of strategy is more likely to occur when both parties have an amicable relationship with each other, which is why the owner and I were skewed towards creating mutually beneficial solutions.
During the negotiation, there was no signs of either party adapting a firm position or any power plays. It was a very amicable negotiation process where tactics were used to create new solutions instead of forcing each other to concede and reach an agreement reluctantly. It was also an open interaction where unplanned changes occurred along the way but it eventually reached a positive outcome after both of us focused on finding a way around our problem.
Trust is also important when negotiating as it determines whether there will be a positive or negative outcome. It is hard to establish trust between negotiating parties as there is a fear of exploitation, where trust is broken. There is identification-based trust involved as although it is between a business and a customer, there was a relationship built instead of just a one-time transaction.
After we came to an agreement, I also forgot to bring my wallet so I was unable to pay on the spot. As I was a regular patron at the bakery, the owner knew my nature and hence he trusted that I would abide by my offer of paying for the order another day. He also trusted that I would stick to the agreement of helping him to promote his bakery. It was also through the good handling of the exchange of suggestions that contributed in the steady development of trust. Simply put, there was a trust on cooperation. This then made it easier to manage the process.
One important element is reciprocity. Reciprocity is a basic component and a common feature of many social interactions. It involves matching or exchanging a behaviour of the same valence that the other party has performed. Apart from the pattern of exchange, what one party does tends to evoke certain obligations towards the other party.
The norm of reciprocity is usually involves an informal process of exchange in favours that does not include any specific conversations regarding the terms, and is able to influence how people reciprocate in various cultures around the world. While the element of reciprocity does not happen all the time, it occurs enough to influence the outcome as negotiating parties who mimicked each other seem to increase trust and value between them.
There are acts of reciprocity in this case and it plays a big part in this negotiation. There was a mutually exchange of reciprocity during the process and this has led to feelings of goodwill, where the owner was able to trust me regarding the late payment and the online reviews. There was also strong cooperation where this matching behaviour can be termed as ‘bonds of reciprocity’.
An experiment conducted by Crott, Kayser and Lamm showed that people in an more advantageous position were more likely to be reluctant in obtaining and giving information, it also makes the opposite party suspicious. There then creates the possibility where the opposite party will reciprocate this behaviour that might lead to a negative outcome where there might not be an agreement at all. This strategy is also known as tit-for-tat, where a refusal to provide information from one party is reciprocated by the other party not giving any more information too.
As the bakery owner was very kind in providing alternatives, this beneficial act triggered my response of gratitude. It motivated me to reciprocate and I had a natural feeling of repaying the owner by doing something in return that would match his offers.
Relating to my experience, I asked for a discount for the cake and explained why i could not go over my budget. The bakery owner listen attentively without interrupting me and only proceeded to talk after I was done explaining. He then gave me some reasons why he was unable to give me such a big discount, but instead offered a small discount to ensure that it was within my budget. This act of reciprocity in exchanging information and situation in a very cooperative manner also allowed us to understand each other’s situation. I also reciprocated the fact that he did not interrupt me, which is why we both took turns to speak and express our interest in trying to reach an agreement. This can also be referred to as a tit for tat strategy because as I provided information, the bakery owner provides more information that is also useful in building trust.
If either of us were to adopt a competitive stance and only provide limited information, there will be a lack of understanding of each other’s position and interest. This will most probably lead to a poor outcome or a zero-sum game if we were not able to reach any agreement. If the process becomes competitive, there is a possibility of generating strong emotional reactions where it can affect relationships that leads to a future loss of benefits.
A questionnaire study done by Falk and Fischbacher also states that the theory of reciprocity involves a kind or unkind treatment to one party and the following outcome will be based on a behavioural reaction to that treatment. Hence, I was grateful for the owner’s kind consideration to keep my order within my budget, my behavioural action towards his kind treatment was also to do something for him, such as recommending my friends and posting a review online, to repay his kindness.
Goodwill is also shown in this process of negotiating such that because of adequate information exchange and trust, the outcome benefitted the owner and I. He maxed out my budget of $300 as he cannot lose too much profit but it was still a win-win situation because I was still able to have my party order while he still got the sales.
Reciprocity actually occurs on a daily basis, even without realising it. When a negotiator acts cooperatively rather than competitively whereby there is full information exchange in order to facilitate the negotiation process, the other negotiator will reciprocate this behaviour by also sharing information and interacting in a cooperative manner. This strong matching behaviour of cooperation is also considered as ‘bonds of reciprocity’. This way, the involvement of reciprocity between the parties also established a basis of trust, which led to a win-win situation. In this case, I managed to have a nice birthday cake (figure 1) within my budget and the bakery owners was still able to earn a profit instead of having a zero-sum game. In conclusion, reciprocity does have an effect on the negotiation process.
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