Chapter 7Obstacles and Risks

1、1Part Negotiation Mechanism2Obstacles in negotiation that may be negative for reaching agreement；Dealing with business risks in negotiation phase；Exchange rates problem in international business negotiation as an example.3The Hard-Nosed NegotiatorLack of TrustDont Know Anything About Them - The Nego

2、tiators DilemmaSpoilersCulture and Gender BarriersLanguage4The person who views every negotiation as their own personal war where there can be only one winner. Some of their more charming traits include:a)Unreasonable offersb)Will take concessions, but dont give them, or do so but only with great fa

3、nfare and difficulty.c)Will take information and wield it as a weapon against us, while hoarding their own information like a miser guarding their gold.d)Bull-headed and unyielding.5Solution:a)Probe your negotiating counterparty first to find out what kind of negotiator youre facing.b)Anticipate unr

4、easonable offers and remember your reservation price, aspiration base, and your BATNA (best alternative) c)Dont give out information that can be used against you.d)Give a little, mostly harmless information to your counterparty and see whether they reciprocate.e)Offer different negotiation solutions

5、 and ask which one they prefer.f)Be willing to walk away.6Solutions:a)You can begin by being polite and sincere.b)Emphasize that any negotiated agreement hammered out at the table.c)Ask them to provide documentation to support the data they present.d)Design the agreement to stipulate fulfilment of t

6、he agreed upon terms.e)Use Compliance Transparency to verify the terms of the agreement are being fulfilled. f)Use enforcement mechanisms7We cannot find it easy to relate to our counterparts when we dont know anything about them, or their goals and objectives.Solution:Dont be afraid to take the firs

7、t crucial step, but be wise and make it a small one by only revealing something harmless about your goals. Generally, the other side will reciprocate and the beginning of a constructive dialogue can now be initiated.8This often occurs in multi-party negotiations. Occasionally, theres at least one pa

8、rty-pooper whos out to sabotage the negotiations. They may oppose the deal passively by refusing to make a commitment, or actively oppose the deal simply by presenting direct opposition, or using some other form of subterfuge to sabotage the talks.9Solution:a)Be prepared for these spoilers, by consi

9、dering their real fears and anticipating what kind of impact an agreement would have on their objectives. b) Counter their resistance and explain why this change will benefit them. c)Offer them roles so that they will be able to retain control over their business and be more proactive in the negotia

10、tion process.d)If all else fails, it might best to form a coalition with the other parties, to overwhelm and counter the spoilers.10Sometimes, companies, people, and cultures simply operate differently from what we usually experience. One company might be conservative and staid in its approach, whil

11、e another might be more entrepreneurial and dynamic. We might encounter obstacles in negotiating with a person of the opposite gender, or stumble upon culture barriers because of our different perspectives.11Solution:The solution may lay in stopping ourselves from jumping to a conclusion, and by ana

12、lyzing the problem thoroughly. We must step outside of any preconceptions or biases that blur our vision. We must view the problem logically to understand what issues are acting as hindrances, or whether there is a pattern that can illuminate our lack of understanding. Go back to the basics. Examine

13、 the issues and their positions by learning the motivating reasons that lay behind objections, either theirs or yours. Then, find ways to solve these concerns and revamp the solutions. 12In international negotiations, language has always been a main barrier. More and more, English is the universal l

14、anguage of business. For those who speak English as a second language, its probably much more difficult. Native English speakers also have to be aware of their language during a negotiation. The language in the contract is also a problem. The language used in the contract must be as standardized as

15、possible so that terms used are familiar to both parties. 13Solution:To be fully conversant in another language, you have to understand idioms, expressions, nuance, and alternative uses for words. In business negotiations, everything that is said at the negotiating table matters. Everyone must under

16、stand what is going on and what is being said. It is essential to master the language that is being spoken. 14Exchange RatesExisting National LawsShipmentAgreement Implement Country Risk15This is a common problem that needs a keen observation for international businesses especially those who are in

17、import and export businesses. Therefore, The company should plan ahead of time so as not to be affected much by currency fluctuations. They should consider buying out in bulk in economic situations that would favor more profit to them. They should develop a strategic plan in backing up the supplies

18、during currency fluctuations so as the increase in net profit would be at hand.16Putting up business in other countries could greatly be affected by existing laws of the country. The company should therefore make the most of the free trade system so as not to suffer much from tariffs, quota regulati

19、ons and other business taxes that may be required of them.Companies should also consult well with their legal counsels so that they could be given fair trial in courts since discrimination can sometimes be unavoidable in some countries that would favor more its citizens than the foreign investors in

20、 them.17There is a risk for products do be damaged while it is being shipped to the customers.It should already be part in the companys accounting to still maintain its income despite scenarios of loss or damage. There are different insurance agencies where they could apply in insuring shipped produ

21、cts so that they could still get claims if worst things happen.It would also be an option to choose a courier system that offers the highest insurance for shipped goods.18Any single thing can change that might challenge the terms of the agreement, ranging from labor disruptions, civil strife, intere

22、st rates, supply and demand, just to name a few. All of these things have the potential to upset the apple-cart and may require that the agreement be renegotiated, to adapt to these new challenges.We need to have a variety of well-conceived dispute mechanisms in place to address these changes, or el

23、se the agreement can quickly disintegrate. Be clear on who will handle what contingency and make it mutually understandable with our counterparts, who must be equally forthcoming.19There is also a risk of interference in the business by the government of the foreign country, which increases where th

24、e enterprise has a branch or subsidiary in the foreign country. The enterprise must take these political risks into account before deciding to trade in the foreign country. Nothing can take the place of acquiring all relevant information and advice before deciding to do business in a particular coun

25、try.20Currency Challenges of Negotiated International AgreementsHow to Address and Negotiate Foreign Exchange FluctuationsHow to Address and Negotiate Foreign Exchange Restrictions21Foreign Currencies FluctuationForeign Exchange Restrictions22Foreign Currencies FluctuationThe fluctuating worth of co

26、nvertible foreign currency, as compared to our own currency, presents particular risks relative to the ratio of their comparative value. The value of any currency, as all business people are well aware, can shift dramatically due to a variety of reasons.Some foreign currencies of developing countrie

27、s may have their value pegged to other foreign currencies, such as the Euro or Dollar for example. 23Foreign Exchange Restrictions The reason could be a result of the unsteady political climate of the country, or the foreign trading partner has policies that deliberately limit the ability of its cit

28、izens to use the foreign exchange market. The value of currencies could also be deliberately regulated by a series of regulations called exchange controls to regulate the flow of both local and foreign currencies in and out of the country. Other nations may allow their currencies to be only partiall

29、y convertible, so they can only be converted for specified transactions. 24Put the Onus of Risk on your Foreign Trading PartnerDividing the RiskHedging25Put the Onus of Risk on your Foreign Trading PartnerThe first way to avoid the undulating currency risk during the negotiation is to insist that yo

30、ur foreign partner make and receive payments in your currency.One logical reason to make this demand is that, if we are the ones who are incurring the larger portion of the costs, it would be only reasonable that our partner should be the ones to bear the risk.26Put the Onus of Risk on your Foreign

31、Trading PartnerIf they insist we transact in their currency, we might counter that the amount to be paid or received, be directly associated to the existing exchange rates between the two nations. So the proportion between currencies remains the same reducing the risk of sharp exchange rate shifts.

32、The purchasing power parity of currencies would work against the sustainability of this method in the face of a big exchange rate shift.27Put the Onus of Risk on your Foreign Trading PartnerHow can we safeguard ourselves should the agreement be dependent on this set of circumstances? One method is t

33、o approximate what the currency fluctuation could be at the time the agreement is concluded, then to change this figure to the actual rate at the time of signing the contract. This is however only a short term solution to a problem that is usually long term.28Dividing the Risk a negotiated agreement

34、 can accomplish the risk sharing, is for one side to pay a percentage of the transaction in one currency and the balance in the other sides foreign exchange. to address foreign currency fluctuation is to allow for payment in an artificial unit of account, which is an assortment of multiple currencie

35、s such as a SDR (Special Drawing Right). we can employ is to outline a clause in our contract, where we agree to re-negotiate the financial terms of the agreement, should the fluctuations occur outside a pre designated and agreed upon range. 29HedgingThe first method of hedging consists of signing an agreement to buy a specified amount of the foreign trading partners currency, at a defined price and date in the forward foreign exchange market. The second method of hedging is to acquire an option for the sale and purchase of the foreign curr