Section 5 Concession and agreement of international business negotiations
5.1 The principles of making concessions
1. A concession by one party must be matched by a concession of the other party;
2. It’s better for the pace of concession to be as little as possible;
3. It is a must for negotiators to make the frequency of concession to be slow;
4. The pace of concession must be similar for the two parties;
5. A party should trade their concessions to their own advantage, doing their best to give the other party plenty of satisfaction even if concessions are small;
6. A party must help the other party to see each of their concessions as being significant;
7. Negotiators of one party need to move at a measured pace towards the projected settlement point;
8. Last but not least, negotiators shall be thoughtful and reserve concessions until they are needed.
5.2 The ways of making concessions
As for the specific ways of making concessions, there are nine common patterns of making concessions in international business negotiations and the different patterns shall be applied carefully.
Table 2.2 Nine common ways of making concessions
Currency: RMB
Ways of making concessions | Planned reduction | First step | Second step | Third step | Four step |
1.Keeping up until the last concession | 100 | 0 | 0 | 0 | 100 |
2.Concession by equal margin | 100 | 25 | 25 | 25 | 25 |
3.Large, small and then large range | 100 | 35 | 15 | 24 | 36 |
4.Progressive decrease with a minor range | 100 | 40 | 32 | 18 | 10 |
5.Progressive decrease with a middle range | 100 | 50 | 30 | 15 | 5 |
6.Progressive decrease with a large range | 100 | 60 | 26 | 13 | 1 |
7.Large, small range, then more than planned reduction, and breaking one’s words | 100 | 70 | 25 | 10 | -5 |
8.Unstable concession | 100 | 70 | 5 | 18 | 7 |
9.Showing hands at first | 100 | 100 | 0 | 0 | 0 |
5.3 Cultural differences in making concessions and building towards agreement
American and other Western business executives tend to take a sequential approach to solving complex problems. That is, “Let’s discuss and settle quantity, then price, then delivery, then after-sale service” and so on. Alternatively, the Asian approach is more holistic-looking at all issues simultaneously and not agreeing on any single issue until end. Westerns often are very upset by such differences in style of concession making. American managers report great difficulties in measuring progress. After all, in American you’re half done when half the issues are settled. But in Asian countries nothing seems to get settled, then, in surprise, you make it. Frequently, impatient American managers make unnecessary concessions right before agreements are announced by the Japanese.
