THE UNIVERSITY OF DODOMA COLLEGE OF HUMANITIES AND SOCIAL SCIENCES SCHOOL OF BUSINESS AND ECONOMIC STUDIES DEPARTMENT OF BUSINESS

ADMINISTRATION AND STATISTICS

COURSE NAME: INTERNATIONAL TRADE AND NEGOTIATION COURSE CODE: IR 312 COURSE INSTRUCTOR: DEGREE PROGRAMME: BCOM. IN INTERNATIONAL BUSINESS SUBMISSION DATE: 18TH JANUARY, 2013 NATURE OF WORK: GROUP ASSIGNMENT GROUP MEMBERS:
NO. 1 2 3 4 5 6 7 8 9 10 NAME
KADENDULAH, JOSEPH MAGEGE, EVA .M RUHEMBE, NIOSHIMA .S NANYARO, PRAYGOD .E PAUL, FRANSIS SADICK, SHAMIM MRISHO, HASSAN .J MUNISI, HENRY KISAMO, JULIETH LYIMO, JOHN

REGISTRATION NUMBER
T/UDOM/2010/03845 T/UDOM/2010/03851 T/UDOM/2010/03869 T/UDOM/2010/03864 T/UDOM/2010/03867 T/UDOM/2010/03870 T/UDOM/2010/03856 T/UDOM/2010/03859 T/UDOM/2010/03847 T/UDOM/2010/03850

SIGNATURE

NEGOTIATON THEORIES INTRODUCTION Negotiation, according to Henry Kissinger defined negotiation as a process of combining conflicting positions into a common position, under a decision rule of unanimity (Kissinger 1969) Also in other words negotiation can be explained as a process (give and take process) between two or more parties each with its own aims, needs and viewpoints seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict. Negotiation can also be defined as the purposeful communication consisting of strategies developed and implemented by two or more actors to per sue or defend their interest. Negotiation is a specialized and formal version of conflict resolution most frequently employed when important issues must be agreed upon. Negotiation is necessary when one party requires the other party's agreement to achieve its aim. The aim of negotiating is to build a shared environment leading to long-term trust and often involves a third, neutral party to extract the issues from the emotions and keep the individuals concerned focused. It is a powerful method for resolving conflict and requires skill and experience. On the other hand negotiation is defined as a specialized and formal version of aspects of conflict resolution most frequently employed when important issues must be agreed upon. Negotiation is necessary when one party requires the other parts agreement to achieve its aim. A theory is a map described a limited geographical area from a specific functional perspective. Such a map help a user to understand at a glance the full dimensions of the area being described as well as determines best plan or strategies a completing stated project. (Murray s. 1986) Therefore negotiation theory explains on how an agreement between parties involved in negotiation can be achieved.

NEGOTIATION STRUCTURE All theories of negotiation are based and executed in accordance with the particular structure, or balance of power existing by and between the negotiating parties. One cannot go anywhere in negotiating without knowing the abilities of each negotiating party to give, take, strike, or otherwise affect others in their efforts to dominate the other parties.

Any source of power in a negotiation for one or more of the parties is considered an element of the negotiation structure. Monetary resources Military capabilities Diplomatic relations Contracts,

and other elements can all be used to persuade others in the negotiation to cooperate or defeat concepts and ideas asserted during negotiation.

TYPES OF NEGOTIATION THEORY Rational negotiation theory Being rational means Understanding ones goals and being able to spell them out. Being able to prioritize goals. Being able to make trade- offs among competing values Being consistence, choosing according to the same principle every time and under all circumstances. Being able to incorporate uncertainty into the analysis and solution of problems.

The pillar of rational theory is game theory. A game is a model of a given situation that contains four essential elements which are actors alternatives preferences rules

CLASSIFYING GAME THEORY

The game of chickens The game of chickens can be described in several aspects as negotiation is concerned. The following are some of the cases in which the game of chickens can be elaborated;In October 1962, US surveillance discovered that the Soviet Union was about to install offensive atomic missiles on Cuba. For one week US president Kennedy and his advisors kept this knowledge secret and just discussed among themselves what to do. Robert McNamara had outlined three options: trying to solve the problem politically, surveillance and blockade, or military action against Cuba. Then one week later the USA released the information to the public, they went for the blockade option, which they called "quarantine". Russian ships drove towards the blockade, and many thought that the world would slip into an atomic war over this. Eventually, after several days of blockade, some letters between Kennedy and Khrushchev, and some diplomatic talk behind the scenes, the matter got resolved. The Soviets pulled their offensive missiles back from Cuba. Although the word "game" doesn't seem quite appropriate for a crisis as serious and threatening as this, game theory and in particular the game of CHICKEN is often used to model the Cuba crisis. In the game of CHICKEN both parties move simultaneously, move only once, and have just two options: to stand firm, the "Hawk" move, or to give in, the "Dove" move. If both stand firm, a nuclear war is unavoidable. As far as the payoffs are concerned, at that time, 1962, it had become obvious that a nuclear war would be by far the worst possible outcome for both parties. Both giving in does not change things much, but of course, if one gives in and the other remains firm, the firm party has a slight advantage, both for achieving the goal, and also as a gain of stature in public opinion. However, this modeling as described could be criticized. Isn't it a little odd that the players have only one move which they perform simultaneously when the conflict lasts 14 days, with several opportunities every day for both parties to give in. Maybe this and other conflicts should rather be described as a multiple step game, where, if you stand firm, you have to confirm your decision repeatedly. In all these rounds the probability of disaster---atomic war---would increase, until eventually such a war would be unavoidable if none of the parties changed their mind. Why would we introduce Nature's (i.e. random) moves in a game like this? Isn't the decision to start the war a decision that can only be made by either Kennedy or Khrushchev? In my opinion the conflict teaches us that this is not the case. There were certain events in the crisis, for instance Soviet boats approaching the blockade line, or a US U-2 spy airplane accidentally entering the Soviet airspace, or an US U-2 spy airplane shot down over Cuba by a missile

(ordered by a soviet commander, not by Moscow), that all could have triggered war. One wrong reaction of the soldiers involved, and the presidents wouldn't have had a choice left. Criticism of Game of Chicken: First problem is that equilibrium play depends on off-the-path conjectures about behavior, and analysts have had difficulty deciding what an actor must believe if an out-of-equilibrium behavior occurs: since this is a zero-probability event, Bayes rule does not specify how the actor should update its beliefs. An arbitrary specification of beliefs in these instances can rationalize a wide variety of behavior in equilibrium, and some of that behavior can be quite odd: for instance, a resolved actor may be deterred from taking an action that would signal its strength because its opponent threatens to interpret any such behavior as evidence of weakness. The general approach to this issue has been to define increasingly stringent notions of what actors are permitted to believe when a zero-probability event occurs, but the deeper problem is that it remains unclear why an actor who observes evidence that flatly contradicts its conjecture about the world would continue to believe the model. The theory also provides little guidance as to what to do when the model admits multiple solutions for the same set of parameters. The problem of multiple equilibria is unresolved, and may remain so (Cooper 1999). While the indeterminacy may be a serious hindrance for empirical testing of theoretic implications, the quest for a unique solution may be contrary to what the rich empirical reality may offer. Evolutionary models hold out the promise to provide a selection mechanism that eliminates some equilibria in favor of others. Finally, game-theoretic models may quickly become intractable when multiple actors are introduced, especially when diverse players are modeled in incomplete information settings. For instance, it is not clear whether different agents should interpret observable behavior in the same way. This problem is particularly glaring for applications to international relations where most non-formal thought concerns behavior in multi-player environments. Despite all these problems, the history of game theory suggests that it would be premature to abandon the tool, especially in the absence of a viable alternative. If anything, the development of game-theory has been driven precisely by the realization of its limitations and attempts to overcome them.

The Prisoners Dilemma

The prisoner's dilemma is a canonical example of a game analyzed in game theory that shows why two individuals might not cooperate, even if it appears that it is in their best interests to do so. A classic example of the game is presented as follows:-

Two men are arrested, but the police do not have enough information for a conviction. The police separate the two men, and offer both the same deal: if one testifies against his partner (defects/betrays), and the other remains silent (cooperates with/assists his partner), the betrayer goes free and the one that remains silent gets a one-year sentence. If both remain silent, both are sentenced to only one month in jail on a minor charge. If each 'rats out' the other, each receives a three-month sentence. Each prisoner must choose either to betray or remain silent; the decision of each is kept secret from his partner until the sentence is announced. In casual usage, the label "prisoner's dilemma" may be applied to situations not strictly matching the formal criteria of the classic or iterative games: for instance, those in which two entities could gain important benefits from cooperating or suffer from the failure to do so, but find it merely difficult or expensive, not necessarily impossible, to coordinate their activities to achieve cooperation. Therefore if it is in the negotiation of a deal that is important if both collaborate it will be much worth off if the parts collaborate for the better outcome. The prisoner's dilemma is like a lot of other situations in the real world. For example, when cigarette advertisement was legally in USA most competing cigarette producing companies were to decide on the weight of funds to be spent in advertising campaign, it is also known that advertisement of one firm determine the profit of another firm, they also learn if they advertise at equilibrium point both firms will gain less because of increase cost of advertising, if both firms reduce amount of funds to be spent in advertisement so as to advertise below the equilibrium point both firms will gain more profit. Also they know that if one firm advertises at equilibrium point it will highly benefit leaving the other firm which has reduce their number of advertisement with smaller profit. In this situation firms may choose to defect. Another example is this, if two countries are trying to decide whether to make new weapons, they are both better off if neither country does. But sometimes the countries are in the same situation as the prisoners: each country only cares about itself, and it's better off if it "betrays" the other country by making weapons.

Strength of the theory, It is good in providing theoretical approach in a situation where it is difficult to predict feelings and decisions of the opponent player in negotiation process.

Weakness of this theory is that, It is not always players will choose to defect because there are some cases where players may cooperate; take an example when both players know that they are going to meet again, for this case cooperation by both players will be more likely.

Nash Equilibria. In 1950, John Nash demonstrated that finite games have always an equilibrium point, at which all players choose actions which are based for them given their opponents choices. This is a point of equilibrium to the extent that even if one part among the negotiating one push forward will gain nothing. It is at this point that even if you put more effort you will not gain much more than what has been agreed upon. It is a point where no player cans unilateral change his strategy and gets better payoffs. Weakness of the theory: The theory has been criticized on the sense that it ignore extra effort to be made by each parties in negotiation since the focus much to the point of equilibrium to be attained by each parties, however even if parties put extra effort these effort is no longer been considered since there is common equilibrium choice at which all players is satisfied at. The theory reduces the opportunity to disagree with the decision in the future time after the decision in the perception that there will be no farther benefits. Strength of the theory: This theory determine the satisfaction point in the negotiation a point at which each party must be satisfied and be read to be bound by the agreement and not to put further demands.

Look before you Leap In any negotiation do not concentrate only on the immediate outcome. Think about the future outcome of the negotiation. Do not do a decision in a quick way before looking into the future outcome of the decision that you make

Weakness of the theory, The theory only insists in the consideration of the future benefits and outcomes that will be derived from the conclusion after negotiation. It ignores that fact that the past history of the situation and the present situation are the great determinants of the future. The theory ignore the

consideration of the history before the conclusion of the new agreement. For example what was the behavior of the past that we negotiate with before the negotiation so that to be able to determine whether he or she will change and be able to be bound by the agreement, he he or she will not change then enter into the agreement for the expectation of the future benefit as the theory suggest will be as good as nothing. Strength of the theory Future benefits are a very important aspect in any negotiation. Everyone entering into any negotiation must aim at achieving the best in favor of his needs and demand.

Concentration on forces In negotiation there are both weak and strong points, always concentrate to the weakest point. First of all do analyses of the weak point and sometimes be conscious, maximize the weakest point and minimize the leverage point. The weakest point must be clear to the extent that the both parts should not be able to escape or deny the truth presented in it. For example, in the case of Malawi and Tanzania over who should have the control over lake Nyasa. Malawi claims to be the owner of Lake Tanganyika due to the colonial partitions including the helligoland treaty. The weakness point that Tanzania may concentrate on is that according to the treat Rwanda and Burundi, Congo DRC and Zambia are part of the northern Rhodesia then why are they not part of Malawi and Malawi only claim for lake Tanganyika?

Trust dilemma This refers to the situation or condition where there is a problem in keeping the promise and trust as agreed prior by the members concerned. Trust dilemma can happen under several circumstances. This can be explained more clearly in the stag hunt example as follows;A group of hunters have tracked a large stag, and found it to follow a certain path. If all the hunters work together, they can kill the stag and all eat. If they are discovered, or do not cooperate, the stag will flee, and all will go hungry. The hunters hide and wait along a path. An hour goes by, with no sign of the stag. Two, three, four hours pass, with no trace. A day passes. The stag may not pass every day, but the hunters are reasonably certain that it will come. However, a hare is seen by all hunters moving along the path. If a hunter leaps out and kills the hare, he will eat. However, it results in the trap laid for the stag to be wasted, and the others will starve. There is no certainty that the stag will arrive; the hare is present. The dilemma is that if one hunter waits, he risks one of his fellows killing the

hare for himself, sacrificing everyone else. This makes the risk two fold, risk the stag never coming, or risk another man taking the kill. Another example addresses two individuals who must row a boat. If both choose to row they can successfully move the boat. However if one doesn't, the other wastes his effort. In the same case, example involves two neighbors wishing to drain a meadow. If they both work to drain it they will be successful, but if either fails to do his part the meadow will not be drained.

Weakness of trust dilemma. In many agreement parts come into a conclusion at which every one become satisfied in accordance with his demands and claims before the negotiation. The problem arise that no part is assured of remaining trustful as agreed in the negotiation. For example if both raw a boat they will move it but if one does not it will not move. Therefore the same to the negotiations if both players agree to be bound by the agreement then it will work but if they do not it will not work. They will still return into conflict. The main problem is that no one or nation in a negotiation that will be willing to agree without continuing with secret mission. Strength of the theory. The theory insists on the very important element to be considered in maintaining beneficial relations between human beings, organizations and even nations. It insists in the maintenance and keeping of the trust depending on the agreement made for the benefit of both parties involved.

CONCLUSION Negotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcome to satisfy various interest of two people/parties involved in negotiation process. The dialogue may be applicable in business, non-profit organization, government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life. Hence the study of the subject is called Negotiation theory.

BIBLIOGRAPHY. Murray S. 1986 understanding competing theories of negotiation; Plenum Publishing Corp. http://en.wikipedia.org/wiki/Negotiation_theory