The purpose of this memo is to shed more light on the rationale behind the success of the last negotiation agreement I took part in.
There is a growing interest in real estate stocks in Saudi Arabia, where an investor will offer shares to develop a huge land into a residential land (what will markedly change the monetary value of the land). These shares usually appreciate slowly toward the end of land development and they can be replaced by a part of the land and/or money.
It has been a popular alternative to regular real estate business in Saudi as it distributes the risk. It also offers more land development that a single investor may be unable to bankroll.
I had the opportunity of joining one of the most popular investments in the year 2006. The owner is one of my relatives and I invested nearly 1,000,000 SR in this land with 50,000 shares (each share was a 20,000 SR initially). In the year 2007 the prices of share did increase to 22,000 SR per share. However, in August 2007 the Saudi tadawul (stock market) did drop by approximately 10 per cent. This subsequently affected real estate shares negatively
My interest at that time was to have more shares at an efficient rate. I was offered fifty thousand shares at 21,250 SR per share. My line of thinking, although not scientific, was still in line with rational negotiation.
My BATNA was 20,800 for similar no of shares (as only few shares were in the 20,500 SR range. It will cost me more to get it from different sellers), my opponent’s BATNA was not very clear to me but my research yield that it is may be around 20,500 – 20,700 range.
My alternative was very clear to me as I will have to pay close to 20,800SR a share for this investment and will take more time from me (the monetary value of which I cannot determine). My opponent’s alternative was to sell it for 20,500 but he will go into the risk of not being able to sell them as many shares were offered at that time.
We both had a clear understanding of what this negotiation was all about, and I had some knowledge of our Bargaining zone (20,000—21,250 SR). I did not think of any trade off at that stage, I was aware that my opponent was running through some financial difficulties and needs cash.
I offered him 20,250 SR per share (in cash); I used this as a test to see how he would react and how the negotiation would go. My aim was to reach a maximum of 20,700 SR for this agreement and I was hoping to get it by 20,400 SR, he did reduce his selling price to 20,750. We in fact reached a 20,350 SR agreement that I will pay him a 20,250 now and the remaining 100 SR in a month.
At that time, I did make a profit, but I think it was due to other factors. I was privy to his financial predicament. He had limited alternatives. This, I exploited in pushing him into making an irrational decision. He was unaware of the fact that I did not have time to look for another agreement, although I was able to mask this remarkably well both during and prior to the agreement.
In my candid opinion, I have been practicing something similar to rational negotiation. However, I believe that the nature of the individual, in terms of personality, coupled with cultural differences definitely affect international negotiation. These factors, I believe, must be taken into consideration.