Transcript DISTRIBUTIVE BARGAINING

DISTRIBUTIVE
BARGAINING
• There are two ways in which the parties to the
negotiation can try to meet their needs. They can
each try to claim as large a share of the available
benefits for themselves… or, they can try to increase
the total amount of benefits available to everyone
• Each of these approaches can be found in almost all
negotiations
• To the extent that a negotiation is about
gaining as much as possible of what is
available, it is distributive.
• People try to get their needs met at other
peoples' expense.
• A zero sum game. You try to divide up a
pie so you get the majority share.
A Second Way
• People can try to meet their needs through
increasing what is available to all and making
sure everyone's needs are adequately addressed.
• To the degree that people are pursuing this
integrative dimension, they have a common
interest of increasing the pie and their needs are
integrated. This is termed integrative, principlebased, interest-based or, mutual gains bargaining
THIS WILL BE THE FOCUS OF CLASS # 3
THE IMPORTANCE OF YOU
One of the first choices a negotiator (YOU)
has to make is whether to use distributive
or integrative bargaining
Versatile
Ultra-distributive
Ultra-integrative
THE IMPORTANCE OF RANGE
The Importance of You
• If you are basically an accommodating, nice
person, do not try to become Buzz Hargrove.
It will not work. And if you are basically
competitive, do not try to convince people
you are a saint! Just be yourself and use the
style that fits you more effectively.
BUT, BE CERTAIN YOU DEVELOP A
RANGE OF SKILLS
THE REALITY IS, YOU
CANNOT AFFORD TO BE
TOTALLY UNIDIMENSIONAL you need to be able to do some of
both
Assess the situation
Perceived conflict over stakes
Hi
Perceived
importance Hi
of
future
relationship
Lo
Lo
I. Balanced
concerns
II. Relationships
III. Transactions
IV. Tacit
Coordination
Quadrant I - Balanced Concerns
• The future relationship and the immediate stakes are
in balanced tension
• You want to do well but not at the cost of the future
relationship
• Examples: Many employment disputes,
partnerships, mergers, long-term supplier
relationships, family business issues, relationships
between different units of the same organization
Best strategies: Problem-solving or compromise
Assess the situation
Perceived conflict over stakes
Hi
Perceived
importance Hi
of
future
relationship
Lo
Lo
I. Balanced
concerns
II. Relationships
III. Transactions
IV. Tacit
Coordination
Quadrant II - Relationships
• Here, the relationship matters a lot and the particular
matter being negotiated is secondary
• We strive to treat the other party 'well', we play by the
rules and conduct ourselves well
• Examples: Healthy marriages, friendships, wellfunctioning work teams
Best strategies: Accommodation, problem-solving, or
compromise
Assess the situation
Perceived conflict over stakes
Hi
Perceived
importance Hi
of
future
relationship
Lo
Lo
I. Balanced
concerns
II. Relationships
III. Transactions
IV. Tacit
Coordination
Quadrant III - Transactions
• The stakes matter more than a continuing relationship
• Leverage counts
• Examples: Buying a car, buying a house, land
transactions, many market-mediated deals
Best strategies: Competition, problem solving, or
compromise
Assess the situation
Perceived conflict over stakes
Hi
Perceived
importance Hi
of
future
relationship
Lo
Lo
I. Balanced
concerns
II. Relationships
III. Transactions
IV. Tacit
Coordination
Quadrant IV - Tacit Cooperation
• These situations do not require formal negotiation so
much as the tactful avoidance of conflict
• Example: Two cars meet at an intersection or
choosing seats in an unassigned bus or train
Best strategies: Avoidance, accommodation, compromise
The Dual Concerns Model
HI
YIELDING
CONCERN
ABOUT
OTHERS'
OUTCOMES
PROBLEMSOLVING
COMPROMISING
INACTION
CONTENDING
LO
HI
CONCERN ABOUT YOUR OUTCOMES
Some Characteristics of
Distributive Bargaining
The focus is on how to get the most for
yourself
Distributive Bargaining
Characteristics
• Issues tend to be framed in terms of how to
compromise among conflicting needs or how
to choose among mutually exclusive
alternatives
• Power is applied to 'wrest' concessions from
the other side. The power is applied to
convince the opponent they have no option
but to make concessions
WHAT MIGHT BE TYPES OF POWER
USED???
Distributive Bargaining
Characteristics (continued…)
• Information is shared only to the extent it
will convince others to compromise.
Information that points out weakness of the
other side is 'good'
• Agreement is reached when the parties
accept a proposal they believe to be better
than their realistic alternatives
MPA 821
PREPARING FOR
NEGOTIATIONS
The absolutely essential,
but often neglected, first
step in any negotiation
Strategy Before Tactics
• Strategy
– Overall goals price, quantity,
the "package"
– Your intended
approach
– Your situation
analysis
• Tactics
– Time and place
– Logistics
– Moves/countermove
s/closure
– Communication
Good Preparation Means Preparing for 3
things;
1. Preparing for the process
2. Preparing numbers and vision
3. Preparing for "end-game"
Preparing for the Process

What should you watch out for, what should
you be ready for?
or, put another way,

What might they expect to see in terms of
your behaviour and attitudes?
Things to Think About
• How might the other party perceive this? Stakes,
relationship?
• Power (influence)
• Ritual and non-task behaviour
• Uncertainty
• Conflict - 'To be, or not to be'
• Decision-making
• If possible, you need to include in your
homework some analysis of your opponent
and your opponent's situation including how
they might think about the situation
• How might the other party perceive this?
Stakes, relationship?
• Power (influence)
• Ritual and non-task behaviour
• How do you get such information?
– Examples
Preparation: Numbers and Vision
• Targets
• Resistance points
• Settlement range (window of opportunity)?
• Interests
• Alternatives
Targets
• The target is your preferred price. It is your
optimal goal;
– The best targets are well researched and
well reasoned as opposed to esoteric 'wishes'
– Do not set your aspiration too low! - the
concept of 'the winners curse'
Reasons for Setting Targets
• It pays!
• An "anchor"
–A reference point for a decision that affects
that decision. It becomes a standard against
which subsequent adjustments are made.
An anchor becomes a benchmark
BATNA
• You normally are willing to accept any deal that
is better than your BATNA.
• A BATNA is not wishful thinking.
• BATNA is not something you wish for - it is
determined by objective reality
–ACCEPT THE FALLING IN LOVE RULE develop several options
• A good BATNA is a valuable source of
negotiating power
Resistance Point
• This is your 'bottom line' or the point beyond
which you will not go
• This is where you will 'walk away‘
• The point beyond which you will not accept a
deal and will turn to your BATNA. The
reservation point is the quantification of
BATNA, the trigger point where you will
take your next best alternative instead of
negotiating. (Informally, this is often called
"your bottom line.")
Settlement Range
• The settlement range, sometimes called the
bargaining range, is the spread between
resistance points
• This is the area where bargaining takes place
TODAY…
• A bit of hands on experience with
– key concepts
– The act of planning thoroughly
• The concept of distributive bargaining
and the elements
• Some ‘tactics’
• Offers or asking and counters
– Hands on experience if time
• CASE 1 AND STRUCTURE
SELLER
Concession Making
Resistance
Point
Initial Offer
Target
Target
Concession Making
BUYER
Asking
Price
Resistance
Point
• Be sure to identify ALL the issues in negotiation
- Do not focus just on one
1.Identify alternatives for EACH issue
2.Think about how they might be packaged,
i.e.. for a job offer
•Why, if asked to state your expected
salary range in a job interview, should
you not answer with a range?
• Define your 'walk away point' in advance
• Have and/or develop a good alternative
• Ignore your relationship with the other side focus only on this deal
• Get as much information as you can without
giving much up - the power of questions
• SET THE OPENING AS HIGH OR LOW AS
POSSIBLE! THIS IS NOT THE TIME TO BE NICE!
Having done all this, you
now need to make the same
assessment of where you
think the other side is on
each of these key points!!!
NOTE THE DETAIL THAT GOES IN TO
PLANNING YOUR APPROACH TO
NEGOTIATION AND TRYING TO
ANTICIPATE THE OPPOSITION’S
SITUATION
Questions: Karrass
.Questions are mind openers. They lead both
buyer and seller into more active involvement
with each other
.Give a lot of attention to the questions you will
ask during preparation☼☼
...
.Questions and answers can be looked at as
negotiation in their own right. Every question
has the character of a demand. Every answer is
in a sense, a concession
.Try to keep your questions ‘open ended’.
Questions early on should seek
general information about,
• What the other person thinks will be
achieved,
• What expectations they have about each
side’s goals.
• Attitudes on key issues,
• Interest in developing or maintaining a
relationship,
• Outside constraints-real or perceived.
The matter of agenda
• Agendas stipulate the important issues for
negotiators.
• RECOGNIZE that setting the agenda is a
negotiation in and of itself. Agenda building lets
you situate issues in a manner conducive to
attaining your goals. It also lets you trade issue
positioning with the other side which shows ‘good
will’. BUT make sure you trade lower important
issue positioning!
– Here again-preparation is critical
Distributive Bargaining
Distributive Bargaining
Characteristics (continued…)
• Alternatives are used as 'leverage' to convince
others to compromise or give up potential
benefits
Leverage means the tools negotiators
use to give themselves an advantage or increase
the probability of achieving their objectives.
WHAT ARE SOME EXAMPLES??
Negotiation is a process of give and take
• The process exchanges:
1.Information
2.Concessions
Changes in positions are usually accompanied
by new information concerning the other's
intentions, the value of outcomes, and likely
area of settlement
Opening Offer or Bid
• Do not set your initial bid or offer too near
your final objective. Assume your opponent
will always table maximum positions first
• There is STRONG research evidence that
high and even extreme opening offers get
higher settlements than those that are low or
modest
Advantages of a High Opening Bid
1. It gives you room to maneuver as more
information becomes available
2. It sends a strong message that:
–There is a long way to go to a settlement
–More concessions than the opponent had
planned may be necessary
Risk of a High Opening Bid
1. You may alienate the opponent to the point they
may just say "Get lost!"
2. It may damage future negotiations between the
parties
3. IF YOU CHOOSE TO OPEN HIGH, BE
CERTAIN TO HAVE A CONTINGENCY PLAN
TO DEAL WITH ABRUPT REJECTION
CONCESSIONS
• An opening offer is usually met by a
counteroffer, and these two offers define
the initial bargaining range
• After the first round of offers, the next
step is to decide what movement or,
concessions are to be made.
• NOTE; the first concession conveys a
message, frequently a symbolic one, to
the other side.
Role of Concessions
• Avoid the resentment of the 'take it or leave
it' scenario
• By beginning with an opening offer not close
to your resistance point, you insure some
room for YOU to make some concessions
which plays to the psychology of bargaining
Some Rules Before Starting
Concessions
1. Do not set your initial demand near your
final objective
2. Do not ever underestimate your power =
knowledge + bargaining skill + resources
3. Do not EVER be intimidated by boorishness
4. Do not reveal your power too early
Some More Rules for Concessions
 Never accept the first offer
 Never give a concession without getting one in
return
 Never lose track of how many concessions you
have made
Some Rules for
Concessions
4. Try not to make the first concession on
important issues.
1. How might you do this while keeping
the negotiation ‘alive’ and moving??
5. Do not go into a negotiation without listing
every issue you can imagine beforehand.
Establish an aspiration level, a minimum,
and an initial asking price for each issue.
Often it helps to role play the session. ( This
is a particularly effective planning method
for people who are not very confident in
their negotiating abilities.)
Some Rules for Concessions
(continued…)
6. Do not be reluctant to ask that an initial
demand that you feel is too high be lowered
BEFORE you make a counteroffer.
Some Rules for Concessions:
The Matter of Rate/Pattern
1. Buyers who start with low offers do better
than those who do not. Niceness does not
count!
2. Sellers who are willing to take less, get less.
3. People who give a little at a time do better.
4. Bargainers with a clear pattern lose!
Some Rules for Concessions:
The Matter of Rate/Pattern
(continued…)
• Never make concessions in a predictable
pattern
• Different concession rates send different
messages
Some Rules for Concessions:
The Matter of Rate/Pattern
(continued…)
• Ideally you should start low and 'give in' very
slowly over a long period of time.
• When you sense concessions are getting
smaller, the opponent's resistance point may
be near.
Some Rules for Concessions:
• When making a concession, do not assume
your actions speak for themselves. Let it be
known what you have given up- or what you
have stopped demanding
• Emphasize the benefits to the other side..
Malhotra’s research indicates negotiators
reciprocate concessions based on the benefits
they receive, not the other side’s sacrifices
• YOU define the reciprocity you expect for
YOUR concession
SOME TACTICS OF WHICH
YOU NEED TO BE AWARE
YOUR ASSIGNMENT FOR DEMONSTRATION
CASE
ROLE PLAY
DEBRIEF