Chapter 2 - Summary Essentials of Negotiation PDF

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BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining -

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Sometimes called competitive/win-lose bargaining Goals of one party fundamental and directly conflict with goals of the other Resources = fixed and limited, both parties want to maximize their share Important to guard info carefully Three reasons why every negotiator should be familiar with distributive bargaining:  Negotiators face some interdependent situations that are distributive, and to do well in them they need to understand how they work  Need to understand how to counter their effects since many people use these tactics exclusively  Every negotiation situation has the potential to require distributive bargaining skills when at the “claiming value” stage Distributive bargaining tactics and strategies are quite useful when:  A negotiator wants to maximize the value obtained in a single deal  When the relationship with the other party is not overly important  When the two parties are at the claiming value stage of negotiations The Distributive Bargaining Situation  Target Point: the point at which a negotiator would like to conclude negotiations o AKA a negotiator’s aspiration o To achieve, must make an initial offer lower (buyer) or higher (seller) than the target point to create room for concessions o Learned/inferred as negotiations progress o Influence negotiator outcomes and satisfaction with their outcomes  Resistance Point: a negotiator’s bottom line/the point at which a negotiator is indifferent to a deal o AKA reservation price o Established by the value expected from a particular outcome o Should be kept secret from the other party  If they know your RP then all negotiation is done o A warning for the possible presence of hardball tactics  Both parties should establish starting, target and resistance points before beginning a negotiation  Bargaining Zone: the space between the resistance points of each negotiator o AKA zone of potential agreement o Anything outside the points will be rejected by at least one negotiator o Positive when the buyer’s resistance point is above the sellers (i.e. she is minimally willing to pay more than he is minimally willing to accept) o Negative when the seller’s resistance point is above the buyer’s and the buyer won’t pay more than the seller will minimally accept  Can only be resolved if 1+ parties change their resistance points/if someone else forces a solution upon them  The Role of Alternatives to a Negotiated Agreement

BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining

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o Fourth factor = alternative outcome obtained by completing a deal with someone else o Important because they give negotiators the power to walk away from any negotiation when the emerging deal is not very good o Many attractive alternatives = higher goal, fewer concessions o Identify realistic alternatives before starting discussions with the other party so they can properly gauge how firm to be in the negotiation o Improve alternatives while negotiation is underway Settlement Point o Fundamental process of distributive bargaining = reach settlement within the positive bargaining zone o Objective = obtain as much of the bargaining zone as possible (i.e. an agreement as close to the other’s resistance point as possible) o For agreement to occur – both parties believe the settlement, although maybe less desirable than they would prefer, is the best they can get o Factor affecting satisfaction = whether parties will see/deal w/ each other again Fundamental Strategies o Primary objective in distributive bargaining = maximize value of the current deal o Two tasks are important:  Discovering the other party’s resistance point o Learn everything you can about the other person without giving them certain info about you o Do not tell other party: resistance point, your targets, confidential info about a weak strategic position/emotional vulnerability  Influencing the other party’s resistance point o Central idea = locate the other’s resistance point and the relationship of that point to your own o Important factors:  The value the other attaches to an outcome  The costs the other attaches to delay/difficulty in negotiations  The cost the other attaches to having the negotiations aborted o The higher the other party’s estimate of your cost of delay/impasse, the stronger the other party’s resistance point will be o The higher the other party’s estimate of their own cost of delay/impasse, the weaker the other party’s resistance point will be

BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining o The less the other party values an issue, the lower his/her resistance point will be o The more the other party believes that you value an issue, the lower his/her resistance point may be -

Tactical Tasks  Four important tactical tasks: o Assess the other party’s target, resistance point, and cost of terminating negotiations  Two routes: o Indirect Assessment  Determining what info and individual likely used to set target and resistance points and how they interpreted this info  Ex: union determining whether or not the company can afford a strike based on size of inventories, market conditions, percentage of workers as part of the union o Direct Assessment  May explain facts clearly if pushed to the limit and in need of a quick settlement o Manage the other party’s impression of the negotiator’s target, resistance point, and cost of terminating negotiation  Start negotiations with screening activities; say and do as little as possible o Invest words in asking the other person questions instead of answering them yourself o Concealment = most general screening activity o Calculated incompetence in representative situations = don’t give negotiating agent all necessary info so it is impossible for them to leak it, and may be limited in their authority to make decisions (ex: representative needs to consult wife before buying a car) o Using a spokesperson reduces # of people who could reveal info and allows members to observe the other party to detect clues and pieces of info o Present many negotiation items, only some of which are important – other party then has to gather info about so many items that it becomes difficult to detect which ones are really important (called snow job/kitchen sink)  Direct action is more useful later on in negotiations o Selective Presentation: negotiators reveal only facts necessary to support their case

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Can be used to lead the other party to form desired impressions of resistance points o Displaying emotional reactions to facts, proposals and possible outcomes to provide info about what is important to them  “The Flinch”  Letting the other party see your negative reaction to an offer increases the likelihood you will claim more value o Modify the other party’s perception of their own target, resistance point, and cost of terminating negotiation  Can alter other party’s impressions of their own objectives by making outcomes appear less attractive/making cost of obtaining them appear higher  Making demands and positions appear more/less attractive to other party  Interpret for the other party what the outcomes of their proposal will really be  Conceal info (may carry ethical hazards) o Manipulate the actual costs of delaying/terminating negotiations  Majority of agreements in distributive bargaining reached when deadline is near  Time pressure reduces other party’s demands  Negotiator represents constituency = time pressure reduces likelihood of agreement  Ultimate weapon = threaten to terminate  Three ways to manipulate the costs of delay: o Plan disruptive action  Public picketing of a business  Boycotting a product/company  Locking negotiators in a room until they reach agreement o Form alliance with outsiders o Manipulate scheduling of negotiations Positions Taken during Negotiation  Each party takes position  one party changes their position in response to info the other party has provided/in response to other party’s behaviour  Opening Offers o Better to make the first offer o Anchoring Effect: the observation that people who make decisions under uncertain conditions are influenced by initial starting numbers o Exaggerated opening offers = higher settlements

BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining

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o Why an ambitious opening offer is advantageous:  Gives negotiator room for movement and allows them to learn the other party’s priorities  Acts as a metamessage and may create the impression that there is: o A long way to go before reaching a reasonable settlement o More concessions than originally intended may have to be made to bridge the difference between the two opening positions, and o The other may have incorrectly estimated their own resistance point o Disadvantages of an ambitious opening offer:  May be rejected by the other party  Communicates an attitude of toughness that may be harmful to long-term relationships o Have viable alternatives to employ if opposing party refuses to deal Opening Stance o Competitive or moderate? o Other party may mirror the initial stance o Send a consistent message through opening offer and stance o Reasonable bargaining position = friendly stance, exaggerated bargaining position = tougher stance Initial Concessions o Firm positions = attempt to capture most of bargaining range to maximize their final outcome  Can create a climate in which the other party feels they may as well capitulate and settle quickly rather than drag things out o Reasons for being flexible:  Take different stances = learn about other party’s targets and perceived possibilities by observing how they respond to proposals  Keeps the negotiations proceeding; more flexible = other party believes settlement is possible Role of Concessions o Ensure there is room in the bargaining range for concessions o People will generally accept the first or second offer that is better than their target point o Negotiators generally resent a “take it or leave it” approach o Parties feel better about a settlement when negotiations involve a progression of concessions

BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining

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o Powerful concession = logrolling; “If you move on A and B, I will move on C and D” – leads to better outcomes for negotiators than making concessions singly on individual issues  Pattern of Concession Making o Concessions getting smaller = reaching resistance point o Concession late in negotiations = maybe little room left to move o Opening offer exaggerated = considerable room for new offers o Important to signal to other party with actions and words that concessions are almost over  Final Offers o Make the last concession more substantial to convey the message that an offer is the last one o Has to be large enough to be dramatic yet not large enough to create suspicion that negotiator has been holding back  Closing the Deal o Provide alternatives o Assume the close  Ex: taking out an order form and start to complete it without asking if they would like to make a purchase o Split the difference  Most popular  Assumes the parties started with fair opening offers  Hardball tactic = exaggerated opening offer and then suggests splitting the difference o Exploding offers  Extremely tight deadline to pressure the party to agree quickly  Purpose = to accept and not consider alternatives o Sweeteners  “I’ll give you X if you agree to the deal” Hardball Tactics  Do more harm than good  Dealing with Hardball Tactics o Ignore them o Discuss them (label it and let other party you know what they’re doing) o Respond in kind o Co-opt the other party (befriend them beforehand)  Typical Hardball Tactics o Good cop/bad cop  First interrogator presents tough opening position  leaves room to “cool off”  good cop tries to reach quick agreement before bad cop returns  Relatively transparent

BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining o Lowball/Highball  Causes other party to re-evaluate their opening offer and move closer to/beyond their resistance point  Risk = other party thinks negotiating is a waste of time and will stop  To deal: o Ask for a more reasonable opening offer o State your understanding of the market value of the item being discussed o Threaten to leave negotiations to demonstrate dissatisfaction o Respond with an extreme counteroffer to send a clear message you won’t be anchored by an extreme offer from the other party o Bogey  To pretend an issue of little/no importance to them is quite important  Later traded for major concessions on issues actually important to them o The Nibble  Ask for proportionally small concession on an item not discussed previous to closing the deal  Ex: after trying on suits, saying you’ll take it if tie is included for free  Two ways to combat: o Respond with a question (“what else do you want?”) o Have your own nibbles prepared to offer in exchange o Intimidation  Increasing the appearance of legitimacy  Anger  Guilt  To deal: o Discuss the negotiation process with intimidating party o Ignore attempts to intimidate o Use a team to negotiate o Aggressive Behaviour  Asking for the best offer early in negotiations  Relentless push for further concessions  Asking other party to explain/justify their proposals  To deal: o Halt negotiations to discuss the process

BUS301 Chapter 2 Strategies and Tactics of Distributive Bargaining o Be prepared and understand everyone’s needs and interests o Snow Job  When negotiators overwhelm other party with so much info that they have trouble determining which facts are real/important  Governments use this frequently  Using highly technical language to hide a simple answer to a question asked by a non-expert  To counter: o Do not be afraid to ask questions until they receive an answer they understand o If matter is highly technical = negotiators may suggest technical experts work together on the issue o Listen carefully to other party and identify consistent/inconsistent info...