H: Negotiations Flashcards
[Week 9: How to negotiate]
- What is a BATNA? What advice would you give someone about their BATNA before they negotiate?
BATNA stands for Best Alternative to a Negotiated Agreement. It is the best course of action a party can take if negotiations fail and an agreement cannot be reached. Understanding your BATNA provides leverage in negotiations because it defines the point at which you are willing to walk away from the negotiation table.
Advice:
Strengthen Your BATNA: Before entering negotiations, try to improve your BATNA. The stronger your BATNA, the more confidently you can negotiate. For example, if you’re negotiating a job offer, securing another job offer would strengthen your BATNA.
Be Aware of Perceptions: Understand not only your own BATNA but also how your counterpart perceives it. If they underestimate your BATNA, they might offer less favorable terms, so be prepared to communicate it clearly if necessary.
- What is a ZOPA? Why is it important?
ZOPA stands for Zone of Possible Agreement. It is the range within which an agreement is satisfactory to both parties involved in the negotiation. It exists between the buyer’s and seller’s reservation prices (the lowest the seller is willing to accept and the highest the buyer is willing to pay).
Importance:
Understanding the ZOPA is crucial because it determines whether a negotiation has the potential to result in an agreement. If the ZOPA does not exist (e.g., the seller’s minimum price is higher than the buyer’s maximum price), then no amount of negotiation can lead to a deal.
- What do the terms “reservation price” and “target price” mean?
Reservation Price: This is the worst offer you are willing to accept in a negotiation. It is often based on your BATNA and represents the point at which you are indifferent to accepting the deal or walking away. It’s also known as the “bottom line” or “resistance point”.
Target Price: This is the ideal outcome you hope to achieve from the negotiation. It is the price or terms you are aiming for, which is often set above the reservation price. The target price guides your strategy and initial offers during the negotiation.
- How important is anchoring in negotiations? What should you do if your counterpart anchors first?
Anchoring is critically important in negotiations. The first offer typically sets the anchor, which can heavily influence the negotiation’s outcome. Research shows that the final agreement often gravitates towards the initial offer, even if subsequent adjustments are made. The first offer can account for more than 50% of the variance in the final outcomes.
If Your Counterpart Anchors First:
Re-anchor: Make a counter-offer based on your target price to shift the anchor closer to your desired outcome.
Ignore the Anchor: If the first offer is extreme, explicitly state that it is unreasonable and reset the negotiation with a more moderate counter-offer.
Base your response on information: Use data and facts to justify your counter-offer, ensuring that the negotiation is grounded in realistic and objective terms.;
- When making concessions, you should…
When making concessions in negotiations:
Start with Larger Concessions: Begin by making more significant concessions and then gradually make smaller ones. This signals to your counterpart that you are reaching your limit.
Be Strategic: Each concession should be tied to gaining something in return. Don’t make concessions unilaterally; ensure they are part of a reciprocal process.
Be Mindful of the Pattern: Avoid making equal-sized concessions throughout the negotiation. Consistent or large concessions can indicate that you are not close to your reservation price, potentially encouraging your counterpart to push for more.
- What are the two major negotiation strategies? Discuss the three major findings stemming from research on the two major negotiation strategies.
The two major negotiation strategies are:
Distributive Negotiation (Win-Lose): This is a competitive approach where each party seeks to maximize their own gain, often at the expense of the other party. It involves dividing a fixed pie of resources.
Integrative Negotiation (Win-Win): This is a collaborative approach where parties work together to find a mutually beneficial outcome. The goal is to expand the pie rather than simply divide it.
Major Findings:
Integrative Negotiation Leads to Better Outcomes: Research shows that integrative negotiations often result in more favorable outcomes for both parties compared to distributive strategies. By focusing on interests rather than positions, negotiators can find creative solutions that satisfy both sides.
Long-Term Relationships Benefit from Integrative Strategies: Distributive tactics can damage relationships, especially in situations where future interactions are likely. Integrative strategies help maintain and even strengthen relationships by ensuring both parties feel they have won.
Effective Negotiators Combine Strategies: Skilled negotiators often blend distributive and integrative tactics. They may start with distributive approaches to establish a strong position but transition to integrative tactics to find a win-win solution.
- What are some things managers can do to attenuate gender differences in negotiation?
Managers can take several steps to reduce gender differences in negotiation outcomes:
Encourage Negotiation: Promote a culture where both men and women feel comfortable negotiating. Offer negotiation training and make it clear that negotiation is expected and welcomed.
Transparent Processes: Ensure that compensation and promotion processes are transparent and based on clear criteria, reducing the impact of negotiation disparities.
Address Biases: Train managers to recognize and mitigate unconscious biases that may affect their perceptions of male and female negotiators. Ensure that performance evaluations are based on objective measures rather than gendered expectations.
These strategies help create a more equitable environment where everyone has an equal opportunity to succeed in negotiations.
