Week 2 - Strategy and Tactics of Distributive Bargaining Flashcards
Distributive bargaining situation
- Goals of one party are usually fundamental and direct conflict with the goals of the other party
- Resources are fixed and limited
- Maximizing one’s own share of resources is the goal
Target point/aspiration point
Goal
The point at which a negotiator would like to conclude negotiations (their aspiration) - learned as negotiations are under way
Resistance point
A price of outcome below which you will not go
: Negotiator’s bottom line - the most they will pay as a buyer (or smallest amount a seller will settle for) aka their reservation price (not known and is kept secret)
Asking price/initial offer
Starting point - in the opening statement each party makes (i.e. the seller’s listing price and the buyer’s first offer)
Value climate
Nature and amount of resources/value available to satisfy the respective needs of the negotiating parties
- Will dictate strategy - Is this a climate of abundance (resources > or = needs) or scarcity (needs> resources)? - When do you use distributive bargaining as a strategy? When the value climate (amount of resources available) is deemed to be one of scarcity (as opposed to one of abundance) - Rare that you're in a situation of true scarcity - but it happens and this is how to determine the strategy to negotiation
Bargaining zone/zone of potential agreement
The space between the two parties’ resistance points
If resistance points fall short for both parties - there is a gap
Positive bargaining zone
When the buyer’s resistance point is above the seller’s (she is minimally willing to pay more than he is minimally willing to sell for)
Negative bargaining zone
The seller’s resistant point is above the buyer’s and buyer won’t pay more than the seller will minimally except
- Negotiations that begin here are likely to stalemate
The role of alternatives to a negotiated agreement
Alternatives give the negotiator power to walk away from the negotiation
If alternatives are attractive, negotiators can:
- set their goals higher
- make fewer concessions
If there are no attractive alternatives: Negotiators have much less bargaining power
4 fundamental strategies
- Push for settlement near opponent’s resistance point (small concessions)
- Get the other party to change their resistance point by influencing their beliefs
- If settlement range is negative either:
a) get the other side to change their resistance point
b) modify your own resistance point - Convince the other party that this settlement is the best possible
Keys to strategies
- Discovering the other party’s resistance point
- Influencing the other party’s resistance point
Strategies of distributive bargaining
- Decide whether your stance is competitive (aggressive) or moderate
- Each party uses tactics to discover the other’s reservation point, to make the other side re-evaluate their reservation (or target) point and to exaggerate their own reservation point. This information may be obtained directly or indirectly and is often obscured. This process may also involve manipulation of the costs of delay, being distributive or allying with external parties
- The negotiation three step:
○ Offer
○ Exchange information (verbal/non-verbal/action)
○ Counteroffer - Have a logic when you make an offer
- Concessions can tell the story. Typically large incremental moves diminish as the parties are near reservation points
- Interventions may be used to close the deal
- If the manipulation is extreme, they are seen as being a hardball and are best addressed by ignoring them, discussing them, reciprocating them or co-opting
Tactical tasks
- Assess other party’s target, resistance point, and cost of termination
- Manage other party’s impressions
- Modify other party’s perceptions
- Manipulate actual costs of delay or termination
Assess the other party’s target, resistance point and cost of termination
Indirectly - determine information opponent likely used to set: target/resistance points
Directly - opponent reveals the information
Manage the other party’s impressions
Screen your behaviour - say and do as little as possible
Direct action to alter impressions
- selective presentation (present facts that enhance one’s position)
- emotional reactions (e.g. a flinch)
Modify the other party’s perceptions
- Make outcomes appear less attractive
- Make the cost of obtaining outcomes appear higher
- Make demands and positions appear more/less attractive to the other party
- Interpret for the other party what the outcomes of his/her proposal will really be (highlight something that has been overlooked)
- Conceal information
Manipulate the actual costs of delay or termination
Plan disruptive action: raise the costs of delay to the other party - increase costs of not reaching an agreement
Form an alliance with outsiders: Involve (or threaten to involve) other parties who can influence the outcome in your favour
Schedule manipulation: one party is usually more vulnerable to delaying than the other
Positions taken during negotiations: Opening offer
Advantageous to the negotiator making the offer because they can anchor the negotiation
An ambitious opening offer gives the negotiator room for movement and time to learn about the other’s priorities
Anchoring effect
People making decisions under uncertain conditions are influenced by initial starting numbers
The would think a car for 30K is too expensive, but instead if they saw it was the same car for 60K on sale for 30K - it’s a good deal
Phantom anchors
Provide economic benefits by reducing the magnitude of the counteroffers made by the opposing side
Phantom anchors are retracted and aggressive figures—attached to their actual and less aggressive offers
“I was going to ask for $10,000, but I can offer $8000.”
*More value claimed by the party making the initial offer
People who use this technique are also perceived as more manipulative, which may impact reputation and relationships
“I was thinking something in the 400’s….”
He’s trying to ultimately get to $450 (pre-phantom offer)
Opening stance
Attitude of if you’ll be competitive (fighting to get the best on every point or moderate (willing to make concessions and compromises)
- Reasonable bargain is usually coupled with a friendly stance
Initial concessions
An opening offer is usually met with a counteroffer; these two offers define the initial bargaining range
Symbolic message to the other party about how you will proceed
The role of concessions
Without them, there is either capitulation or deadlock
Pattern of concession making
The pattern contains valuable information - When successive concessions get smaller, the obvious message is that the concession maker’s position is getting firmer and that the resistance point is being approached.
A concession late in negotiations may also indicate that there is little room left to move.
Closing the deal
- Provide alternatives (2 or 3 packages)
- Assume the close (act like the decision has been made instead of asking)
- Split the difference (brief summary of the negotiation and then suggest to split the difference because things are so close)
- Exploding offers (convince party to accept and stop considering alternatives (offer an attractive salary but the offer will expire in 24 hours)
- Deal sweeteners (save a special concession for the close - “I’ll give you X if you agree to the deal)
Dealing with typical hardball tactics
- Ignore them
- Discuss/label them
- Respond in kind
- Co-opt the other party (befriend them)
Typical hardball tactics
- Good cop/bad cop
- Lowball/highball: start with ridiculously low/high opening offer that they know they will never achieve to push other team to rethink their opening offer closer to their resistance point
- Bogey: pretending that an issue of little to no importance to them is quite important - then trade for major concessions that are actually important to them
○ Suspect if other party takes a position completely counter to what you expected - The nibble: ask for a proportionally small concession on an item that hasn’t been discussed previously to close the deal
- Intimidation:
○ Anger to indicate seriousness of a position
○ Increase appearance of legitimacy (policies and procedures invented to make the process appear legitimate)
○ Guilt to question the other party’s integrity or the other’s lack of trust in them - Aggressive behavior: pushing your position or attacking the other person’s position (pushing for further concessions)
- Snow job: negotiators overwhelm the other party with so much information that he or she has trouble determining which facts are real or important and which are included merely as distraction
To deal with intimidation techniques
Discuss the process and your policy to bargain in a fair manner; use a team to negotiate so some may not be intimidated and they can provide mutual support
Counter snow job
Ask questions, if the matter is technical, suggest technical experts to discuss the issue, and listen carefully to the other party to identify consistent and inconsistent information (and undermine effectiveness of the snow job)
