CHAPTER TWO Strategy and Tactics of Distributive Bargaining McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER TWO

Strategy and Tactics of Distributive Bargaining

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2-2

Three Reasons Negotiators Should Be Familiar with Distributive

Bargaining1. Independent situations require knowing how

this works in order to do well

2. Need to know how to counter the effects of the strategies

3. Every situation has the potential to require skills at the “claiming-value” stage

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The Distributive Bargaining Situation

• Goals of one party are in fundamental,direct conflict to another party

• Resources are fixed and limited

• Maximizing one’s own share of resources is the goal for both parties

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The Distributive Bargaining Situation

Situation includes:

• Starting points (initial offers)

• Target points

• Resistance points (walkaway)

• Alternative outcomes

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The Distributive Bargaining Situation

Party B - Buyer

Party A - Seller

Walkaway Point Target Point Asking Price

Initial Offer Target Point Walkaway Point

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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

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The Distributive Bargaining Situation

Party B - Buyer

Party A - Seller

Walkaway Point Target Point Asking Price

Initial Offer Target Point Walkaway PointAlternative

Alternative

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Fundamental Strategies

• Push for settlement near opponent’s resistance point

• Get the other party to change their resistance point

• If settlement range is negative, either:– Get the other side to change their resistance point– Modify your own resistance point

• Convince the other party that the settlement is the best possible

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Keys to the Strategies

The keys to implementing any of the four strategies are:

• Discovering the other party’s resistance point

• Influencing the other party’s resistance point

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Tactical Tasks of Negotiators

• Assess outcome values and the costs of termination for the other party

• Manage the other party’s impressions

• Modify the other party’s perceptions

• Manipulate the actual costs of delay or termination

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Assess the Other Party’s Target, Resistance Point, and Costs of

Terminating Negotiations

• Indirectly– Determine information opponent used to set:

• Target

• Resistance points

• Directly– Opponent reveals the information

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Manage the Other Party’s Impressions

• Screen your behavior:– Say and do as little as possible

• Direct action to alter impressions– Present facts that enhance one’s position

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Modify the Other Party’s Perceptions

• Make outcomes appear less attractive

• Make the cost of obtaining goals appear higher

• Make demands and positions appear more or less attractive to the other party – whichever suits your needs

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Manipulate the Actual Costs of Delay or Termination

• Plan disruptive action– Raise the costs of delay to the other party

• Form an alliance with outsiders– Involve (or threaten to involve) other parties

who can influence the outcome in your favor

• Schedule manipulations– One party is usually more vulnerable to

delaying than the other

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Positions Taken During Negotiations

• Opening offers– Where will you start?

• Opening stance– What is your attitude?

• Competitive? Moderate?

• Initial concessions– Should any be made? If so, how large?

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Positions Taken During Negotiations

• The role of concessions– Without them, there is either capitulation or

deadlock

• Patterns of concession making– The pattern contains valuable information

• Final offers (making a commitment)– “This is all I can do”

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Commitments: Tactical Considerations

• Establishing a commitment– Three properties:

• Finality

• Specificity

• Consequences

• Preventing the other party from committing prematurely– Their commitment reduces your flexibility

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Ways to Create a Commitment

• Public pronouncement

• Linking with an outside base

• Increase the prominence of demands

• Reinforce the threat or promise

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Commitments: Tactical Considerations

• Ways to abandon a committed position– Plan a way out– Let it die silently– Restate the commitment in more general terms– Minimize the damage to the relationship if the

other backs off

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Closing the Deal

• Provide alternatives (2 or 3 packages)

• Assume the close

• Split the difference

• Exploding offers

• Deal sweeteners

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Dealing with Typical Hardball Tactics

• Four main options:– Ignore them

– Discuss them

– Respond in kind

– Co-opt the other party (befriend them)

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Typical Hardball Tactics

• Good Cop/Bad Cop

• Lowball/Highball

• Bogey (playing up an issue of little importance)

• The Nibble (asking for a number of small concessions to)

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Typical Hardball Tactics

• Chicken

• Intimidation

• Aggressive Behavior

• Snow Job (overwhelm the other party with information)

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Summary

Negotiators need to:

• Set a clear target and resistance points

• Understand and work to improve their BATNA

• Start with good opening offer

• Make appropriate concessions

• Manage the commitment process