QBook UNIT 4 Distributive Bargaining. QBook INTRODUCTION During a basketball game, every time one team scores two points, the other team falls behind.

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UNIT 4Distributive Bargaining

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INTRODUCTION

During a basketball game, every time one team scores two points, the other team falls behind.

There is no way for both sides to gain points at the same time.

As one side wins, the other side loses. This kind of competition is called win-lose. In negotiation, win-lose is also called distributive

bargaining. Every time one side gains something, the other

side loses something.

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DIALOG(Personal Distributive Bargaining) Fred and Jane negotiating over a slice

of pizza Jane: There is only one slice of

leftover pizza, and there is nothing else in the refrigerator.

Fred: It has been a really busy day today, and I’m really hungry.

Jane: Well, I’m hungry too. Fred: To tell you the truth, I haven’t

eaten all day. Jane: Frankly, I don’t see how this one

slice can satisfy you. Fred: You know I love pizza. Jane: Yes, but I kind of like it too. Fred: You are being uncooperative. Jane: You are being inflexible.

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DIALOG(Business Distributive Bargaining) Alex and Fred are negotiating and

both don’t want to give anything (distributive bargaining).

Alex: Our price of 25.50 USD per unit is firm.

Fred: Unless you lower your price, we can’t agree.

Alex: This is our bottom line. There is no flexibility on this issue.

Fred: To be honest, we cannot sell this product in the market at this price.

Alex: Because of our emphasis on quality, we don’t have any space to maneuver. This is the lowest we can offer.

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DIALOG(Business Distributive Bargaining) Fred: We cannot make progress

if you don’t agree to a 20 percent discount. This is the highest we can offer.

Alex: There is simply no way we can give you a discount.

Fred: If you are so unyielding, this negotiation will reach a deadlock.

Alex: If you don’t accept this offer, we will have to withdraw the package.

Fred: That is an ultimatum we cannot accept. If you cannot give us a discount, we will have to find another supplier.

Alex: There is no reason to become hostile. The 25.50 price really is our final offer.

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DIALOG(Business Distributive Bargaining) Fred: We can agree on the need

to wrap up this deal, so we will offer 21. We cannot make this offer again.

Alex: The implication of this price is that we lose 4.50 on each unit. Although I would like to give you what you want, we cannot take a loss on this deal.

Fred: This is pointless. Our customers simply won’t pay more.

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VOCABULARY Deadlock (n): Negotiations stop because both sides will not change their

demands. Final Offer (n): The last offer; Often used to pressure the other side; The

bottom line. Firm (adj): Unchangeable; An offer or part of an offer that cannot be

changed. Hostile (adj): Not friendly; A negotiator who is strongly against something. Maneuver (v): The negotiator’s flexibility to compromise, Changing options

in the negotiation. Pointless (adj): A negotiation or an offer that is not helpful; an offer that is

not useful. Take a loss (phrase): Losing money on the offered deal; A way to reject an

offer that is not favorable.

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VOCABULARY Ultimatum (n): A final demand that cannot be refused or negotiation will end. Uncooperative (adj): A negotiator or team that will not compromise. Unyielding (adj): A negotiator who does not give in; A negotiation position

that is not changed. We cannot make this offer again (phrase): Giving pressure to the opposition

through a time limit; After some time, the current offer will be cancelled.

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FOLLOW UP In distributive bargaining,

the goals of both sides are in conflict.

Resources are fixed, like a pizza. If Fred takes one slice of pizza, that means Jane will get one slice less.

If Fred wants more and Jane wants more, someone will win and someone will lose.

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FOLLOW UP

For the buyer, a distributive negotiation begins with what the best deal is (the target point) and the worst deal that is still acceptable (the resistance point).

Secret

Buyer’s Resistance

Point

Buyer’s Target Point

Secret A target point is the actual desired result, while anything beyond the resistance point cannot be accepted. Both the target point and the resistance point are secret and should not be told to the seller.

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FOLLOW UP The seller has a public price

the buyer can see, which may be the list price.

At the start of the negotiation, one value is public (everyone can see it), while two values are secret.

Seller’s Asking Price

Public

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FOLLOW UP The first step if for the buyer to decide how much

the first offer (initial offer or starting offer) should be.

The first offer should be lower than the target point. Since the seller will try to raise the price, the buyer should begin under his/her target so as to increase the chance of getting close to the desired target.

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FOLLOW UP If the buyer’s first offer is too low for the seller, the

seller will not want to sell. This means the first offer must be higher than the

seller’s resistance point. This point, however, is secret and the buyer must

try to guess that it is. All negotiation must fit between the two resistance

points. This is called the bargaining zone.

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FOLLOW UP The Buyer’s View If the price is too low for the seller, he/she will

walk away from the negotiation. If the price is too high for the buyer, he/she will

walk away from the negotiation.

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FOLLOW UP Each side must have their own goals clear and guess

what the other side’s secrets. The buyer’s first offer must not be below the seller’s

resistance point (too low), while also trying not to go above the seller’s target point.

Higher than the seller’s target point, the seller will agree to the offer quickly.

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FOLLOW UP

A buyer’s first offer would be best if it is above the seller’s resistance point while also below the seller’s target point.

Starting out below the buyer’s own target point is also a good idea, because the price will rise during negotiation.

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FOLLOW UP The Buyer’s View