Strategy and Tactics of Distributive Bargaining

CHAPTER TWO

Strategy and Tactics of Distributive Bargaining

The Distributive Bargaining

The Distributive Bargaining Situation

•      Conflicting Goals

•      Resources are fixed and limited

•      Time is limited

•      Relationship is not important

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

•      A conflict situation

Reasons behind using Distributive Bargaining

The Distributive Bargaining Situation

Preparation—set a

•      Target point, aspiration point, optimal goal, preferred price

•      Walk-away, bottom line, resistance point, reservation price

•      Asking price, initial offer

The Distributive Bargaining Situation


The Distributive Bargaining
Situation


The Distributive Bargaining
Situation


The Distributive Bargaining
Situation


The Distributive Bargaining
Situation


The Distributive Bargaining
Situation

The Distributive Bargaining
Situation: Bargaining Range

The Role of Alternatives to a Negotiated Agreement

•      Alternatives give the negotiator power to walk away from the negotiation: BATNA

–   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


The Role of Alternatives to a
Negotiated Agreement

The Role of Alternatives to a Negotiated Agreement

Settlement Points

Bargaining Mix

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

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
Keys to the Strategies

Influencing The Other Party’s Resistance Point

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

Assess Outcome Values and the Costs of Termination for the Other Party

•      Indirectly

–   Determine information opponent used to set:

•   Target

•   Resistance points

•      Directly

–   Opponent reveals the information

•     Time shortage

•     Absolute limit

Manage the Other Party’s Impressions

Important Tactical Task- conceal and control information sent to other party.

• Screening activities are more important at the beginning of the negotiation, and direct action is more useful later on.

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

Direct action to Alter Impressions

Direct action to Alter Impressions

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

Modify the Other Party’s Perceptions

Manipulate the Actual Costs of
Delay or Termination

Negotiators have deadline. Extending negotiation beyond deadline can be costly.

Three ways to manipulate the costs of delay in negotiation:

•Plan disruptive action

•Form an alliance with outsiders

•Schedule manipulations

Manipulate the Actual Costs of
Delay or Termination

•      Plan Disruptive Action

–   Raise the costs of delay to the other party

Examples:

üPublic picketing of a business

üBoycotting a product

üBoycotting a company

üLocking negotiators in a room

These tactics can work but there are possibilities of producing anger, escalation of conflict

Manipulate the Actual Costs of
Delay or Termination

•      Form an alliance with outsiders

–   Involve (or threaten to involve) other parties who can influence the outcome in your favor

•      Schedule manipulations

–   Scheduling process can often put one party at a considerable disadvantage.

–   Especially when one party is usually more vulnerable to delaying than the other

Manipulate the Actual Costs of
Delay or Termination

•      Schedule manipulations: Examples-

–   Negotiation are often scheduled to begin immediately after the journey

–   The place of the negotiation is not comfortable

–   Delay tactics could e used so that part could squeeze negotiation in the last remaining minutes of a session

–   Industrial buyers-> short lead time-> idle sitting of the plants

–   Just in time inventory users

Positions Taken
During Negotiations

•      At the beginning of the negotiation each party takes a position.

•      Changes in position will occur as new information concerning the other’s intention, the value of outcomes, concessions, and likely zone for settlement will come fore.

Positions Taken
During Negotiations

•      Opening offer

–   Where will you start?

ØToo low

ØToo High: Higher offer makers  gets higher settlements

Advantages of Exaggerated offers:

1. Higher bargaining range, thus parties have more time to learn about each others intention

Positions Taken
During Negotiations

Positions Taken
During Negotiations

•      Disadvantages of Exaggerated offers:

–    instantly rejected by the other party

–    Communicates an attitude of toughness

Positions Taken
During Negotiations

•      Opening stance

–   What is your attitude?

•    Competitive? Moderate?

ØA reasonable bargaining position is usually coupled with a friendly stance

ØAn exaggerated bargaining position is usually coupled with a tougher more competitive stance

Positions Taken
During Negotiations

•      Initial concessions

Concessions are central to Negotiation

–   Should any be made? If so, how large?

ØAn opening offer is usually met with a counteroffer = Bargaining Range

ØGood distributive bargainers make sure that there is a large bargaining range while placing their opening offer.

Positions Taken
During Negotiations

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

–    When successive concessions get smaller the obvious message  is – the concession maker’s position is getting firmer and the resistance point is being approached

Positions Taken
During Negotiations

•      Final offer (making a commitment)

–   “This is all I can do”

Commitment

Commitments:
Tactical Considerations

Commitments:
Tactical Considerations

Commitments:
Tactical Considerations

Closing the Deal

Typical Hardball Tactics

Typical Hardball Tactics

Typical Hardball Tactics

Typical Hardball Tactics

Dealing with Typical
Hardball Tactics

Summary

Summary

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