Information Theory Quiz

Negotiating in Management and Business

• Distributive negotiations involve opposing preferences, where one party's gain is the other's loss.
• The goal is maximizing individual gain ("slicing the pie").
• Integrative negotiations involve common interests, aiming for maximizing both individual and joint gain ("increasing the pie").

Distributive Negotiation Strategies

• Improve your BATNA (Best Alternative to a Negotiated Agreement):
  • Generate new alternatives.
  • Improve the value of existing alternatives.
  • Increase certainty for probabilistic alternatives.
• Ambitious first offers:
  • Sets the tone (frames the discussion).
  • Anchors the opponent (influences their expectations).
  • Explains a large portion of outcome variance.
• Precise offers:
  • Precision increases anchor potency.
  • Negotiators with precise offers generally perform better.
• Use qualitative anchors:
  • Qualities (e.g., product defects) can anchor perceptions.
  • Highlight positive or negative qualities to influence outcomes.
• Decreasing concessions:
  • Gradual concessions communicate seriousness for reaching bottom line.
  • Some dealmakers use a 25-10-5 model.

Negotiating from a position of low power

• Make the other party smaller:
  • Diversify business across multiple counterparts.
  • Diversify across different parties within your counterpart.
• Make yourself bigger:
  • Build coalitions with other entities.
  • Use deals in sequence to build momentum, credibility, etc.

Example: When not to move first (1/2)

• In 1963, United Artists offered The Beatles' manager Brian Epstein $25,000 upfront and then asked for his view about a suitable percentage of profits for a low-budget movie.
• Epstein asserted they needed 7.5% of profits.
• The movie became a success. United Artists had been willing to offer up to 25%.

Example: When not to move first (2/2)

• Let the other party move first:
  • If the negotiator lacks knowledge on the matter.
• Build expertise and do homework:
  • Research past movie deals with other bands
• Play hard to get:
  • E.g., playing a reluctant buyer

Integrative Negotiations

• Delay first offers:
  • Allows for the discovery of creative agreements.
  • Reduces focus on fixed positions.
• Take the other party's perspective:
  • Empathy and perspective-taking can lead to better results.
• Build trust:
  • Being likable (emphasizing commonalities).
  • Being vulnerable (sharing information).
• Ask questions:
  • Reveals priorities.
  • Strengthens liking.

Complex Negotiations

• Logrolling: Trade-off issues with different values to each party.
• Post-settlement settlement: Exploring additional deals after a deal is agreed to.
• MESOs (Multiple Equivalent Simultaneous Offers): Multiple offers of similar value to anchor the opponent, signal flexibility and reveal preferences.
• Scoorring systems: Quantifying possible outcomes by assigning weights to satisfaction/utility.

Negotiation in Teams

• Identify issues, define your BATNA, worst- and best-case scenarios.
• Decide on team procedures for meetings.
• Clarify facts and information.
• Develop a "Positions and Interests" chart; set priorities.
• Define team roles: Lead negotiator, Number cruncher, Note taker, Good cop/bad cop.
• Use rectangular or circular setups for team meetings dependent on goals.
• Rectangular tables are better for competitive situations while circular tables are better for cooperative situations.

Negotiating in a Global Context

• Culture is like an iceberg (much is unseen).
• Relevant dimensions to consider include: self-interest, communication styles, hierarchies, disagreement approaches, and scheduling.
• Create your own culture map for yourself and your counterpart.
• Be aware of cultural stereotypes.
• Use diverse communication channels for international negotiation

Communicating virtually

• Communication channels matter (synchronicity / social bandwidth).
• Use appropriate channels for the negotiation, participants' needs, etc.
• Be conscious of potential miscommunication with virtual negotiation channels.

Dispute Resolution

• A dispute arises when a claim is made and rejected, not just an exchange of resources.
• Characteristics: high emotions, possibly no bad intentions, and linked BATNAs
• Model of dispute resolution considers interests, rights, and power as interdependent factors.
• Effective dispute resolution focuses on interests first, using rights and power as backup.
• To address disputes, use an approach that balances power, rights, and interests.