Essentials of Negotiation: Strategy and Tactics of Distributive Bargaining - 2024 Release - McGraw Hill - PDF

Because learning changes everything. ® Essentials of Negotiation 2024 Release Chapter 02: Strategy and Tactics of Distributive Bargaining © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent...

Because learning changes everything. ® Essentials of Negotiation 2024 Release Chapter 02: Strategy and Tactics of Distributive Bargaining © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Chapter 2 Learning Objectives 1. Understand the basic elements of distributive bargaining including the strategy and tactics of distributive bargaining. 2. Consider the strategic impact of positions taken during negotiation and the role of concessions 3. Appreciate the role of concessions in distributive bargaining. 4. Identify hardball tactics and learn how to counter them. © McGraw Hill LLC 2  Introduction Distributive bargaining is basically a competition over who is going to get the most of a limited resource. You need to understand distributive In order to bargaining. proactively manage Some interdependent situations are these situations, distributive. negotiators must You should know how to counter understand the distributive tactics. concepts of Distributive skills may be required distributive during the “claiming-value” stage. bargaining. © McGraw Hill LLC 3  The Distributive Bargaining Situation A target point is a negotiator’s optimal goal. A resistance point is a negotiator’s bottom line. The asking price is the initial price set by the seller. The buyer may counter with an initial offer. Set starting, target, and resistance points before negotiating. Staring points are public, target points are inferred, and resistance points are secret. The spread between the resistance points is the bargaining range, settlement range, or zone of potential agreement. There can be a positive or a negative bargaining range. © McGraw Hill LLC 4  Price Continuum for Condo Purchase Negotiation Jackson’s Sofia’s Jackson’s A table summarizes target the buyer’s view of the 5asking prices in row 2.resistance point price point There are no views for the first and third prices. $230,000 $235,000 $240,000 $245,000 $250,000 Sofia’s Jackson’s Jackson’s Sofia’s Sofia’s Jackson’s resistanceThe following initial content is arranged target targetlike a table. asking resistance point offer point point price point (inferred) (public) (private) (inferred) (public) (private) $230,000 $233,000 $235,000 $240,000 $245,000 $250,000 © McGraw Hill LLC 5  The Role of Alternatives to a Negotiated Agreement Negotiators also must consider their B͏A͏T͏N͏As, and W͏A͏T͏N͏As. ’ ’ Alternatives give negotiators the power to walk away. Attractive alternatives mean negotiators can set their goals higher and make fewer concessions. Good distributive bargainers identify their alternatives before starting discussion. Good bargainers continually try to improve their B͏A͏T͏N͏A during the negotiation. Strong B͏A͏T͏N͏As influence how a negotiation unfolds. ’ © McGraw Hill LLC 6  Figure 2.3: The Buyer’s View of the Condo Negotiation (Extended With Alternatives) Sofia’s Jackson’s Sofia’s Jackson’s Sofia’s Jackson’s Sofia’s Jackson’s resistance initial alternative target point target alternative asking resistance point offer The following buyer content (private) point is arranged condo price point (inferred) (public) (private) (inferred) (private) (public) (private) like a table. $230,000 $233,000 $234,000 $235,000 $240,000 $242,000 $245,000 $250,000 © McGraw Hill LLC 7  Settlement Point The fundamental process of distributive bargaining is to reach a settlement within a positive bargaining range. The objective of both parties is to obtain as much of the bargaining range as possible. In other words, to reach an agreement as close to the other party’s resistance point as possible. Both parties know they might have to settle for less than their target point, but hope for better than their resistance point. For agreement, both parties must believe the settlement is the best they can get (within a positive bargaining range). © McGraw Hill LLC 8  Discovering the Other Party’s Resistance Point Information is the life force of negotiation. The more you learn about the other party, the more likely you will be to strike a favorable settlement. At the same time, you want to keep secret your resistance point, some of your targets, and information about a weak strategic position or an emotional vulnerability. Each side wants to obtain and conceal information. Communication can become complex—evolving into a coded language. © McGraw Hill LLC 9  Influencing the Other Party’s Resistance Point The resistance point is established by: The value the other attaches to a particular outcome. Costs the other attaches to negotiation delay or difficulty. The cost the other attaches to halting the negotiations. When influencing the other’s viewpoint, you must deal with: The other party’s understanding of your value for a particular outcome. The costs you attach to delay or difficulty in negotiation. And your cost of having the negotiation halted. © McGraw Hill LLC 10  Weakening the Other Party’s Resistance Point Four ways to weaken the other party’s resistance point. Reduce the other party’s estimate of your cost of delay or impasse. Increase the other party’s estimate of their own cost of delay or impasse. Reduce the other party’s perception of the value of an issue. Increase the other party’s perception that you value an issue. The more attractive the other party’s B͏A͏T͏N͏A, the more likely they will be to set a high resistance point. © McGraw Hill LLC 11  Tactical Tasks There are four important tactical tasks for a negotiator to consider in a distributive bargaining situation. Assess the other party’s target, resistance point, and cost of terminating negotiations. Manage the other party’s impression of your target, resistance point, and cost of terminating negotiations. Modify the other party’s perception of their own target, resistance point, and cost of terminating negotiations. Manipulate the actual costs of delaying or terminating negotiations. © McGraw Hill LLC 12 Assess the Other Party’s Target, Resistance Point, and Cost of Terminating Negotiations The purpose is to identify what the other party really wants to achieve, as well as how much they are willing to pay. Indirect assessment. Direct assessment. Indirectly obtain information Directly obtain information about an issue’s factors. from the other party. Find what information a The other party may reveal negotiator used. information when pressed. Try to determine how they If not forthcoming, methods interpreted the information. of obtaining information become complex. © McGraw Hill LLC 13  Manage the Other Party’s Impressions of Your Target, Resistance Point, and Cost of Terminating Negotiations Screening activities are more important at the beginning of negotiation, and direct action is more useful later on. Screening activities. Direct action. Concealment is the most Selective presentation general screening activity. reveals only needed facts. Calculated incompetence Explain known facts for a may be a useful approach. logical argument. Channel communication Display an emotional through a spokesperson. reaction. Present many items, only Ethics are a concern. a few important to you. It may backfire. © McGraw Hill LLC 14  Modify the Other Party’s Perceptions of Their Target, Resistance Point, and Cost of Terminating Negotiations Use one of two approaches. Make outcomes appear less attractive. Make the cost of obtaining them appear higher. The negotiator may also try to make demands and positions appear more attractive or less unattractive to the other party. One approach to modifying the other party’s perceptions is to interpret for the other party what the outcomes of their proposal will really be. © McGraw Hill LLC 15  Manipulate the Actual Costs of Delaying or Terminating Negotiations The ultimate weapon in negotiation is to threaten to terminate negotiations, denying both parties a settlement. Disruptive action. Public picketing, boycotting, and locking negotiators in a room until an agreement is reached. Alliance with outsiders. Involve other parties who can influence the outcome. Schedule manipulation. Negotiation schedules can be used to increase time pressure. © McGraw Hill LLC 16  Positions Taken During Negotiation: Opening Offers The “first-offer advantage” means the negotiator making the first offer gets better outcomes. Consider how precise to make the first offer. Negotiators can dampen the “first-offer advantage.” Concentrate on their own target and the other’s resistance point. Exaggerating an opening offer may be advantageous if it provides room to move or confuses the other party. It may not be advantageous if the other party ends negotiations, or it harms the relationship. © McGraw Hill LLC 17  Positions Taken During Negotiation: Opening Stance Negotiators must decide their stance (attitude) to adopt during the negotiation. Competitive or moderate? Remember that the other party may respond “in kind.” Make sure your visual cues match your intended stance. Try to send a consistent message through both the opening offer and opening stance. Timing also plays a part. © McGraw Hill LLC 18  Positions Taken During Negotiation: Initial Concessions An opening offer and a counteroffer define the initial bargaining range. The first concession conveys a message to the other party about how you will proceed. Negotiators who take a hard line achieve better economic outcomes, but at a cost of being perceived negatively. Good reasons for adopting a flexible position. When taking different stances throughout the negotiation, you learn about the other party’s targets and perceived possibilities. Flexibility keeps a negotiation moving—the more flexible you are, the more the other party believes a settlement is possible. © McGraw Hill LLC 19  Positions Taken During Negotiation: Role of Concessions Concessions are central to negotiation. Parties feel best about a settlement when the negotiation involves a progression of concessions. A reciprocal concession cannot be haphazard. Negotiators may link their concessions to a prior concession from the other party. © McGraw Hill LLC 20  Positions Taken During Negotiation: Pattern of Concession Making When successive concessions get smaller: The concession maker’s position is getting firmer. And the resistance point is being approached. Concessions late in the game may indicate there is no room left to move. Access the text alternative for slide images. © McGraw Hill LLC 21  Positions Taken During Negotiation: Final Offers Eventually, a negotiator wants to convey the message that there is no further room for movement. No further concessions convey the message, but the other party may feel the pattern of concessions is being violated. One way to accomplish this is to make the last concession more substantial. Large enough to be dramatic yet not so large it creates suspicion that the negotiator has been holding back. A concession may also be personalized to the other party signaling this is the last concession the negotiator will make. “I went to my boss and got a special deal just for you.” © McGraw Hill LLC 22  Positions Taken During Negotiation: Closing the Deal Provide alternatives. Exploding offers. Offer alternate packages Contains a very tight with roughly equal weight. deadline. Assume the close. Pressures the other party Act as if a decision has to agree quickly. already been made. Sweeteners. Split the difference. Save a special concession Summarize the situation for the close. and suggest to split the “I’ll give you X if you agree difference. to the deal.” © McGraw Hill LLC 23  Hardball Tactics Hardball tactics work best against poorly prepared negotiators. They can also backfire. Many find the tactics offensive and out-of-bounds. Difficult to enact, each involves risk for the person using it. It is important to understand hardball tactics and how they work so you can recognize if they are used against you. © McGraw Hill LLC 24  Dealing With Typical Hardball Tactics Discuss them. Label the tactic and offer to negotiate the process itself before continuing. Ignore them. Ignoring a hardball tactic can be very powerful—the tactics take a lot of energy to enact properly. Respond in kind. May be useful when dealing with a party who is testing your resolve or as a response to exaggerated positions. Co-opt the other party. It is more difficult to attack a friend than an enemy. © McGraw Hill LLC 25  Typical Hardball Tactics: Good Cop/Bad Cop It often leads to concessions and negotiated agreements, but the tactic has many weaknesses. Relatively transparent, especially with repeated use. Easily countered as the other party may call you out. Difficult to enact—requires a lot of energy. It may alienate the other party. Negotiators may get involved in the game and fail to concentrate on their goals. © McGraw Hill LLC 26  Typical Hardball Tactics: Lowball/Highball Negotiators start with a ridiculously low (or high) opening offer they know they will never achieve. This may cause the other party to reevaluate their opening offer and move closer to their resistance point. There is risk—the other party may stop negotiating. The best offense is not to make a counteroffer. Insist the other party start with a reasonable offer. Show the other party that you won’t be tricked. Threaten to leave the negotiation. You could also respond with an extreme counteroffer. © McGraw Hill LLC 27  Typical Hardball Tactics: The Bogey Negotiators use this tactic to pretend that an issue is of little or no importance to them, when it actually is quite important. Most effective when a negotiator identifies an issue that is quite important to the other side but of little value to them. This tactic is deceptive and can be difficult to enact. Although difficult to defend against, being well prepared for the negotiation will make you less susceptible. If the other’s position is opposite of your expectations, suspect a bogey tactic and ask probing questions. Be cautious about sudden reversals in positions—again, question the other party carefully. © McGraw Hill LLC 28  Typical Hardball Tactics: The Nibble Negotiators use the nibble tactic for a proportionally small concession on an item that hasn’t been discussed previously in order to close the deal. Weaknesses in using the nibble. Many feel the party using the nibble did not bargain in good faith. The person being nibbled will not feel good about the process. Combating the nibble tactic. Respond to each nibble with, “What else do you want?” Have your own nibbles prepared for exchange. © McGraw Hill LLC 29  Typical Hardball Tactics: Chicken Combining a large bluff with a threatened action to force the other party to “chicken out” and give them what they want. Negotiation becomes a serious game in which parties may find it difficult to distinguish reality from postured positions. Difficult to defend against. Preparation and understanding of the situation is essential for identifying where reality ends and chicken tactics begin. © McGraw Hill LLC 30  Typical Hardball Tactics: Intimidation An attempt to force the other party to agree by means of an emotional ploy, usually anger or fear. Dealing with intimidation tactics. Do not allow yourself to feel threatened. Discuss the negotiation process with them. Ignore the other party’s attempts to intimidate you. Use a team to negotiate. © McGraw Hill LLC 31  Typical Hardball Tactics: Aggressive Behavior Aggressive tactics may include the following. A relentless push for further concessions. Asking for the best offer early in negotiations. Asking the other party to explain and justify their proposals. An excellent response is to halt the negotiations in order to discuss the negotiation process itself. Having a team can be helpful. Good preparation makes responding easier. © McGraw Hill LLC 32  Typical Hardball Tactics: Snow Job Negotiators overwhelm the other party with information so they cannot distinguish important facts from distractions. Another example is the use of highly technical language to hide a simple answer to a question asked by a nonexpert. The snow job can backfire. Negotiators can counter a snow job tactic. Ask questions until you understand the answer. If the matter is highly technical, bring in experts. Listen carefully and identify information consistency. Strong preparation is important as a defense. © McGraw Hill LLC 33  End of Main Content Because learning changes everything. ® www.mheducation.com © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.