BUSM4722 - Topic 4 - Negotiations Strategies-1

Negotiations & Infl uence Topic 4: Negotiations Strategies Dr Steven Clarke Strategy and tactics of Distributive Bargaining Distributive Bargaining Situation •Called competitive, win-lose bargaining •Goals of one party are usually in fundamental and direct conflict with goals of the other party •Resource are fixed and limited while both parties want to maximise their share •Distributive bargaining is basically a competition over who is going to get the most of a limited resource, which is often money •-> to achieve objectives, each party use a set of strategies and tactics to maximise his/her share of outcomes to be obtained Distributive Bargaining Situation - Asking price from one party (A) The price the other party (B) prefer to pay, which is target point The price above which party B would not buy party A’s products/services, which is called resistance point Party B might counter Party A’s asking price with his initial offer Negotiators’ starting and resistance points are usually arranged in reverse order, with the resistance point being a high price for the buyer and the low price for the seller - The spread between the resistance points are called the bargaining range, settlement range or zone of potential agreement - Positive bargaining range - buyer’s resistance point is above the seller’s Negative bargaining range – seller’s resistance point is above the buyer’s Alternatives, Settelment point an Bargaining mix - Best alternative to a negotiated agreement (BATNA) – influence the decision to close the deal or walk away - Settlement point - The fundamental process of distributive bargaining is to reach a settlement within a positive bargaining range, reach an agreement as close to the other party’s resistance point as possible - Bargaining mix – the package of issues for negotiation, some are important to both parties but others are important to one party only Fundamental strategies - To push for a settlement close to the seller’s resistance point, thereby yielding the largest part of the settlement for the buyer - To convince the seller to change her resistance point by influencing the seller’s beliefs about the value of the product/service, and thereby increasing the bargaining range - If a negative settlement range exists, to convince the seller to reduce her resistance point or to change his own resistance point, to create a positive settlement range - To convince the seller to believe that this settlement is the best that is possible Distributive Bargaining Situation • • Discovering the Other Party’s Resistance Point o Information is life force of negotiation o The more you can learn about the other party, the more able you will be to strike a favorable agreement o At the same time, you not want the other party to have certain information about you Influencing the Other Party’s Resistance Point o The higher the other party’s estimate of your cost of delay or impasse, the stronger the other party’s resistance point will be o The higher the other party’s estimate of hi or her own cost of delay or impasse, the weaker the other party’s resistance point will be o The less the other party values an issue, the lower their resistance point will be o The more the other party believes that you value an issue, the lower their resistance point may be Tactical Tasks • Within the fundamental strategies of distributive bargaining, there are important tactical tasks: o Assess the other party’s target, resistance point, and cost of terminating negotiations o Manage the other party’s impression of the negotiator’s target, resistance point, and cost of terminating negotiation o Modifying the other party’s perception of his or her own target, resistance point, and cost of terminating negotiation o Manipulate the actual costs of delaying or terminating negotiations Assess the other party’s target, resistance point, and cost of terminating negotiations •To achieve this task: oObtain information indirectly about the background factors behind an issue (Indirect Assessment) oObtain information directly from the other party about their target and resistance points (direct assessment) Manage the other party’s impression •Negotiators need to screen information about their positions and to represent them as they would like the other to believe •Screening activities (generally concealment) are more important at the beginning of negotiation and direct action to alter impression is more useful later oCommon forms •Screening activities: Concealment •Direct action: Selective Presentation, emotional reaction Tactical Considerations in Using Commitment • Establishing a Commitment o Public pronouncement o Linking with an outside base o Increase prominence of Demands o Reiforce the Threat or Promise • Preventing the Other Party from Committing Prematurely • Finding Ways to Abandon a Committed Position o Plan a way out o Let it die silently o Restate the commitment o Minimize the damage Hardball Tactics • Hardball tactics are used to beat other party They are designed to pressure negotiators to things would not otherwise do, and their presence usually disguises the user’s adherence to a decidedly distributive bargaining approach • • Dealing with Typical Hardball Tactics o Ignore them o Discuss them o Respond in find o Co-opt the other party Typical Hardball Tactics o Good Cop/Bad Cop o Lowball/Highball o Bogey o The Nibble o Chicken o Intimidation o Aggressive Behavior o Snow Job Strategy and Tactics of Integrative Negotiation Integrative Negotiation • Win – win solution, mutual gains, or problem solving • The goals of the parties in integrative negotiation are not mutually exclusive If one side achieves its goals, the other is not precluded from achieving its goals as well • One party’s gain is not at the other party’s expense • it allows both sides to achieve their objectives What make Integrative Negotiation Different? • Focus on commonalities rather than differences • Attempt to address needs and interests, not positions • Commit to meeting the needs of all involved parties • Exchange information and ideas • Invent options for mutual gain • Use objective criteria for standards of performance An Overview of the Integrative Negotiation Process • Creating a free flow of Information o • Emphasizing the commonalities between then parties and minimizing the differences o • One must understand the other’s needs before helping to satisfy them Individual goals may need to be redefined as best achieved through collaborative efforts directed toward a collective goal Searching for solutions that meet the needs and objectives of both sides o Negotiators must be firm but flexible – firm about their primary interests and needs, but flexible about how these needs and interests are met Key Steps in the Integrative Negotiation Process • • major steps o Identify and redefine the problem o Understand the problem and bring interests and needs to the surface o Generate alternative solutions for the problem o Evaluate those alternatives and select among them The goal of creating value is to push the potential negotiation solutions toward the upper-right hand side of the Figure When it is done to the fullest extent possible, the line is called the Pareto efficient frontier, and it contains a point where “there is no agreement that would make any party better off without decreasing the outcomes to any other party” Creating Value Claiming Value Identify and Define the problem • Define the problem in a way that is mutually acceptable to both sides • State the problem with an eye toward practicality and comprehensiveness • State the problem as a goal and identify the obstacles to attaining this goal • Depersonalise the problem • Separate the problem definition from the search for solutions Understand the Problem Fully – Identify Interests and Needs • Type of interests o o o o • Substantive interests Process interests Relationship interests Interest in principle Some observations on Interests o o o o o o There is almost always more than one type of interest underlying a negotiation Parties can have different types of interests at stake Interests often stem from deeply rooted human needs or values Interests can change Surfacing interests Surfacing interests is not always easy or to one’s best advantage Generate Alternative Solutions • Inventing options: generating alternative Solutions by Redefining the problem or problem set o o o o Position Accommodation vs Position Achievement Achieve underlying interests vs Substitute underlying interests Simple vs Complex Person-based vs Issue-based ... price for the seller - The spread between the resistance points are called the bargaining range, settlement range or zone of potential agreement - Positive bargaining range - buyer’s resistance... Settelment point an Bargaining mix - Best alternative to a negotiated agreement (BATNA) – influence the decision to close the deal or walk away - Settlement point - The fundamental process of distributive... is often money ? ?-> to achieve objectives, each party use a set of strategies and tactics to maximise his/her share of outcomes to be obtained Distributive Bargaining Situation - Asking price from