Negotiations chap002 strategy and tactics of distributive bargaining

CHAPTER TWO Strategy and Tactics of Distributive Bargaining McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc All rights reserved 2-2 Three Reasons Negotiators Should Be Familiar with Distributive Bargaining Independent situations require knowing how this works in order to well Need to know how to counter the effects of the strategies Every situation has the potential to require skills at the “claiming-value” stage 2-3 The Distributive Bargaining Situation • Goals of one party are in fundamental,direct conflict to another party • Resources are fixed and limited • Maximizing one’s own share of resources is the goal for both parties 2-4 The Distributive Bargaining Situation Situation includes: • Starting points (initial offers) • Target points • Resistance points (walkaway) • Alternative outcomes 2-5 The Distributive Bargaining Situation Party A - Seller Walkaway Point Initial Offer Party B - Buyer Target Point Target Point Asking Price Walkaway Point 2-6 The Role of Alternatives to a Negotiated Agreement • Alternatives give the negotiator power to walk away from the negotiation – 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 2-7 The Distributive Bargaining Situation Party A - Seller Walkaway Point Target Point Alternative Initial Offer Party B - Buyer Asking Price Alternative Target Point Walkaway Point 2-8 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 2-9 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 2-10 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 2-11 Assess the Other Party’s Target, Resistance Point, and Costs of Terminating Negotiations • Indirectly – Determine information opponent used to set: • Target • Resistance points • Directly – Opponent reveals the information 2-12 Manage the Other Party’s Impressions • Screen your behavior: – Say and as little as possible • Direct action to alter impressions – Present facts that enhance one’s position 2-13 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 2-14 Manipulate the Actual Costs of Delay or Termination • Plan disruptive action – Raise the costs of delay to the other party • Form an alliance with outsiders – Involve (or threaten to involve) other parties who can influence the outcome in your favor • Schedule manipulations – One party is usually more vulnerable to delaying than the other 2-15 Positions Taken During Negotiations • Opening offers – Where will you start? • Opening stance – What is your attitude? • Competitive? Moderate? • Initial concessions – Should any be made? If so, how large? 2-16 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 • Final offers (making a commitment) – “This is all I can do” 2-17 Commitments: Tactical Considerations • Establishing a commitment – Three properties: • Finality • Specificity • Consequences • Preventing the other party from committing prematurely – Their commitment reduces your flexibility 2-18 Ways to Create a Commitment • • • • Public pronouncement Linking with an outside base Increase the prominence of demands Reinforce the threat or promise 2-19 Commitments: Tactical Considerations • Ways to abandon a committed position – – – – Plan a way out Let it die silently Restate the commitment in more general terms Minimize the damage to the relationship if the other backs off 2-20 Closing the Deal • • • • • Provide alternatives (2 or packages) Assume the close Split the difference Exploding offers Deal sweeteners 2-21 Dealing with Typical Hardball Tactics • Four main options: – Ignore them – Discuss them – Respond in kind – Co-opt the other party (befriend them) 2-22 Typical Hardball Tactics • Good Cop/Bad Cop • Lowball/Highball • Bogey (playing up an issue of little importance) • The Nibble (asking for a number of small concessions to) 2-23 Typical Hardball Tactics • • • • Chicken Intimidation Aggressive Behavior Snow Job (overwhelm the other party with information) 2-24 Summary Negotiators need to: • Set a clear target and resistance points • Understand and work to improve their BATNA • Start with good opening offer • Make appropriate concessions • Manage the commitment process [...]... During Negotiations • Opening offers – Where will you start? • Opening stance – What is your attitude? • Competitive? Moderate? • Initial concessions – Should any be made? If so, how large? 2-16 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 • Final offers... 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 2-14 Manipulate the Actual Costs of Delay or Termination • Plan disruptive action – Raise the costs of delay to the other party • Form an alliance with outsiders – Involve (or threaten... prominence of demands Reinforce the threat or promise 2-19 Commitments: Tactical Considerations • Ways to abandon a committed position – – – – Plan a way out Let it die silently Restate the commitment in more general terms Minimize the damage to the relationship if the other backs off 2-20 Closing the Deal • • • • • Provide alternatives (2 or 3 packages) Assume the close Split the difference Exploding offers... sweeteners 2-21 Dealing with Typical Hardball Tactics • Four main options: – Ignore them – Discuss them – Respond in kind – Co-opt the other party (befriend them) 2-22 Typical Hardball Tactics • Good Cop/Bad Cop • Lowball/Highball • Bogey (playing up an issue of little importance) • The Nibble (asking for a number of small concessions to) 2-23 Typical Hardball Tactics • • • • Chicken Intimidation Aggressive...2-11 Assess the Other Party’s Target, Resistance Point, and Costs of Terminating Negotiations • Indirectly – Determine information opponent used to set: • Target • Resistance points • Directly – Opponent reveals the information 2-12 Manage the Other Party’s Impressions • Screen your behavior: – Say and do as little as possible • Direct action to alter impressions – Present facts... • • Chicken Intimidation Aggressive Behavior Snow Job (overwhelm the other party with information) 2-24 Summary Negotiators need to: • Set a clear target and resistance points • Understand and work to improve their BATNA • Start with good opening offer • Make appropriate concessions • Manage the commitment process ... stage 2-3 The Distributive Bargaining Situation • Goals of one party are in fundamental,direct conflict to another party • Resources are fixed and limited • Maximizing one’s own share of resources... 2-4 The Distributive Bargaining Situation Situation includes: • Starting points (initial offers) • Target points • Resistance points (walkaway) • Alternative outcomes 2-5 The Distributive Bargaining. .. alternatives: • Negotiators have much less bargaining power 2-7 The Distributive Bargaining Situation Party A - Seller Walkaway Point Target Point Alternative Initial Offer Party B - Buyer Asking Price