Definition of Negotiation:
• Process by which we pursue the terms of
getting what we want from people who
are in control of those wants and also want
something from us
•It is essentially a mutually beneficial
exchange of tangibles or intangibles
between two parties
Negotiation as a decision-making techniqu
is appropriate when:
• People voluntarily want to exchange things that
they have for things that they want, creating
wealth in the process.
• Each party needs the consent of the other party
and thereby effectively has veto-power. Because
parties cannot simply take what they want, each
party must accommodate the other party as well.
Distributive Bargaining
• Goals of parties are at odds or appear that way to
parties involved.
• Central to conflict is the belief that there is a
controlled amount of key resources to be
distributed (fixed pie)
• Both parties want to be winners or claim more
than half that is available. Both want to win on the
same dimension (control of certain policies) and
so their goals are mutually exclusive and hence
leads to conflict.
Strategies: Distributive Bargaining
• Guard information carefully
• Give information only when it provides
strategic advantage
• Attempt to get as much information from
other party
• Try to get as much of the limited resource as
possible
Why study Distributive Bargaining?
1. Some interdependent situations you face
ARE distributive and to do well you need
to understand how they work.
2. Some negotiators will use DB strategies
and tactics exclusively so need to know
how to counter their effects.
Distributive Bargaining Problem:
• DB can often be costly and
counterproductive. Often cause the
negotiating parties to focus so much on their
differences that they ignore what they have
in common.
• People issues often arise as a result of
“selfish” perception of negotiation
(reputation and trust)
When is Distributive Bargaining effective for you:
Distributive Bargaining strategies and tactics are
quite useful when a negotiator wants to:
•
•
maximize the value obtained in a SINGLE
DEAL
the relationship is UNIMPORTANT
Integrative Negotiation:
• Goals of parties are not mutually exclusive .
• If one side achieves goal the other is not necessarily
precluded from achieving its goals.
• One party’s gain is not necessarily at the expense
of the other.
• Although conflict may appear initially to be winlose to the parties, discussion and mutual
exploration will usually suggest win-win
alternatives
Overview Integrative Negotiation
Process
1. Create a Free Flow of Information
2. Attempt to Understand the Other Negotiator’s
Real Needs and Objectives (Interests-Positions)
3. Emphasize What is in Common Between Parties
and Minimize the Differences
4. Search for Solutions That Meet
Goals/Objectives of Both Sides
What Makes Integrative Negotiation Different:
• Focus on commonality 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 gains
• Use objective criteria for standards of performance
Communication/Joint Gains
•Negotiation- process of communication
•Involves exchange of information on
parties interests, issues, and positions.
•Resulting information is used to make
tradeoffs and identify compatible issues
fundamental to an integrative outcome.
•Integrative outcome-both parties are
satisfied and is measured in joint gains (the
sum of the value of the deal for both
parties)
• Information can be conveyed both
– Indirectly (high context cultures)
– Directly (low context cultures)
• Japan- more likely to reveal preferences
indirectly through implicit contextual cues
• USA-more likely to state preferences
directly through verbal expression
• Given differences in communication styles
are the parties able to understand
preferences on interests, issues, and
positions to create an integrative outcome
Low vs. High Context Example
• Low Context Seller- reveals interests by
stating directly to negotiation partner that
financing is more important than price by
stating:
“ I can be flexible on price if you can pay
everything up-front”
Low vs. High Context Example
• High Context Seller- reveals same
information indirectly in the following
sequence of offers (reaction of other party not revealed)
“ I can sell it to you for 6 million with
payment up front in year 1”
“What about 6.1 million with payment over 3
years”
“How about 5.8 million with payment in year
1”
Terms
• BATNA- Best alternative to a negotiated
agreement
• Entry Point- initial offer Buyer-low Seller-high
• Exit Point- point in which your BATNA
provides a better alternative
• Winner’s Curse- opponent accepting your
first offer
• Interests, Issues, Positions
The negotiators’ exit prices meet
Buyer
100
Seller
120
130
The negotiators’ exit prices overlap
100
120
Buyer’s negotiating range
Settlement
range
Seller’s negotiating range
115
130
A gap between the negotiator's exit price
Total negotiating range
Gap
100
115
Buyer’s negotiating
range
120
130
Seller’s entry price
Bargaining Mix
• The package of items in the negotiation
process
(terms of payment, closing date etc)
• Each item has its entry, exit and settlement
point
• Items must be prioritized in importance
before the negotiation