Chap_4

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UNIT 4
Distributive Bargaining
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INTRODUCTION
 During a basketball game, every time one team
scores two points, the other team falls behind.
 There is no way for both sides to gain points at
the same time.
 As one side wins, the other side loses.
 This kind of competition is called win-lose.
 In negotiation, win-lose is also called distributive
bargaining.
 Every time one side gains something, the other
side loses something.
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DIALOG
(Personal Distributive Bargaining)
 Fred and Jane negotiating over a slice
of pizza
 Jane: There is only one slice of
leftover pizza, and there is nothing
else in the refrigerator.
 Fred: It has been a really busy day
today, and I’m really hungry.
 Jane: Well, I’m hungry too.
 Fred: To tell you the truth, I haven’t
eaten all day.
 Jane: Frankly, I don’t see how this one
slice can satisfy you.
 Fred: You know I love pizza.
 Jane: Yes, but I kind of like it too.
 Fred: You are being uncooperative.
 Jane: You are being inflexible.
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DIALOG
(Business Distributive Bargaining)
 Alex and Fred are negotiating
and both don’t want to give
anything (distributive bargaining).
 Alex: Our price of 25.50 USD per
unit is firm.
 Fred: Unless you lower your
price, we can’t agree.
 Alex: This is our bottom line.
There is no flexibility on this
issue.
 Fred: To be honest, we cannot
sell this product in the market at
this price.
 Alex: Because of our emphasis
on quality, we don’t have any
space to maneuver. This is the
lowest we can offer.
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DIALOG
(Business Distributive Bargaining)
 Fred: We cannot make progress
if you don’t agree to a 20 percent
discount. This is the highest we
can offer.
 Alex: There is simply no way we
can give you a discount.
 Fred: If you are so unyielding, this
negotiation will reach a deadlock.
 Alex: If you don’t accept this offer,
we will have to withdraw the
package.
 Fred: That is an ultimatum we
cannot accept. If you cannot give
us a discount, we will have to find
another supplier.
 Alex: There is no reason to
become hostile. The 25.50 price
really is our final offer.
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DIALOG
(Business Distributive Bargaining)
 Fred: We can agree on the need
to wrap up this deal, so we will
offer 21. We cannot make this
offer again.
 Alex: The implication of this price
is that we lose 4.50 on each unit.
Although I would like to give you
what you want, we cannot take a
loss on this deal.
 Fred: This is pointless. Our
customers simply won’t pay
more.
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VOCABULARY
 Deadlock (n): Negotiations stop because both sides will not change their
demands.
 Final Offer (n): The last offer; Often used to pressure the other side; The
bottom line.
 Firm (adj): Unchangeable; An offer or part of an offer that cannot be
changed.
 Hostile (adj): Not friendly; A negotiator who is strongly against something.
 Maneuver (v): The negotiator’s flexibility to compromise, Changing options
in the negotiation.
 Pointless (adj): A negotiation or an offer that is not helpful; an offer that is
not useful.
 Take a loss (phrase): Losing money on the offered deal; A way to reject an
offer that is not favorable.
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VOCABULARY
 Ultimatum (n): A final demand that cannot be refused or negotiation will end.
 Uncooperative (adj): A negotiator or team that will not compromise.
 Unyielding (adj): A negotiator who does not give in; A negotiation position
that is not changed.
 We cannot make this offer again (phrase): Giving pressure to the opposition
through a time limit; After some time, the current offer will be cancelled.
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FOLLOW UP
 In distributive bargaining,
the goals of both sides are in
conflict.
 Resources are fixed, like a
pizza. If Fred takes one slice
of pizza, that means Jane will
get one slice less.
 If Fred wants more and Jane
wants more, someone will win
and someone will lose.
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FOLLOW UP
Secret
 For the buyer, a distributive negotiation
Buyer’s
begins with what the best deal is (the target Resistance
point) and the worst deal that is still
Point
acceptable (the resistance point).
 A target point is the actual desired result,
while anything beyond the resistance point
cannot be accepted. Both the target point
and the resistance point are secret and
should not be told to the seller.
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Secret
Buyer’s
Target
Point
FOLLOW UP
 The seller has a public price
the buyer can see, which
may be the list price.
 At the start of the negotiation,
one value is public (everyone
can see it), while two values
are secret.
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Public
Seller’s
Asking
Price
FOLLOW UP
 The first step if for the buyer to decide how much
the first offer (initial offer or starting offer) should
be.
 The first offer should be lower than the target
point. Since the seller will try to raise the price,
the buyer should begin under his/her target so as
to increase the chance of getting close to the
desired target.
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FOLLOW UP
 If the buyer’s first offer is too low for the seller, the
seller will not want to sell.
 This means the first offer must be higher than the
seller’s resistance point.
 This point, however, is secret and the buyer must
try to guess that it is.
 All negotiation must fit between the two resistance
points. This is called the bargaining zone.
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FOLLOW UP
 The Buyer’s View
 If the price is too low for the seller, he/she will
walk away from the negotiation.
 If the price is too high for the buyer, he/she will
walk away from the negotiation.
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FOLLOW UP
 Each side must have their own goals clear and guess
what the other side’s secrets.
 The buyer’s first offer must not be below the seller’s
resistance point (too low), while also trying not to go
above the seller’s target point.
 Higher than the seller’s target point, the seller will
agree to the offer quickly.
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FOLLOW UP
A buyer’s first offer would be best if it is
above the seller’s resistance point while
also below the seller’s target point.
Starting out below the buyer’s own target
point is also a good idea, because the price
will rise during negotiation.
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FOLLOW UP
 The Buyer’s View
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