What I have learned about the art and science of negotiation
201100020146 Wang ruo lin
The Elmtree House case is a classic example of Distributive
Bargaining which better shows us the whole process of negotiation. In
this case, the seller, Elmtree House represented by Steve , received an
indication of buying the Elmtree property from Wilson, representative of
a combined architectural and developmental contractor. After an informal
phone call by Steve, the two parties had their first meeting discussing the
possibilities. Based on careful investigation of the other party, Steve
started making preparations for the coming negotiation. Details like their
own reservation price, their possible alternatives, their target price, the
assessment of the other party’s reservation price, their strategy, the
support team, the first offer or counteroffer, the role of time are all taken
into account. After the first round of negotiation, Steve realized the broad
gap between the other’s initial offer and his aspiration, then he reassessed
the other’s reservation price, made cautious concession and persuaded the
other party to give in as well in the following rounds of negotiation. Due
to his proper strategy and tactic, Steve finally closed the deal at a
satisfactory price, much close to his aspiration.
This successful case enlightens me a lot by deepening my
understanding of the science and art of negotiation. There are so many
factors to consider before and during the negotiation process, which I
have no idea about before. For example, at the very beginning when
Steve met his opponent, he didn’t talk about money matters, neither did
he mention a word concerning the governing board’s intention of looking
for other locations. All he did was sounding out Wilson and finding out
what he might have in mind. This is called “playing hard to get”, that is to
create an illusion that he didn’t rush to get the house off his hands, which
may help him win the initiative of the negotiation since the opponent
showed his request of talking about money at once.
The second point deserves mention is that a prominent negotiator
should be well-rounded in various fields such as calculating, analyzing,
estimating, and so on. In the Elmtree House case, the reservation price
was difficult to decide, however, Steve worked it out by ascertaining the
reset prices and analyzing the moving costs of the two possible sites to
locate through investigating and calculating. Then he consulted local
realtors and real estate experts to find out what the House would bring if
sold on open market, which may serve as his alternative. Next, he tried
hard to estimate the other party’s reservation price so that he could make
proper offer during the negotiation. As Sun zi put it, “Know yourself and
your enemy, you will win every war”.
Another point is never reveal your real idea or let out your information.
In this Elmtree House case, Steve tried not to move first in case that his
initial offer might be much lower or higher than the rival’s true
reservation price. This is much like a gamble, both sides want to know
the other’s reservation point but hide their own. The first offer might not
reflect one’s real reservation, sometimes it only serves as a feeler. For
instance, Wilson’s first offer was 125grand, much lower than Steve’s
reservation price 220grand. If Steve takes this offer as a reflection of
reservation price, he might lose the negotiation. Even when your rival’s
offer is close to what you want, don’t let him know that. We see from the
case that when Wilson increased his offer to 250grand, Steve failed to
contain himself and blurted out his real thought, which we should take
notice of.
Last but not the end, preparing a face-saving reason for your opponent
to make concession is necessary. Take this case as an example, Steve
hoped to increase the selling price a bit although it seemed that 300grand
was fixed to Wilson. In order to achieve his goal, Steve adopted flexible
measures, he accepted the 300grand as the transaction price but suggested
Wilson to make a tax-free gift to Elmtree House for Elmtree’s Financial
Aid Fund for needy residents, which not only raised his profit but also
gave the other party a face-saving reason to make concession because it
provided the opponent with a nice reputation of doing good for the
society.
These are what I have learned from the Elmtree House case.