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INB 350 Lecture
By: Ms. Adina Malik (ALK)

T HE D ISTRIBUTIVE B ARGAINING
 Distributive Bargaining occurs when the goals of one party are in fundamental and direct conflict with the goals of the other party.
 It is also called Competitive , or Win-Lose Bargaining
 Both parties want to Maximize the Value obtained in a single deal.
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 Conflicting Goals
 Resources are fixed and limited
 Time is limited
 Relationship is not important
 Maximizing one’s own share of resources is the goal
 A conflict situation
 Every party has to use this strategy during claiming value stage
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Things to know:
 Target point (aspiration point, optimal goal, preferred price)
 Walk-away (bottom line, resistance point, reservation price)
 Asking price (seller)
 Initial offer (buyer)
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION
Mr. Rahim (Buyer) wants to buy a 55 inch LED TV. His target price is TK. 135,000. His resistance point , the price beyond which Mr. Rahim won’t go, is TK. 150,000. So TK. 150,000 is the reservation point or bottom line –the most he will pay as a buyer and the least amount for which the seller will settle for.
Now Mr. Helal (The Seller) is selling a 55 inch LED TV and his asking price is TK. 145,000, which is also known as initial offer .
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION
Party A - Helal- Seller
Walkaway Point Target Point Asking Price
TK 145,000
Initial Offer Target Point Walkaway Point
TK 135,000 TK 150,000
Party B – Rahim- Buyer
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION
 Deciding Initial Offer of the Buyer (Rahim):
 Mr. Rahim cannot open negotiation at his target point
(135,000 TK). He has to make lower initial offer to make room for making concession.
 If Rahim open negotiation at his target point afterward when he has to make concessions then he will move more closer to the resistant point.
 However if the buyer (Rahim) makes the first offer too low (TK 100,000) the seller might break off negotiation believing the buyer is not interested* .
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION
Party B – Rahim- Buyer Party A - Helal- Seller
R- Initial P
130,000 133,000
R- Target Point
135,000 140,000
H- Initial P
145,000
R- Res. P
150,000
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION

 Starting points* are disclosed in the opening statement. (133,000 – Mr. Rahim)
 Target points are usually learned or inferred as negotiations proceeds, however , it is not usually disclosed at first.
 Reservation points should always be kept secret.
( 150,000 – Mr. Rahim)
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION
Party A - Helal- Seller
Party B – Rahim- Buyer
H- Res P inferred
R- Initial P
Public
R- Target Point
Private
H- Target P inferred
H- Asking P public
R- Res. P private
Tk.
130,000
Tk.
133,000
Tk.
135,000
Tk.
140,000
Tk.
145,000
Tk.
150,000
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T HE D ISTRIBUTIVE B ARGAINING
S ITUATION : B ARGAINING R ANGE
 The spread between the resistance points (150-130) called the Bargaining Range/Settlement Range/Zone of
Potential Agreement.
 If the buyer’s resistance point is above the seller then there is a positive bargaining range (130 - 150)
 If the seller’s resistance point is above the buyer then there is a negative bargaining range (130-125)
*This thing can be resolved only if one or both parties are persuaded to change their resistance points
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T HE R OLE OF A LTERNATIVES TO A
N EGOTIATED A GREEMENT
 Alternatives give the negotiator power to walk away from the negotiation: BATNA


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
 Negotiators need to have clear understanding of their BATNA.
Good bargainers always try to improve their alternatives. BATNA clarifies what the negotiators will do if the agreement is not reached
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T HE R OLE OF A LTERNATIVES TO A
N EGOTIATED A GREEMENT
Party B – Rahim- Buyer
Party A - Helal- Seller
H- Res P inferred
R- Initial P
Public
R- Target Point
Private
H- Target P inferred
H- Initial P public
R- Res. P private
130,000 133,000 135,000
H- Alternative
Private
134,000
140,000 145,000
R- Alternative
Private
142,000
150,000
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S ETTLEMENT P OINTS
 The fundamental process of distributive bargaining is to reach a settlement within a positivebargainingrange .
 The agreement should be the best possible result both the parties could get - both the parties should be satisfied with the outcome.
 Both parties should belief that the settlement is the best they can get (although it might be less desirable than their preference).
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B ARGAINING M IX
 In almost all negotiations, agreement is necessary on several issues:
 Price
 Closing Date* of the sale
 Other items related to the agreement
 The package of issues for negotiation is the bargaining mix.
Each item in the mix has its own starting, target and resistance points.
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F UNDAMENTAL S TRATEGIES
1.
2.
3.
4.
The prime objective of distributive bargaining is to maximize the value of the current deal.
There are four fundamental strategies:
Push for settlement near opponent’s resistance point
Get the other party to change their resistance point
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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
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K EYS TO THE S TRATEGIES
The keys to implementing any of the four strategies are:
 Discovering the other party’s resistance point
 Information is the life force of negotiation
 Influencing the other party’s resistance point
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The value the other attaches to a particular outcome
The cost the other attaches to delay or difficulty in negotiation
The cost the other attaches to having the negotiation aborted
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T ACTICAL T ASKS OF N EGOTIATORS
Tactics:
 Assess the other party’s target, resistance point, and the costs of terminating negotiation
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

Manage the other party’s impressions
Modify the other party’s perceptions
Manipulate the actual costs of delay or termination
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T ACTICAL T ASKS OF N EGOTIATORS
Assess the other party’s target, resistance point, and the costs of terminating negotiation
 Indirect Assessment: Determining what information an individual likely used to set target and resistance points and how he or she interpreted this information.
 Direct Assessment: Opponent reveals the accurate information when pushed to the absolute limit and in need of a quick settlement (time shortage).
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T ACTICAL T ASKS OF N EGOTIATORS
Manage the Other Party’s Impressions
 Important Tactical Taskconceal and control information (target and resistance points) sent to other party.
 Screening activities are more important at the beginning of the negotiation, and direct action is more useful later on.
 Screen your behavior:
 Say and do as little as possible. ‘Silence is golden.’
 Direct action to alter impressions:
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Present facts that enhance one’s position
Negotiators should justify their case through selective presentation - presenting facts necessary to support their cases.
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D
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 Displaying emotional reaction to facts, proposals, and possible outcome is another form of direct action-
 A loud, angry outburst or an eager response; disappointment or enthusiasm-> important issue

 Casual acceptance; boredom or indifference-> trivial issue or unimportant
Presentation of Information
 Elaborate-> important
 Concise-> trivial
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P
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 At the beginning of the negotiation each party takes a position.
 Changes in position will occur as new information concerning the other’s intention, the value of outcomes, concessions, and likely zone for settlement will come fore.
 Opening offer
 Where will you start?
 Too Low
 Too High
 Modest
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P OSITIONS T AKEN
D URING N EGOTIATIONS

 What is your attitude?

Competitive? Moderate?

A reasonable bargaining position is usually coupled with a friendly stance

An exaggerated bargaining position is usually coupled with a tougher more competitive stance
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P OSITIONS T AKEN
D URING N EGOTIATIONS
 Final offer (making a commitment)
 “This is all I can do” or ‘’This is as far as I can go’’
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C OMMITMENT
 Commitment is an agreement or pledge to do something in the future.
 It removes ambiguity about the actor’s intended course of action.
 However it also limits the option and sometimes interpreted as threat to other party.
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C
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 Three properties: A high degree of Finality , a high degree of
Specificity & a clear statement of Consequences . For example:
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We need a raise or there will be trouble (less powerful)

We must have 10% raise in our salary or we will go for strike from next month (more powerful)
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S UMMARY
:
Stg-1: Assess your BATNA and improve it
Stg-2: Determine your reservation point but do not reveal it.
Stg-3: Research other party’s BATNA and estimate their reservation point
Stg-4: Set high Aspiration: but do not pursue lowball/highball tactics
*Unrealistically low/high estimate (bid)
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S UMMARY
Stg-5: Make the first offer
 if you are prepared and have sufficient information make the first offer because it act an anchor point.
Stg-6: Appear to norm of fairness
Stg-7: Plan your concessions
Stg-8: Try not to exceed your reservation point
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