2 strategy and tactics of distributive bargaining

LOGO:2.2TheDistributiveBargainingSituationACaseLarrydecidedtobuyanewcondo.Theseller,Megan,settheaskingpriceat$145,000,whichwas$10,000abovewhatLarryhopedtopaybut$5,000belowthemosthewouldbewillingtopay.2.2TheDistributiveBargainingSituationThepointatwhichanegotiatorwouldliketoconcludenegotiationsThepointbeyondwhichanegotiatorwillnotgoandwouldratherbreakoffnegotiationsTheinitialpricesetbythenegotiatorTargetpointResistance(Reservation)pointAskingprice2.2TheDistributiveBargainingSituationNote:•Foraseller,resistancepointisthesmallestamounthe/shewillsettlefor.•Forabuyer,resistancepointisthemosthe/shewillpay2.2TheDistributiveBargainingSituationTherangeofpossiblepricesThebuyer’sviewofthehousenegotiationLarry’sMegan’sLarry’stargetaskingresistancepointpricepoint$130000$135000$140000$145000$1500002.2TheDistributiveBargainingSituationBargainingrange(settlementrangeorzoneofpotentialagreement):Thespreadbetweentheresistancepoints.Positivebargainingrange:Whenthebuyer’sresistancepointisabovetheseller’s.Negativebargainingrange:Whentheseller’sresistancepointisabovethebuyer’s.Negotiationsthatbeginwithanegativebargainingrangearelikelytostalemate.Figureofbargainingrange2.2TheDistributiveBargainingSituationNote:(1)Bothpartiestoanegotiationshouldestablishtheirstarting,targetandresistancepointsbeforebeginninganegotiation.•Startingpointsareintheopeningstatementseachpartymakes.•Thetargetpointislearnedorinferredasnegotiationsgetunderway.•Theresistancepointshouldbekeptsecret2.2TheDistributiveBargainingSituation(2)Theparties’startingandresistancepointsarearrangedinreverseorderwiththeresistancepointbeingahighpriceforthebuyerandalowpricefortheseller.(3)Thefoundamentalprocessofdistributivebargainingistoreachasettlementwithinapositivebargainingrange.2.2TheDistributiveBargainingSituationBargainingmixDefinitionofbargainingmix:Thepackageofissuesfornegotiationisthebargainingmix.Eachiteminthemixhasitsownstarting,targetandresistancepoints.E.g.inLarryandMegan’scase:Asecondaryissueimportanttobothpartiesistheclosingdateofthesale.Thedateofsaleispartofthebargainingmix.2.3FundamentalStrategiesDiscoveringtheotherparty’sresistancepointInformationisthelifeforceofnegotiation！Case:Thesecond-handpianoBuyer’stargetpoint:$700Seller’saskingprice:$1000Analysis:Ifthesellerhadnotvolunteeredtheinformationaboutthepackerscomingthatafternoon,thebuyermightnothavebeenabletonegotiatetheprice.2.3FundamentalStrategiesInfluencingtheotherparty’sresistancepoint(1)Thevaluetheotherattachestoaparticularoutcome.•Thelesstheotherpartyvaluesanissue,thelowertheirresistancepointwillbe.•Themoretheotherpartybelievesthatyouvalueanissue,thelowertheirresistancepointmaybe.2.3FundamentalStrategies(2)Thecoststheotherattachestodelayordifficultyinnegotiation•Thehighertheotherparty’sestimateofyourcostofdelayorimpasse,thestrongertheotherparty’sresistancepointwillbe.•Thehighertheotherparty’sestimateofhis/herowncostofdelayorimpasse,theweakertheotherparty’sresistancepointwillbe.(3)Thecosttheotherattachestohavingthenegotiationaborted.2.3FundamentalStrategiesManipulatingtheactualcostsofdelayorterminationExtendingnegotiationbeyondadeadlinecanbecostly!(1)Disruptiveaction:Toincreasethecostsofnotreachinganegotiatedagreement.Case:Negotiationbetweenfoodworkersandtheboss2.3FundamentalStrategies(2)Alliancewithoutsiders:Toinvolveotherpartieswhocansomehowinfluencetheoutcome.(3)SchedulemanipulationCase:SmartJapanese2.4PositionsTakenduringNegotiationOpeningofferWhethermakingthefirstoffer?Doesmakingthefirstofferleadtoabetteroutcomeforyou?--Yes,ifyou’recertainofyourcounterpart’sBATNA.Andinthissituation,firstoffercananchoranegotiation.--Notnecessaryifyouareuncertain.2.4PositionsTakenduringNegotiationWethermakingexaggeratedopeningoffer?•Negotiatorswhomakeexaggeratedopeningoffersgethighersettlementthandothosewhomakelowormodestopeningoffers.Case:Awrongopeningofferresultingabetteroutcome2.4PositionsTakenduringNegotiationOpeningstanceCompetitivestancevs.ModeratestanceAnegotiatorshouldtrytosendaconsistentmessagethroughboththeopeningofferandstance.2.4PositionsTakenduringNegotiationConcessionsQ1:Afterthefirstroundofoffers,whatmovementorconcessionsaretobemade?Q2:Ifconcessionsaretobemade,howlargeshouldtheybe?NoteItisnotanoptiontoescalateone’sopeningofferNoteThefirstconcessionconveysamessagetotheotherpartyabouthowyouwillproceedGuidelinesformakingconcessions•1.Giveyourselfenoughroomtomakeconcessions.•2.Trytogettheotherpartytostartrevealingtheirneedsandobjectivefirst.•3.Usetrade-offstoobtainsomethingforeveryconcessionyoumake.•4