Monday, December 04, 2006

Negotiation Chapter 3:Strategy and Tactics of Distributive Bargaining

Chapter 3: Strategy and Tactics of Distributive Bargaining

In a distributive bargaining situation, the goals of one party are usually in fundamental and direct conflict with the goals of the other party. Resources are fixed and limited, and both paties want to maximize their share of the outcomes to be obtained. Distributive bargaining is basically a competition over who is going to get the most of the limited resource.

There are two reasons that every negotiator should be familiar with distributive bargaining. First, some interdependent situations that negotiators face are distributive, and to do well in them negotiators need to understand how they work. Second, because many people use distributive bargaining strategies and tactics almost exclusively, all negotiators will find it improtant to know how to counter their effects.

The distributive bargaining situation
Both parties to a negotiation should establish their starting, target, and resistance points, at least implicitly, if not explicitly, before beginning a negotiation.Starting points are usually in the opening statements each party makes. The target point is usually learned or inferred as negotiations get under way. People typically give up the margin between their starting points and target points as they make concessions. The resistance point, the point beyond which a person will not go and would rather break off negotiations, is not known to the other party and should be kept secret.

The spread between the resistance points,called the bargaining range, settlement range, or zone of potential agreement, is particularly importnt. In this area the actual bargaining
takes place, for anything outside these points will be summarily rejected by one of the two negotiators.

The role of alternatives to anegotiated agreement
In addition to opening bids, target points, andresistance points, a fourth factor may enter the negotiations; an alternative outcome that can be obtained by completing a different party. An alternative point can be identical to the resistance point, although the two do not necessarily have to be the same.

Alternatives are important because they give the negotiator power to walk away from the negotiation when the emerging deal is not very good.

1. Settlement point – The fundamental process of distributive bargaining is to reach a settlement within a positive bargaining range. The objective of both parties is to obtain as much of the bargaining range as possible – that is, to get the settlement as close to the other party’s resistance point as possible.
2. Bargaining mix – Each item in the mix has its own starting, target, and resistance points. Negotiators need to know what is important to them and to the other party, and they need to make sure they take these priorities into account during the planning process.

Fundamental Strategy

The prime objective in distributive bargaining is to maximize the value of this single deal. In all distributive bargaining situations, there are two important tasks: 1) discovering the other party’s resistance point, and 2) influencing the other party’s resistance point.

1. Discovering the other party’s resistance point. The more you can learn about the other party’s outcome values, resistance point, motives, feeling of confidence, and so on, the more able you will be to strike a favorable agreement.

2. Influencing the other party’s resistance point
The following factors are important in attempting to influence the other person’s resistance point: 1) the value the other attaches to a particular outcome, 2) the costs the other attaches to delay or difficulty in negotiations, and 3) the cost the other attaches to having the negotiations aborted.

To explain how these factors can affect the process of distributive bargaining, we will make four major propositions :
· The other party’s resistance point will vary directly with his or her estimate of the cost of delay or aborting negotiations.
· The other’s resistance point ill vary inversely with his or her cost of delay or aborting.
· A resistance point will vary directly with the value the other party attaches to that outcome.
· The other’s resistance point varies inversely with the perceived value yhe first party attaches to an outcome.

Tactical tasks
There are four important tactical tasks emerging for a negotiatot in a distributive bargaining situation:
1. Assess Outcome Value and the Costs of Termination. An important first step for a negotiator is to get information about the other party’s outcome values and resistance point. The negotiator can pursue two general routes: getting information indirectly about the background factors behind an issue (indirect assessment) or getting information directly from the other party about outcome values and resistance points (direct assessment).

2. Manage the other party’s impressions. As a negotiator, an important tactical task may be to prevent the other party from getting accurate information about his/her position by screening actual information about positions and representing them to the other to believe them.
· Screening activities. The simplest way to screen a position is to say and do as little as possible.
· Direct action to alter impressions. Negotiators can take many actions to present facts that will directly enhance their position or at least make it appear strongeer to the other party by using Selective Presentation, in which negotiators reveal only the fact necessary to support their case and lead the other party to form the desired impression of their resistance point ot to open up new possabilities for agreement that are more favorable to the presenter than those that currently exist.

3. Modify the other party’s perceptions. Thera are several approaches to modifying the other party’s perceptions:
· To interpret for the other party what the outcomes of his or her proposal will really be.
· To modifying the other’s perceptions is to conceal information.

4. Manipulate the actual costs of delay or termination. There are three ways to manipulate the costs of delay in negotiation:
· Plan disruptive action.
· Form an alliance with outsiders.
· Manipulate the scheduling of negotiations.

Positions taken during negotiation

Effective distributive bargainers need to understand the process of taking a position during bargaining and the role of making concessions during the negotiation process.

· Opening offer. There are at least two reasons that an exaggerated opening offer is advantageous. First,it gives the negotiator room for movement and allow him or her time to learn about the other party’s prioeities. Second, an exxaggerated opening offer acts as a metamessage and may create. Two disadvantages of an exaggerated opening offer are 1) that it may be summarily rejected by the other party, and 2) that it communicates an attitude of toughness that may be haemful to long-term relationships.

· Opening stance. To communicate effectively, a negotiator should try to send a consistent message through both opening offer and stance.

· Initial concessions. It is important to note that the first concession conveys a message, frequently a symbolic one, to the other party about how you will peoceed.

· Role of concessions.
People enter negotiations expecting concessions. Good distributive bargainers will not begin negotiations with an opening offer too close to their own resistance point, but rather will ensure that there is enough room in the bargain range to make to make some concessions. Because concession making indicates an acknowledgment of the other party and a movement toward the other’s position, it implies a recognition of that position and it s legitimacy.

· Pattern of concession making
The pattern of concessions anegotiator makes contains valuable information, but it is not always easy to interpret. When successive concession get smaller, the most obvious message is that the concession maker’s position is getting firmer and that the resistance point is being approached.

· Final offer.
Eventually anegotiator wants to convey the message that there is no further room for improvement – that the present offer is the final one.

Commitment is the taking of a bargaining position with some explicit or implicit pledge regarding the future course of action. The purpose of commitment is to remove ambiguity about the actor’s intended course of action. By making a commitment, a negotiator signals his or her intention to take this course of action, make this decision, or pursue this objective.

1. Tactical considerations in using commitments.
Commitments are two-edged. They may be used to gian the advantages or fix a negotiator to a particular position or point. Commitment exchange flexibility for certainty of action, but they create difficulties if you want to move to a new position.

2. Establishing a commitment.
A commitment statement has three properties: a high degree of finality, a high degree of specificity, and aclear statement of consequences. There are several ways to create a commitment :
· Public pronouncement.
· Linking with an outside base.
· Increase the prominence of demand.
· Reinforce the threat or promise.

3. Preventing the other party from committing prematurely.
All the advantages of a committed position work against a negotiator whrn the other party becomes committed. Therefore, a general strategy is to try to keep the other from becoming commited. One wa\y to prevent the other party from establishing a commited position is to deny him or her the necessary time.

4. Finding ways to abandon a committed position.
· Plan a way out.
· Let it die silently.
· Restate the commitment.
· Minimize the damage.

Closing the deal
There are several tactics available to negotiators for closing a deal; choosing the best tactic for a given negotiation is as much amatter of art as science.

· Provide alternatives. Negotiators can provide two or three alternative packages for the other party that are more or less equivalent in value.
· Assume the close. After having a general discussion about the needs and the positions of the buyer, often the seller will take out a large order form and start to complete it.
· Split the difference.The negotiator using this tactic will typically give a brief summary of the negotiation and suggest that, because things are so close, while this can be an effective closing tactic, it does presume that the parties started with fair opening offer.
· Exploding offers. An exploding offer contains an extremely tight deadline in order to pressure the other party to agree quickly.
· Sweeteners. Another closing tactic is to save a special concession for the close.

Handball tactics
Handball tactics are designed to pressure targeted parties to do somethings they would not otherwise do, and their presence usually disguises the user’s adherence to a decidedly distributive bargaining approach.
1. Dealing with typical hardball tactics. There are four main options that negotiators have for responding to typical hardball tactics:
· Ignore them
· Discuss them
· Respond in kind
· Co-opt the other party

2. Typical hardball tactics.
· Good cop/bad cop
· Lowball/highball
· Bogey
· The nibble
· Chicken
· Intimidation
· Aggressive behavior
· Snow job

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