Define the key differences between distributive and integrative negotiations.

According to Thompson and Hastie (1990) a two party distributive negotiation initial interaction
solidifies the mental model of the negotiation, which could either result in a trusting or
competitive script that carries through the negotiation. A trusting script can be more or less seen
as a integrative negotiation between two parties and a competitive script is more likely a
distributive negotiation. Distributive negotiation is related to no future relationship or no previous
relationship. Both parties want to gain the most in the amount which is divided and it can often
lead to hard situations in a sense that one of both parties is going to take the biggest part of the
deal. Both parties have limited resources and each of the negotiators wants to take the largest
piece of the pie which often results in a winner and a looser.
An integrative situation is a situation where it is possible to create a greater outcome for both
parties than either could reach on his own. When cooperation benefits both parties it is most
common used negotiation. In an integrative negotiation both parties are willing to compromise in
order to create goodwill for later. The integrative negotiation rather seeks for an optimal solution
for both parties rather than willing to gain the most if the deal. The negotiators try to look at the
interests of both parties and thereby creating a mutual gain and agreement.
Discuss the three strategies for effective negotiation (based on your readings for the
class). Provide examples.
My following findings mostly resulted from the article of Maltholtra and Bazerman (2008) which
was part of required readings for the class. In their article they discuss different kind of
strategies in order to result in effective negotiation.
Firstly I have chosen influence based on escalation of commitment. This strategy predicts or is
based on the escalation of commitment of one of the negotiators. The negotiator has put in
already a lot of effort and would take the next step in the negotiation much more easily than he
normally would do. One simple agreement in the starting phase of a negotiation can end up in
larger requests in the future. This tactic of escalation of commitment can be used in a variety of
ways in negotiation. For example, a negotiator may more easily obtain approval for a large sale
after the buyer has agreed to a smaller initial purchase(Green, 1965). For example this is
happening in my own life very often. Since I am having my own Firm Diecks, friends and
business partners are trying this every day. In Dutch it is called Ik geef je de vinger en je pakt
de hand. For example they ask for advertising on t-shirts I am providing to many field hockey
players. They compensate in this or other fields in order make me more easily agreeing on the
negotiation deal. After you discuss the first option, for example small advertisement, and you
agree then secondly they will ask for something more. Is it also possible to get the name of my
company bigger and up front on the t-shirt? This all refers to my escalation of commitment. It
can also be interesting in when someone is asking more and more over again (example;
employee vs employer) in order to get the highest amount of work out of an employee. This can
be seen as positively or negatively from different perspectives.
Secondly influencing based on the overweighting of social comparisons. This proposition as
said in the case; negotiators who are perceived to have many (rather than few) alternatives will
be considered more attractive negotiation partners, will be less likely to have others negotiate

aggressively with them, will more easily reach an agreement, and will capture a higher
percentage of the value in negotiations. In my opinion this negotiation strategy definitely works.
Today I had call with Unilever in order for me to get a position at the company and they have
asked if I am having more options or if I am also busy with other companies. My answer was a
no and at that moment I realized they could give me a lower position or salary or something
else. It gave them a better negotiation position, because in this case I am having few
alternatives a can be seen as a less attractive negotiation partner.
The last one; Influence based on the ability and motivation to process information can be seen
as an effective strategy to. Greenberg and Tannenbaum (1961) and Mills and Harvey (1972) find
that when the source of information being provided is highly credible, arguments are more
persuasive when the source is revealed at the beginning rather than the end of the message.
For example telling a really reliable and credible argument makes the other negotiator think that
the argument is less relevant to the deal then talking about it in the beginning. After trying to get
to a deal but not really reaching it, I would re-evaluate or think that the argument delivered in the
end of the negotiation would feel less important than if it was said in the beginning. So starting
off with the high-importance issues and justifying them in the beginning would be a good idea
when dividing an equity split in the case of Michael and co.
In the Updown case, was the November agreement on equity splits a good idea? Is reevaluating the agreement now a good idea?
My feelings about the initial equity split of the November agreement were good. All of the
players agreed on being equal partners. As being equal partners they could all expect the same
amount of effort putting in the firm and provides commitment to each other. Moreover the
agreement showed that the relationship was a trustful one, because of they all thought that it
could be achieved within the limited amount that they have got. In addition they all agreed on
Michael receiving slight more equity op to five additional percentage points. Still after a few
months problems arrived, because of the funding of the company and secondly because of
changing intentions and actions of Michaels business partners. In my opinion the November
agreement was a good starting point, only Michael and the others should have been thinking of
more issues which could arise during the start-up.
Re-evaluating would definitely be a good idea, because firstly Michael is putting way more time
than the other to two at that point in time. George was away during summer and considered an
internship and Phuc was already working for one other company in which he received a salary.
After a few months Michael still carried most of the workload and revised the equity split to, for
him receiving nine points more on the equity split of November. Because of team members not
committing to the one page agreement made in November Michael could revise the company
setup and equity distribution. For example one of the agreements was that equity can be
obtained by working for the company and/or contributing capital, which was not happening in
the Updown case because of Phuc is working for the consulting company and George planned
to stay in Island for the summer. A problem of this part of the agreement in my opinion is that it
is hard to measure what and how much time people are actually putting in the company.
Furthermore, Joachim was investing in the firm so he should receive a share in Updown as well.
The occurrences which happened after the November agreement should be re-evaluated and
new decisions regarding dividing the share must be made in order to create better conditions.

What is the optimal equity split that you would purpose at the end of the case?
In order to reach the optimal solutions regarding the equity spilt at least some of the players
have to make concessions based agreements made on beforehand. All of the players have to
realized that this deal has to be revised in order to create the optimal split up.
I will discuss all of the incremental changes or all of the issues which needed to be negotiated
within the founding team. By analyzing the text and giving arguments for slight changes my
optimal equity split up would be this.
As known Michael deserves more then he receives now, because of the highest commitment,
bringing in investors and thereby funding. Furthermore his share shouldnt grow above 50%
because of his lack of knowledge about as well as marketing Sales as programmer
development which are in hands of George and Phuc. I would agree on his purpose to receive
up to in 9 points more than the initial November agreement. Lets say he would get up to 44%.
In order to get more commitment from Phuc a large percentage of 30% would be good, because
of his skills in programmer making else the company couldnt finish the product and this is of
course vital. Moreover George would get the rest 25%. Since George is not really committed
and isnt really contributing that much in terms of hard data or work at this moment in time. The
last percent goes to Warren for his help in the first part of the start-up.
Phucs salary would be low in the beginning and could raise during the process if he delivers
content for the firm. In this way he can show his commitment and trust in others. This could
raise if the work is of high quality which benefits himself in share, because of company results
and his salary would go up also.
The allocation of seed equity goes to a 37.5 % Michael and George because of their small
contribution of 5000 in the starting phase of the firm. And the rest would go to Phuc 25%.
Michael and George are now slightly rewarded for this initial investment.