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Strategy and Tactics of

Distributive Bargaining
M/s. S. Shri
Research scholar(socail Science & Humanities)

McGraw-Hill/Irwin

2-1

2006 The McGraw-Hill Companies, Inc., All


Rights Reserved

Foundational Overview

Business
Negotiation

Distributive

Integrative

Multiparty

Cross Cultural Component


Importance of negotiation

The Distributive Bargaining


Situation
Goals of one party are in fundamental , direct
conflict to another party
Win-Lose

Resources are fixed and limited


The more one gets, the less the other gets

Maximizing ones own share of resources is the


goal

Opinions on Distributive Bargaining


1. Some people like it: Regardless, you
-- they define
need to know it
Negotiation as
because:
distributive.
1. Some situations
2. Others:
Avoid it at all costs
Destructive

require it
2. Needed when we
Claim Value in
Win-Win
negotiations
3. Some like to use it
against you.

Summary of Use
We use this strategy for:
One-Time Deals: Car Purchase

When:
Relationship is not important

Or:
When we reach the Claiming Value stage
of other negotiation strategies

The Distributive Bargaining


Situation
Need advance preparation to set a:
Target point, aspiration point
What we would like to get

Walk-away or resistance point


What price we will not go beyond

Asking price or initial offer


People expect a give and take
Need to consider this activity
Danger: too high or too low

The Distributive Bargaining


Situation
Party A - Seller
Walkaway Point

Initial Offer
Party B - Buyer

Target Point

Target Point

Asking Price

Walkaway

The Role of Alternatives to a


Negotiated Agreement
Alternatives = power to walk away from
the negotiation
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

Fundamental Strategies
1. Push for settlement near opponents
resistance point
2. Get the other party to change their
resistance point
3. Convince the other party that the
settlement is the best possible

Keys to the Strategies


The keys to implementing any of the four
strategies are:
1. Discovering the other partys resistance
point
2. Influencing the other partys resistance
point

Information is valuable target price,


motives, feelings, confidence

Tactical Tasks of Negotiators


Assess outcome values and the costs of
termination for the other party
Manage the other partys impressions
What they think about your offer

Modify the other partys perceptions


What they think about their situation

Manipulate the actual costs of delay or


termination

The Piano

What was the


value of
information
in this
example?

Manage the Other Partys


Impressions

1. Screen your behavior:

Say and do as little as possible

2. Selective presentation:
Use a representative (realtors, car dealers, one way information)
Snow Job/ Kitchen Sink (unrelated information, used to hide
important info)

3. Direct action to alter impressions:


Present facts that enhance ones position
If I accept / implement your offer, these are my
costs/risks

4. Use emotion or time to show/hide importance

Modify the Other Partys


Perceptions
Make outcomes appear less attractive
Add the extra activities, risks

Make the cost of obtaining goals


appear higher
Make demands and positions appear
more or less attractive to the other
party whichever suits your needs

Positions Taken
During Negotiations
Opening offer Who?
First offer generally has
advantagesets anchor.

Opening stance -- what


is your attitude?
(competitive, moderate)
Belligerent - powerful
Matching stance - equal
Lets be reasonable
people who can solve the
problem

Where will you start?


(modest or exaggerated)
Exaggerated:
Room to negotiate
Signal a lot of work to
progress/ signal need
for concessions
Error in planning by
other side (they
estimated wrong)
Foolish, rejected, may
damage relationship

Moderate (expected)

Guidelines for Making


Concessions

Commitments: Tactical
Considerations
Establishing a commitment
Three properties:
Finality, Specificity, Consequences

Preventing the other party from


committing prematurely, why?
Their commitment reduces your flexibility
Sometimes viewed as a threat
Both parties may become stuck,
deadlocked.

Closing the Deal


1.
2.
3.
4.
5.

Provide alternatives (2 or 3 equal value options)


Assume the close (Start the paperwork)
Split the difference (Assumes both sides started with fair initial
offers)
Exploding offers (expires in 24 hours, preventing party from
developing other alternatives)
Deal sweeteners (bonuses, upgrades for a car)

Summary
Negotiators need to:
Set a clear target and resistance points
Understand and work to improve their BATNA(Best
Alternative to a Negotiated Agreement)BATNA is relative
to the possible settlements available in the current
Negotiation
Start with good opening offer
Make appropriate concessions
Manage the commitment process