Leverage In Negotiation

CONTENTS

Distributive Bargaining
Integrative Bargaining
Negotiation Skills in Leveraging
Leveraging power from BATNA
Leveraging the sources of power
Tools for persuasive communication

Distributive Bargaining
Distributive
bargaining
negotiation method
in which two parties
strive to divide a
fixed pool or
resources (often
money), each party
try to maximize its
share of distribution
(share of pie)
Single issue
negotiation, usually
money

Distributive Bargaining
Very highly
competitive in nature
and variety of tactics
used by each party
including unhealthy
ones
Eg: labor unions
threatening to strike
when they know
management cant
afford to lose any
production.

Distributive Bargaining

(contd)

Three main components of

distributive bargaining:
1. Parties involved view each other as
adversaries
2. Objective of both party is to maximize their
self-interest (share of pie)
3. Only concerned about current negotiation, no
consideration of future or past relationship

Distributive bargaining starts with reservation price on both

parties and the existence of ZOPA (zone of possible
agreement)
The eagerness of the other party to reach agreement also plays a crucial
part in negotiation

DISTRIBUTIVE
BARGAINING (CONTD)

Distributive Bargaining

(contd)

Opening offers sellers minimum price and

buyers maximum price
Novice negotiator might accept opening offer and
not negotiate

Anchoring setting the outer limits of the

bargaining and set the discussion at the
chosen point.
3 types of anchor: Facts, extreme offer, precedent

Bracketing logical bargaining process to

meet in the middle between the opening
offers

Distributive Bargaining

(contd)

Once arrived at the agreed price within

the wanted range, how to move on?
1. Guided by social norms and accepted
practices based on context of situation
2. Relational norms overlook maximum
outcomes in favor of a better long-term
positive relationship
3. Fairness norms maintain an appearance of
consistency and fairness
4. Reciprocity norms Human tendency to
respond with equal or similar actions
5. Good faith bargaining expectation of
certain behaviors in bargaining

Integrative Bargaining
Cooperative approach to negotiation
or conflict resolution
Win-win, searching for mutually profitable
options and logical trade-offs
Also known as expanded-pie approach

Parties strive to integrate their

interests as effectively as possible in
the final agreement
Create as much value as possible for both
Claim as much values for their own

Integrative Bargaining
Factor

(contd)

Distributive vs Integrative
Bargaining
Distributive
Integrative

No. of issue
Technique
General
strategy

One
Win-lose
Max share of
fixed fie

Several
Win-win
Expand pie, create
value

Parties
One time
relationship

Continuing, long term

Interests
Possible
options

Share
Many, create new
ones for max mutual
gain

Hidden
One per issue

Information Hidden

Share and explain

Integrative Bargaining
THOMSONS PYRAMID
MODEL
Level 1 : Agreement
Exceeds both parties
reservation points or BATNA
Level 2 : Superior
Agreement Create
additional values for both
parties
Level 3: Pareto Optimal
Maximum value for both
parties

(contd)

Integrative Bargaining

(contd)

5-steps of categorization method

1. Exchange information and identify all of the
issues to be negotiated. Each sides explain its
interest and concerns on the issues
2. Develop a common list of all issues: compatible
(similar), exchange (equal value), distributive
(not compatible and must be distributed)
3. Reach final agreement on each compatible
issues and continue negotiation
4. Trade or exchange issues of approximately equal
value
5. Resolve remaining issues (distributive
bargaining)

Limitations of integrative bargaining:

The inability of the parties to look for and recognize the
compatible and exchange issues, mistaking good intentions
for a good negotiation process
Perception that there is a balance of power between the two
parties
Common cognitive bias, overconfidence

INTEGRATIVE

Integrative Bargaining

(contd)

INTEREST-BASED BARGAINING
improvement to the bargaining
process
Principles of IBB:

Sharing of information
Willingness to forgo power of leverage
Brainstorming to create options
Focusing on issues, not personalities
Leaving past issues behind
Express interests, not positions
Both parties commit to IBB

Integrative Bargaining
(contd)

Emerged in recent years as one of the

most visible innovations in negotiation.
Different philosophy from distributive or
traditional integrative methods of
negotiation.

It requires negotiators to think of themselves

as joint problem solvers who seek solutions
to mutual problems or issues of interest.

The principles and steps of

IBB as follows:1. Sharing of information such as economic
forecasts, cost
2. Willingness to forgo power find mutually
agreeable solutions to issues or concern and
commit to not using their perceived power
3. Brainstorming to create options to identity
new options to resolve the issues. These
options are mutually agreeable to both
parties.

4. Leaving past issues behind

discussions are focused on current
issues and how to resolve them. The
parties agree not to bring up past
disagreements or try to resolve old
issues.

5. Focusing on issues not personality

-discussing the interests, treat
others with respect

6. Expressing interests, not positions

ask probing questions, use analysis
and seek to develop options that
meet the mutual goals of both parties
7. Both parties committing to IBB: both
parties agree to accept and utilize the
IBB process. To practice IBB, both
parties must have positive past
relationship and have received joint
IBB training.

Advantages of IBB
1. Negotiators tend to focus on interests and not
stating positions will have improved
communications and more likely understand
the interests of the other party .
2. As they tend to do brainstorming, it is more
likely to uncover additional ideas and solutions
to problems
3. The negotiators will uncover new options
4. The focus on interests in IBB is more likely to
cause the parties to explain the critical why
behind an interest or proposal.

Disadvantages of IBB
1. May waste a great deal of time as
negotiators discuss interests and
possible options when a mutual solution
could be quickly reached.
2. IBB negotiators may have difficulty
transferring a proposed option into a
practical, concrete solution.

Common differences between

Distributive And Integrative
Bargaining techniques
FACTOR

DISTRIBUTIVE
BARGAINING

INTEGRATIVE BARGAINING

Number of
issues

One (or with several

issues, one at a time)

Several

Technique

win-lose

win-win

General strategy

Maximize share of a
fixed pie

Expand the pie by creating

value and claiming a share

Relationship of
the parties

One time only

Continuing, long-term

Interests

Keep interests hidden

Share interests with other

party

Possible options

One expressed position

(for each issue)

Many options create new

options for maximum mutual
gain

Information

Keep information given

Share information with other

party-explain the why of an

Keys To Successful Integrative

Bargaining

Willing participation of both parties

Recognition of the relationship
Collaborative atmosphere
Packaging the issues

Packaging the issues

Packaging refers to the process of combining
two or more issues into one proposal that
provides something of value to each party.
E.g: For example one issue is worth RM100,000
to one party and no single issue is worth more
than RM40,000 to the other party, trading any
two issues would not be practical. However, if a
package of four issues whose total value was
approximately RM100,000, both parties might
be agreeable to the deal and five issues would
be resolved.

Limitations of the
Categorization Method
Parties often mistake good intentions
for a good negotiation process parties
mistakenly assumed that if they tried to
fairly and evenly split the differences on
each issue, they would automatically
achieve a win-win settlement.
Perception of the balance of power between
the two parties.
power balance is in their favor. The buyer can
walk away or vendor can provide poor service.

Overconfidence
Some negotiators believe they
know what they other party will
accept on a given issue.
Fail to listen carefully and learn the
other sides underlying interests,
and therefore fail to adjust their
beliefs of what is acceptable.

Negotiation Skills in Leveraging

Skill 1 Learn to use your BATNA to reach
agreement
Skill 2 Recognize the sources of power in
negotiation, both yours and your opponent
Skill 3 Learn to marshal persuasive
arguments to support the position you
have framed in the negotiation
Skill 4 Learn to use both verbal and
nonverbal communication to persuade
Skill 5 Learn when and how to use
threats to get concessions

Leveraging power from BATNA

Power the ability to induce the other
party to settle for less than it wanted
Leverage the use of that power to
achieve your aims

Negotiation is the interaction process

between interdependent parties
You must determine BATNA and it
determines who has more bargaining
power in negotiation

Leveraging power from BATNA

(contd)

Believing you have strong BATNA

ensuring this conviction is conveyed to
your opponent increase your leverage
Convincing others of the strength of your
BATNA 3 basic techniques:
Your opponent doesnt know your BATNA
Increase value by leveraging the weakness of
your opponents BATNA
Team up with others to increase your BATNA

Leveraging the sources of POWER

Power can be acquired and used in negotiation
Different types of power:
1. Reward power controlling resources that could
reward
2. Coercive power - controlling resources that could
punish
3. Legitimate power vested to you by an authority
4. Expert power control necessary knowledge or
information
5. Reference power seek by others (personal
attributes)

Tools for PERSUASIVE COMMUNICATION

Principles of persuasion that can be

successfully used in negotiation
Frame the question that you believe is
at issue create a positive definition of
the problem and equally positive set of
solutions,
Marshal persuasive arguments to
answer that question logos, pathos and
ethos

Tools for PERSUASIVE

COMMUNICATION (contd)
Using persuasive language

Metaphor
Humor
Using props
Storytelling

Other tools for persuasive communication:

Verbal communication voice
Non-verbal communication kinesics, eye
movement, facial expressions, gestures, time
and space