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CHAPTER TWO
Strategy and Tactics of Distributive Bargaining
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The Distributive Bargaining Situation


Goals of one party are in fundamental,direct conflict to another party Resources are fixed and limited Maximizing ones own share of resources is the goal

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The Distributive Bargaining Situation


Preparationset a Target point, aspiration point Walkaway, resistance point Asking price, initial offer

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The Distributive Bargaining Situation


Party A - Seller

Walkaway Point

Target Point

Asking Price

Initial Offer
Party B - Buyer
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Target Point

Walkaway Point

2006 The McGraw-Hill Companies, Inc., All Rights Reserved

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The Role of Alternatives to a Negotiated Agreement


Alternatives give the negotiator 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

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2006 The McGraw-Hill Companies, Inc., All Rights Reserved

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The Distributive Bargaining Situation


Party A - Seller

Walkaway Point Target Point Alternative

Asking Price

Initial Offer
Party B - Buyer
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Alternative Target Point Walkaway Point

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Fundamental Strategies
Push for settlement near opponents resistance point Get the other party to change their resistance point If settlement range is negative, either:
Get the other side to change their resistance point Modify your own resistance point

Convince the other party that the settlement is the best possible
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Keys to the Strategies


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

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2006 The McGraw-Hill Companies, Inc., All Rights Reserved

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Tactical Tasks of Negotiators


Assess outcome values and the costs of termination for the other party Manage the other partys impressions Modify the other partys perceptions Manipulate the actual costs of delay or termination

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Assess Outcome Values and the Costs of Termination for the Other Party
Indirectly
Determine information opponent used to set:
Target Resistance points

Directly
Opponent reveals the information

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Manage the Other Partys Impressions


Screen your behavior:
Say and do as little as possible

Direct action to alter impressions


Present facts that enhance ones position

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Modify the Other Partys Perceptions


Make outcomes appear less attractive 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

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Manipulate the Actual Costs of Delay or Termination


Plan disruptive action
Raise the costs of delay to the other party

Form an alliance with outsiders


Involve (or threaten to involve) other parties who can influence the outcome in your favor

Schedule manipulations
One party is usually more vulnerable to delaying than the other
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Positions Taken During Negotiations


Opening offer
Where will you start?

Opening stance
What is your attitude?
Competitive? Moderate?

Initial concessions
Should any be made? If so, how large?
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Positions Taken During Negotiations


The role of concessions
Without them, there is either capitulation or deadlock

Patterns of concession making


The pattern contains valuable information

Final offer (making a commitment)


This is all I can do
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Commitments: Tactical Considerations


Establishing a commitment
Three properties:
Finality Specificity Consequences

Preventing the other party from committing prematurely


Their commitment reduces your flexibility
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Commitments: Tactical Considerations


Ways to abandon a committed position
Plan a way out Let it die silently Restate the commitment in more general terms Minimize the damage to the relationship if the other backs off

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Closing the Deal


Provide alternatives (2 or 3 packages) Assume the close Split the difference Exploding offers Deal sweeteners

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Dealing with Typical Hardball Tactics


Four main options:
Ignore them Discuss them Respond in kind Co-opt the other party (befriend them)

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Typical Hardball Tactics


Good Cop/Bad Cop Lowball/Highball Bogey (playing up an issue of little importance) The Nibble (asking for a number of small concessions to)

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Typical Hardball Tactics


Chicken Intimidation Aggressive Behavior Snow Job (overwhelm the other party with information)

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Summary
Negotiators need to: Set a clear target and resistance points Understand and work to improve their BATNA Start with good opening offer Make appropriate concessions Manage the commitment process
McGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc., All Rights Reserved