N2 Strategy and Tactics of Distributive Bargaining

Chapter 2 Strategy and Tactics of Distributive Bargaining

Distributive Bargaining: Slicing the Pie

-     also known as competitive, adversarial, or win-lose bargaining

-     the goals of one party are usually in fundamental and direct conflict with the goals of the other party

-     resources are fixed & limited, and both parties want to maximize their share of the resources

-     one party tries to give information to the other party only when it provides a strategic advantage

-     negotiation power depends on the information one can gather about the other party

-     negotiating parties focus much on their differences that they ignore what they have in common

Basic Concepts

Target Point – the point at which a negotiator would like to conclude negotiations; his optimal goal or aspiration

Buyer’s Target Point (BT) – the optimal (lowest) price buyers would like to pay

Seller’s Target Point (ST) – the optimal (highest) price sellers would like to set

Resistance (or Reservation) Point – the negotiator’s bottom line

Buyer’s Resistance Point (BR) –the highest price buyers are willing to pay

Seller’s Resistance Point (SR) – the lowest price sellers are willing to set

Asking Price – the initial price set by the seller; seller’s opening bid

Initial Offer – the first price that the buyer will quote to the seller; buyer’s opening bid

Settlement Point – the price that both buyer and seller will agree upon

Bargaining Range – the spread between the resistance points; a.k.a. settlement range or zone of potential agreement

Bargaining Range Absolute Value – the difference between the buyer’s & seller’s resistance points

Fundamental Strategies:

I. Push for a settlement close to the other party’s resistance point

II. Influence the other party to change its resistance point

III. Convert a negative settlement range into a positive settlement range

IV. Convince the other party that your suggested settlement point is the best possible deal

BOTTOMLINE: discover and influence the other party’s resistance point

Positions Taken During Negotiation:

• Opening Offer

• Opening Stance

• Initial & Subsequent Concessions

• Final Offer

Establishing a Commitment:

• Public Pronouncement

• Linking with an Outside Base

• Increase the Prominence of Demands

• Reinforce the Threat or Promise

Closing the Deal:

• Provide Alternatives

• Assume the Close

• Split the Difference

• Exploding Offers

• Sweeteners

Hardball Tactics – designed to pressure negotiators to do things they would not otherwise do; work best against poorly-prepared negotiators

Dealing with Hardball Tactics:

• Ignore Them

• Discuss Them

• Respond in Kind

• Co-opt the Other Party

Typical Hardball Tactics:

• Good Cop/Bad Cop

• Lowball/Highball

• Bogey

• The Nibble

• Chicken

• Intimidation

• Aggressive Behavior

• Snow Job