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DISTRIBUTIVE BARGAINING

DISTRIBUTIVE BARGAINING. There are two ways in which the parties to the negotiation can try to meet their needs. They can each try to claim as large a share of the available benefits for themselves… or, they can try to increase the total amount of benefits available to everyone

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DISTRIBUTIVE BARGAINING

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  1. DISTRIBUTIVE BARGAINING

  2. There are two ways in which the parties to the negotiation can try to meet their needs. They can each try to claim as large a share of the available benefits for themselves… or, they can try to increase the total amount of benefits available to everyone • Each of these approaches can be found in almost all negotiations

  3. To the extent that a negotiation is about gaining as much as possible of what is available, it is distributive. • People try to get their needs met at other peoples' expense. • A zero sum game. You try to divide up a pie so you get the majority share.

  4. A Second Way • People can try to meet their needs through increasing what is available to all and making sure everyone's needs are adequately addressed. • To the degree that people are pursuing this integrative dimension, they have a common interest of increasing the pie and their needs are integrated. This is termed integrative, principle-based, interest-based or, mutual gains bargaining THIS WILL BE THE FOCUS OF CLASS # 3

  5. THE IMPORTANCE OF YOU One of the first choices a negotiator (YOU) has to make is whether to use distributive or integrative bargaining Versatile Ultra-distributive Ultra-integrative THE IMPORTANCE OF RANGE

  6. The Importance of You • If you are basically an accommodating, nice person, do not try to become Buzz Hargrove. It will not work. And if you are basically competitive, do not try to convince people you are a saint! Just be yourself and use the style that fits you more effectively. BUT, BE CERTAIN YOU DEVELOP A RANGE OF SKILLS

  7. THE REALITY IS, YOU CANNOT AFFORD TO BE TOTALLY UNI-DIMENSIONAL -you need to be able to dosome of both

  8. Assess the situation Perceived conflict over stakes Lo Hi II. Relationships Perceived importance of future relationship I. Balanced concerns Hi III. Transactions IV. Tacit Coordination Lo

  9. Quadrant I - Balanced Concerns • The future relationship and the immediate stakes are in balanced tension • You want to do well but not at the cost of the future relationship • Examples: Many employment disputes, partnerships, mergers, long-term supplier relationships, family business issues, relationships between different units of the same organization Best strategies: Problem-solving or compromise

  10. Assess the situation Perceived conflict over stakes Lo Hi II. Relationships Perceived importance of future relationship I. Balanced concerns Hi III. Transactions IV. Tacit Coordination Lo

  11. Quadrant II - Relationships • Here, the relationship matters a lot and the particular matter being negotiated is secondary • We strive to treat the other party 'well', we play by the rules and conduct ourselves well • Examples: Healthy marriages, friendships, well- functioning work teams Best strategies: Accommodation, problem-solving, or compromise

  12. Assess the situation Perceived conflict over stakes Lo Hi II. Relationships Perceived importance of future relationship I. Balanced concerns Hi IV. Tacit Coordination III. Transactions Lo

  13. Quadrant III - Transactions • The stakes matter more than a continuing relationship • Leverage counts • Examples: Buying a car, buying a house, land transactions, many market-mediated deals Best strategies: Competition, problem solving, or compromise

  14. Assess the situation Perceived conflict over stakes Lo Hi II. Relationships Perceived importance of future relationship I. Balanced concerns Hi III. Transactions IV. Tacit Coordination Lo

  15. Quadrant IV - Tacit Cooperation • These situations do not require formal negotiation so much as the tactful avoidance of conflict • Example: Two cars meet at an intersection or choosing seats inan unassigned bus or train Best strategies: Avoidance, accommodation, compromise

  16. The Dual Concerns Model HI YIELDING PROBLEM- SOLVING CONCERN ABOUTOTHERS' OUTCOMES COMPROMISING CONTENDING INACTION LO HI CONCERN ABOUT YOUR OUTCOMES

  17. Some Characteristics ofDistributive Bargaining The focus is on how to get the most for yourself

  18. Distributive Bargaining Characteristics • Issues tend to be framed in terms of how to compromise among conflicting needs or how to choose among mutually exclusive alternatives • Power is applied to 'wrest' concessions from the other side. The power is applied to convince the opponent they have no option but to make concessions WHAT MIGHT BE TYPES OF POWER USED???

  19. Distributive BargainingCharacteristics(continued…) • Information is shared only to the extent it will convince others to compromise. Information that points out weakness of the other side is 'good' • Agreement is reached when the parties accept a proposal they believe to be better than their realistic alternatives

  20. PREPARING FOR NEGOTIATIONS MPA 821 The absolutely essential, but often neglected, first step in any negotiation

  21. Strategy Overall goals - price, quantity, the "package" Your intended approach Your situation analysis Tactics Time and place Logistics Moves/countermoves/closure Communication Strategy Before Tactics

  22. Good Preparation Means Preparing for 3 things; • Preparing for the process • Preparing numbers and vision • Preparing for "end-game"

  23. Preparing for the Process • What should you watch out for, what should you be ready for? • or, put another way, • What might they expect to see in terms of your behaviour and attitudes?

  24. Things to Think About • How might the other party perceive this? Stakes, relationship? • Power (influence) • Ritual and non-task behaviour • Uncertainty • Conflict - 'To be, or not to be' • Decision-making

  25. If possible, you need to include in your homework some analysis of your opponent and your opponent's situation including how they might think about the situation • How might the other party perceive this? Stakes, relationship? • Power (influence) • Ritual and non-task behaviour • How do you get such information? • Examples

  26. Preparation: Numbers and Vision • Targets • Resistance points • Settlement range (window of opportunity)? • Interests • Alternatives

  27. Targets • The target is your preferred price. It is your optimal goal; • The best targets are well researched and well reasoned as opposed to esoteric 'wishes' • Do not set your aspiration too low! - the concept of 'the winners curse'

  28. Reasons for Setting Targets • It pays! • An "anchor" • A reference point for a decision that affects that decision. It becomes a standard against which subsequent adjustments are made. An anchor becomes a benchmark

  29. BATNA • You normally are willing to accept any deal that is better than your BATNA. • A BATNA is not wishful thinking. • BATNA is not something you wish for - it is determined by objective reality • ACCEPT THE FALLING IN LOVE RULE - develop several options • A good BATNA is a valuable source of negotiating power

  30. Resistance Point • This is your 'bottom line' or the point beyond which you will not go • This is where you will 'walk away‘ • The point beyond which you will not accept a deal and will turn to your BATNA. The reservation point is the quantification of BATNA, the trigger point where you will take your next best alternative instead of negotiating. (Informally, this is often called "your bottom line.")

  31. Settlement Range • The settlement range, sometimes called the bargaining range, is the spread between resistance points • This is the area where bargaining takes place

  32. TODAY… • A bit of hands on experience with • key concepts • The act of planning thoroughly • The concept of distributive bargaining and the elements • Some ‘tactics’ • Offers or asking and counters • Hands on experience if time • CASE 1 AND STRUCTURE

  33. SELLER Concession Making Resistance Point Asking Price Target Initial Offer Target Resistance Point Concession Making BUYER

  34. Be sure to identify ALL the issues in negotiation - Do not focus just on one • Identify alternatives for EACH issue • Think about how they might be packaged, i.e.. for a job offer • Why, if asked to state your expected salary range in a job interview, should you not answer with a range?

  35. Define your 'walk away point' in advance Have and/or develop a good alternative Ignore your relationship with the other side - focus only on this deal Get as much information as you can without giving much up - the power of questions SET THE OPENING AS HIGH OR LOW AS POSSIBLE! THIS IS NOT THE TIME TO BE NICE!

  36. Having done all this, you now need to make the same assessment of where you think the other side is on each of these key points!!! NOTE THE DETAIL THAT GOES IN TO PLANNING YOUR APPROACH TO NEGOTIATION AND TRYING TO ANTICIPATE THE OPPOSITION’S SITUATION

  37. Questions: Karrass .Questions are mind openers. They lead both buyer and seller into more active involvement with each other .Give a lot of attention to the questions you will ask during preparation☼☼ . . . .Questions and answers can be looked at as negotiation in their own right. Every question has the character of a demand. Every answer is in a sense, a concession .Try to keep your questions ‘open ended’.

  38. Questions early on should seek general information about, • What the other person thinks will be achieved, • What expectations they have about each side’s goals. • Attitudes on key issues, • Interest in developing or maintaining a relationship, • Outside constraints-real or perceived.

  39. The matter of agenda • Agendas stipulate the important issues for negotiators. • RECOGNIZE that setting the agenda is a negotiation in and of itself. Agenda building lets you situate issues in a manner conducive to attaining your goals. It also lets you trade issue positioning with the other side which shows ‘good will’. BUT make sure you trade lower important issue positioning! • Here again-preparation is critical

  40. Distributive Bargaining

  41. Distributive BargainingCharacteristics (continued…) • Alternatives are used as 'leverage' to convince others to compromise or give up potential benefits Leverage means the tools negotiators use to give themselves an advantage or increase the probability of achieving their objectives. WHAT ARE SOME EXAMPLES??

  42. Negotiation is a process of give and take • The process exchanges: • Information • Concessions Changes in positions are usually accompanied by new information concerning the other's intentions, the value of outcomes, and likely area of settlement

  43. Opening Offer or Bid • Donot set your initial bid or offer too near your final objective. Assume your opponent will always table maximum positions first • There is STRONG research evidence that high and even extreme opening offers get higher settlements than those that are low or modest

  44. Advantages of a High Opening Bid • It gives you room to maneuver as more information becomes available • It sends a strong message that: • There is a long way to go to a settlement • More concessions than the opponent had planned may be necessary

  45. Risk of a High Opening Bid • You may alienate the opponent to the point they may just say "Get lost!" • It may damage future negotiations between the parties • IF YOU CHOOSE TO OPEN HIGH, BE CERTAIN TO HAVE A CONTINGENCY PLAN TO DEAL WITH ABRUPT REJECTION

  46. CONCESSIONS • An opening offer is usually met by a counteroffer, and these two offers define the initial bargaining range • After the first round of offers, the next step is to decide what movement or, concessions are to be made. • NOTE; the first concession conveys a message, frequently a symbolic one, to the other side.

  47. Role of Concessions • Avoid the resentment of the 'take it or leave it' scenario • By beginning with an opening offer not close to your resistance point, you insure some room for YOU to make some concessions which plays to the psychology of bargaining

  48. Some Rules Before Starting Concessions • Do not set your initial demand near your final objective • Do not ever underestimate your power = knowledge + bargaining skill + resources • Do not EVER be intimidated by boorishness • Do not reveal your power too early

  49. Some More Rules for Concessions • Never accept the first offer • Never give a concession without getting one in return • Never lose track of how many concessions you have made

  50. Some Rules for Concessions • Try not to make the first concession on important issues. • How might you do this while keeping the negotiation ‘alive’ and moving??

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