Negotiation Strategies

Negotiation Strategies

Chapter 1: The nature of negotiation

Negotiation: a process by which two or more parties attempt to resolve their opposing interests.—> There is a conflict of needs and desires between two or more parties and they must search for a way to resolve the conflict.—> The parties negotiate by choice, because they think they can get a better deal by negotiating than by simply accepting what the other side will voluntarily give them or let them have. There are many situations where negotiation is possible, but the parties fail to recognize the opportunity.—> When we negotiate, we expect a ‘give-and-take’ process that is fundamental to our understanding of the word negotiation. We expect that both sides will modify or move away from their opening statements, requests, or demands. They will come to a compromise or find a solution that meets the objectives of all parties.—> Successful negotiation involves the management of tangibles (e.g. the price or the terms of agreement) and the resolution of intangibles (the underlying psychological motivations that may (in)directly influence the parties during a negotiation; e.g. the need to ‘win’, beat the other party).Conflict: ‘’sharp disagreement or opposition, as of interests, ideas, etc.’’ and includes ‘’the perceived divergence of interest, or a belief that the parties’ current aspirations cannot be achieved simultaneously’’. It results from ‘’the interaction of interdependent people who perceived incompatible goals and interference from each other in achieving those goals’’.Elements that contribute to conflict’s destructive image (i.e. conflict is bad): 1.Competitive, win-lose goals: both parties cannot simultaneously achieve their objectives.

2.Misperception and bias: as conflict intensifies, perceptions become distorted.

3.Emotionality: emotions overwhelm clear thinking, and the parties can become irrational.

4.Decreased communication: parties communicate less with those who disagree with them; when they do, it is often an attempt to defeat, demean or debunk the other’s view or to strengthen one’s own prior arguments.

5.Blurred issues: the central issue in the dispute become blurred and less well defined.

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Conflict diagnostic model: helpful to analyze any dispute and determine how easy or difficult it will be to resolve.Dual concerns model: two-dimensional framework that postulates that people in conflict have two independent types of concern, namely substantive outcome and relational outcome.—> Substantive outcome: how much concern do I have for my own desired outcome?—> Relational outcome: how much concern for the relationship with the other?The dual concerns model lead to five possible strategies for conflict management:

•Avoidance: do not negotiate;

•Competition: similar to distributive negotiation, win-lose;

•Collaboration: similar to integrative negotiation, win-win;

•Accommodation: I let you win, lose-win, relationship is more important;

•Compromise: I gain/lose some, you gain/lose some.

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Chapter 2: Strategies and Tactics of Distributive Bargaining

Distributive Bargaining Situation: i.e. competitive or win-lose bargaining; the goals of one party are in fundamental and direct conflict with the goals of the other party. Resources are fixed and limited, and everyone wants to maximize their own share.—> One important strategy is to guard information carefully, only when it provides a strategic advantage. Who is getting the most of a limited resource (often money)?—> Target point (or aspiration): the preferred price of the buyer; the point at which a negotiator would like to conclude negotiations - his optimal goal.—> The seller and the buyer often both have a walkaway or resistance point (a negotiator’s bottom line), which leads to a range of possible outcomes. The final offer does not equal this walkaway point.—> The bargaining takes place in the bargaining range (i.e. settlement range, zone of potential agreement): anything outside these points will be rejected by one of the two negotiators.—> In sum, negotiators need to: 1) set a clear starting, target and resistance point, 2) understand and work to improve their BATNA , 3) start with a good opening offer, 4) make appropriate concessions and 5) manage the commitment process.

Crucial elements of a negotiation: B&B.

•Bargaining Mix: multi-item negotiations, each with different target points such as price, waiting time and extra’s and different walk-away points.—> For example, for selling a house, it can be the date of sale.•BATNA : Best Alternative To a Negotiated Agreement; gives negotiators the power to walk away.However, they are usually less attractive than the preferred agreement.—> Negotiators who have a strong BATNA will have more power throughout the negotiation.Alternatives can be so powerful that they can even influence first offers and outcomes of negotiation when they are not certain. Negotiators with stronger BATNAs are more likely to make the first offer in a negotiation and appear to negotiate better outcomes.

—> As opposed to the WATNA : Worst Alternative To a Negotiated Agreement.

Commitment: the taking of a bargaining position with some explicit or implicit pledge regarding the future course of action. The purpose of a commitment is to remove ambiguity about the negotiator’s intended course of action.

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—> A commitment is often interpreted by the other party as a threat: if the other does not comply of give in, some set of negative consequences will occur.

Several tactics when closing a deal:

•Provide alternatives: these alternatives are more or less equivalent in value.•Assume the close: negotiators can act as if the decision has already been made.•Split the difference: the most popular closing tactic; the negotiator gives a brief summary of the negotiation and then suggest to just split the difference, since things are so close.•Exploding offers: contains an extremely tight deadline in order to pressure the other party to agree quickly; an extreme version of manipulating negotiating schedules. For example, offering a very attractive salary, but saying that the offer will expire in 24 hours.

•Sweeteners: saving a special concession for the close.

Positions taken during negotiations:

•Initial concessions: yes or no, and how high?

•Patterns

•Opening offer: do you take initiative? The first offer has a benefit.

—> Anchoring effect: the first offer has an anchoring effect, since people make assumptions based on this; dropping the anchor around which prices you have to negotiate.•Opening attitude: is it competitive or moderate? You will likely get the same behavior in return.•Final offer (making a commitment): has to be explicit (‘this is my final offer’) and by doing that, you increase the status of the offer, putting pressure on the counterpart.•Closing the deal: split the difference at the end, seems fair, but you have to think about the consequences, is it the most beneficial for you?Hardball tactics (selection): putting power on the counterpart; may be unethical.•Good cop/bad cop: two persons create a lot of pressure on the counterpart; one person stresses the benefits and the other one stresses the threats.•Lowball/highball: using extreme offers, either high or low, to change the anchor of potential negotiation settlements; this could work because of the anchoring effect or its shocking effect.—> The extreme starting offer can cause the other party to reevaluate their own opening offer and move closer to or beyond their resistance point.—> Risk: the other party can think it is a waste of time to negotiate the offer.

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