Chapter 02
Strategy and Tactics of
Distributive Bargaining
Overview
The basic elements of a distributive bargaining situation,
also referred to as competitive or win-lose bargaining, will be discussed. In a distributive bargaining situation, the
goals of one party are usually in fundamental and direct conflict with the
goals of the other party. Resources are
fixed and limited, and both parties want to maximize their share of the
resources. One important strategy is to
guard information carefully – one party tries to give information to the other
party only when it provides a strategic advantage. Distributive bargaining is basically a
competition over who is going to get the most of a limited resource.
There are two reasons that every negotiator should be
familiar with distributive bargaining.
First, some interdependent situations that negotiators face are
distributive, and to do well in them negotiators need to understand how they
work. Second, because many people use
distributive bargaining strategies and tactics almost exclusively, all
negotiators will find it important to know how to counter their effects.
Some of the tactics discussed in the chapter will also
generate ethical concerns. Some tactics
are ethically accepted behavior whereas other tactics are generally considered
unacceptable.
Learning Objectives
- Describe how the
distributive bargaining process works and learn the fundamental strategies
of distributive bargaining.
2.
Four important tactical tasks for a negotiator in a
distributive bargaining situation.
3.
Positions taken during negotiation.
4.
Commitment in a bargaining position.
5.
Closing the agreement.
6.
Typical hardball negotiation tactics.
7.
Distributive bargaining skills applicable to
integrative negotiations.
I.
The
Distributive Bargaining Situation
A. Distributive bargaining strategies and tactics are useful when a negotiator
wants to maximize the value obtained in a single deal, when the relationship with the other
party is not important, and when they are at the claiming value stage of negotiations.
1. The
target point is a negotiator’s
optimal goal, or the point at which she/he would like to conclude
negotiations. The optimal goal is also
referred to as resistance.
2. The
resistance point is a negotiator’s
bottom line – the point beyond which a person will not go. This is not known to the other party and
should be kept secret. The resistance
point is a high price for the buyer and a low price for the seller.
3. The
asking price is the initial price set
by the seller, or the first number quoted by the seller.
4. Both
parties to a negotiation should establish their starting, target, and
resistance points before beginning a negotiation.
5. The
spreads between the resistance points, called the bargaining range, settlement
range, or zone of potential agreement are very important. It is the area where actual bargaining takes
place. When the buyer’s resistance point
is above the seller’s he is minimally willing to pay more than she is minimally
willing to sell for, there is a positive bargaining range.
B. The
role of alternatives to a negotiated agreement.
1. Alternatives
are important because they give negotiators the power to walk away from any
negotiation when the emerging deal is not very good.
a) The
role of alternatives are two fold:
(1) Reach a
deal with the other party.
(2) No
settlement at all.
C. Settlement
point.
1. For agreement to occur, both parties must
believe that the settlement is the best that they can get (within a positive
bargaining range).
D. Discovering
the other party’s resistance point.
1. Learning
about the other party’s resistance point, target, motives, feelings of
confidence, and so on, the more likely you will be able to have a favorable
settlement. You do not want the other
party to know your resistance point.
Because each party wants to know the other’s resistance point,
communication can become complex.
E. Influencing
the other party’s resistance point.
1. The
following factors are important in attempting to influencing the other party’s
resistance point:
a) The
value the other attaches to a particular outcome;
b) The
costs the other attaches to delay or difficulty in negotiations;
c) The
cost the other attaches to having the negotiations aborted.
2. Understanding
your own situation, and the value of your particular outcome, will help you to
understand the other person’s. Four
major positions show how this affects the distributive bargaining process:
a) The
higher the other party’s estimate of your
cost of delay or impasse, the stronger the other party’s resistance point will
be;
b) The
higher the other party’s estimate of his or her own cost of delay or impasse, the weaker the other party’s
resistance point will be;
c) The
less the other party values an issue the lower the resistance point will be;
d) The
more the other party believes that you value an issue the lower their
resistance point will be.
II.
Tactical
Tasks
A. There
are four important tactical tasks for a negotiator in a distributive situation
to consider:
1. Assess
the other party’s target, resistance point, and cost of terminating
negotiations
a) Indirect
assessment means determining what information an individual likely used to set
target and resistance point sand how he or she interpreted this information.
(1) Indirect
indicators can be a source to assess the other party’s resistance point, and
can include observations, consulting documentation and publications, speaking
to experts.
b) Direct
assessment, in bargaining, is where the other party does not usually reveal
accurate and precise information about his or her outcome values, resistance
points, and expectations.
2. Manage
the other party’s impression of the negotiator’s target, resistance point, and
cost of terminating negotiation, while also guiding him or her to form a
preferred impression of them.
a) Screening
activities – say as little as possible.
Instead, use words to ask the other negotiator questions.
b) Direct
action to alter impressions ̶ through selective presentation:
(1) Negotiators
reveal only the facts necessary to support their case;
(2) Lead the
other party to form the desired impression of their resistance point or to open
up new possibilities for agreement that are more favorable to the presenter
than those that currently exist;
(3) Emotional
reaction to facts, proposals, and possible outcomes;
(i) There
are several hazards in taking direct action: perception of dishonesty, which
can lead to the other party conceding on minor points to defeat the maneuverer
at his or her own game.
3. Modify
the other party’s perception of his or her own target, resistance point, and
cost of terminating negotiation.
4. Manipulate
the actual costs of delaying or terminating negotiations through:
a) Planning disruptive action: Increasing
the costs of not reaching a negotiated agreement;
b) Forming an alliance with outsiders who
can somehow influence the outcome of the negotiation;
c) Manipulating the scheduling of negotiations
can put the other party at a considerable disadvantage by enhancing your
position and protect you from the other party’s actions.
III. Positions Taken During Negotiation
A. Opening offers.
1. Making
the first offer is advantageous to the negotiator making the offer because he
or she can anchor a negotiation. Exaggerating
an opening offer is advantageous because:
a) It
gives the negotiator room for movement thereby giving him or her time to learn
about the other party’s priorities;
b) May
create an impression in the other party’s mind that:
(1) There is a
long way to go before a reasonable settlement will be achieved;
(2) A greater
number of concessions will have to be made to find a common zone of potential
agreement (ZOPA);
(3) The other
may have incorrectly estimated his or her own resistance point.
2. Two
disadvantages to exaggerating an offer include:
a) Potential
rejection by the other party;
b) The
perception of a “tough” attitude that can harm a long-term relationship.
B. An
opening stance is the attitude the
negotiator will adopt during a negotiation (competitive, belligerent, moderate,
etc.). To communicate effectively, a
negotiator should try and send a consistent message through both the opening
and stance.
C. Usually
met with a counteroffer, initial
concessions define the initial bargaining range; they communicate to the
other party how you intend to negotiate.
D. Role of concessions – Negotiations would
not exist without them. There is ample data to show that parties feel better
about a settlement when the negotiation involved a progression of concessions
than when it didn’t.
E. The
pattern of concessions made during a
negotiation contains valuable information, though not always easy to interpret.
F. Final offers ̶ a
negotiator wants to convey the message that there is no further room for
movement. One way to accomplish this is
to make the last concession more substantial.
IV. Closing
the Deal
A. Provide alternatives – rather than
making a single final offer, provide two or three alternative packages for the
other party that are roughly equal in value.
B. Assume the close – having a general
discussion about the needs and positions of the buyer, then act as if the
decision to purchase something has already been made.
C. Split the difference – the most popular
tactic used; used when an agreement is close, suggesting that the parties split
the difference.
D. Exploding offers – An offer that
contains an extremely tight deadline in order to pressure the other party to
agree quickly.
1. The
purpose of an exploding offer is to convince the other party to accept the
settlement and to stop considering outcomes.
E. Sweeteners – negotiators need to include
the sweetener in their negotiation plans or they may concede too much during
the close.
V.
Hardball Tactics
A. Dealing
with typical hardball tactics – there are several choices about how to respond.
1. Discuss
them.
2. Ignore
them.
3. Respond
in kind.
4. Co-opt
the other party.
B. Typical
hardball tactics.
1. Good
cop/bad cop.
a) Weaknesses:
(1) Relatively
transparent;
(2) Difficult
to enact – requires a lot of energy toward making the tactic work.
2. Lowball/highball.
a) Risk
in using this tactic:
(1) The other
party will think it is a waste of time to negotiate and stop the process.
b) Strategies
for using this tactic:
(1) Insisting
that the other party start with a reasonable opening offer and refusing to
negotiate further until he or she does;
(2) Stating
your understanding of the general market value of the item being discussed,
supporting it with facts and figures, thus showing the other party that you
won’t be tricked;
(3) Threatening
to leave the negotiation, showing dissatisfaction in the other party in using
this tactic;
(4) Responding
with an extreme counter offer.
3. Bogey.
a) Negotiators
use this tactic to pretend that an issue is of little or no importance to them,
when it actually is quite important.
4. The
nibble.
a) Weaknesses
in using the nibble:
(1) The party
using the nibble did not bargain in good faith.
b) Combating
the nibble tactic:
(1) Respond
with each nibble with the question “What else do you want?”;
(2) Have your
own nibbles prepared for exchange.
5. Chicken.
a) Combining
a large bluff with a threatened action to force the other party to “chicken
out” and give them what they want.
b) Weakness
of chicken tactic:
(1) Turns the
negotiation into a serious game in which one or both parties find it difficult
to distinguish reality from postured negotiation positions;
(2) Difficult
to defend against.
6. Intimidation
a) An
attempt to force the other party to agree by means of an emotional ploy. Negotiators intimidate by:
(1) Using anger;
(2) Increasing
the appearance of legitimacy;
(3) Guilt.
7. Aggressive
behavior.
a) Aggressive
tactics include:
(1) Relentless
push for further concessions;
(2) Asking for
the best offer early in negotiations;
(3) Asking the
other party to explain and justify his/her proposals.
8. Snow
job.
a) Snow
jobs occur when negotiators overwhelm the other party with so much information
that he/she has trouble determining which facts are real or important, and
which are distractions.
Summary
This chapter examined the basic structure of competitive or
distributive bargaining situations and some of the strategies and tactics used
in distributive bargaining. Distributive
bargaining begins with setting your own opening, target, and resistance points. All points are important, but the resistance
points are the most critical. The spread
between the parties’ resistance points defines the bargaining range.
It is rare that a negotiation includes only one item; more
typically, there is a set of items, referred to as a bargaining mix. Each item in a bargaining mix can have
opening, target, and resistance points.
The bargaining mix may provide opportunities for bundling issues
together, trading off across issues, or displaying mutually concessionary behavior.
Examining the structure of distributive bargaining reveals
many options for a negotiator to achieve a successful resolution; most of which
fall within two broad efforts: to
influence the other party’s belief about what is possible and to learn as much
as possible about the other party’s position, particularly about the resistance
points. The negotiator’s basic goal is
to reach a final settlement as close to the other party’s resistance point as
possible. Negotiators work to gather
information about the opposition and its positions; to convince members of the
other party to change their minds about their ability to achieve their own
goals; and to promote their own objectives as desirable, necessary, or even
inevitable.
Distributive bargaining is basically a conflict situation,
wherein parties seek their own advantage, in part through concealing
information, attempting to mislead, or using manipulative actions. All these tactics can easily escalate
interaction from calm discussion to bitter hostility. Yet negotiation is the attempt to resolve a
conflict without force, without fighting.
Further, to be successful, both parties to the negotiation must feel at
the end that the outcome was the best that they could achieve and that it is worth
accepting and supporting. Effective
distributive bargaining is a process that requires careful planning, strong
execution, and constant monitoring of the other party’s reactions.
