24/12/2016 C3-Distributive Negotiations 1

Lecturer: MBA | Trần Khánh

Email: [email protected]
Handphone: 0946512667
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CHAPTER 3

Distributive Negotiations
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Chapter Objectives

1. Develop strategies for distributive negotiations

2. Evaluate the use of power tactics in negotiation

3. Identify the use of hardball tactics in negotiation

and develop effective responses to counter

their use by others
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Chapter Objectives

4. Apply the concept of claiming value in

negotiations

5. Assess the role of concessions in negotiations

6. Evaluate the effectiveness of various tactics for

obtaining commitment in a negotiation

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DAILY NEGOTIATION

• Pressures
• Tactics
• Anytime & Anywhere
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Negotiation

• “A mixture of information

exchange, discovering
interests, reshaping
alternatives, applying
pressure, finding new
solutions, and making
compromises.” Former US. Foreign Minister
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3.1 Distributive Negotiation

• The object is to achieve an efficient compromise

• The focus is on distribution of the outcomes
(rather than meeting the needs of the parties)
• A contest to see who gets the biggest share of
the pie
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3.1 Distributive Negotiation

• Gains come at the expense of the other party

• Relationship between parties is adversarial
• Strategies are typically competitive
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3.1 Distributive Negotiation

• Effective in certain
situations
• Be perceptive to
when a negotiation
is distributive and
adjust approach
accordingly
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3.1 Distributive Negotiation

CAMRY 2.5Q - 2020

BINH DUONG : 1,36 BILLION VND HCMC : 1,39 BILLION VND

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3.2 Mixed-Motive Bargaining

• Mixed-motive bargaining (Walton & McKersie):

negotiation agenda has “significant elements of

conflict and considerable potential for
integration”.
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3.2 Mixed-Motive Bargaining

• Mixed motive negotiation employs aspects of both the

integrative and distributive approaches. The idea is to

create additional value so both parties have some of
their interests met, but with an understanding that the
newly created value might not be enough for everyone to
get the same amount, or everything they want
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3.2 Mixed-Motive Bargaining

• Example: industrial relations – bargaining

between employer who wants to minimize labor

costs to maximize profits, union wants to
negotiate highest wages and best benefits
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• Works best when there is an ongoing relationship

between the parties and multiple issues to

negotiate
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3.3 Leverage Power

Two components of leverage:

Benefits & the counterpart’s
BATNA

The Benefits the negotiator brings to the table –

the more the offer is valued by the other party, the
greater the power the negotiator has
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3.3 Leverage Power

The Counterpart’s BATNA – the better the

BATNA, the more power the counterparty has
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3.3 Leverage Power

leverage is the power that one side of a negotiation has

to influence the other side to move closer to their
negotiating position. A party's leverage is based on its
ability to award benefits or impose costs on the other side
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3.3 Leverage Power

Year 1992 | $ 140,000

The higher the demand and lower the supply for an

item, the better the BATNA
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3.3 Leverage Power

EVERYTHING CHANGING EVERYDAY

RICHNESS SYMBOL BY 90s

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3.3 Leverage Power

EVERYTHING CHANGING EVERYDAY

Applicants who possess knowledge, skills, and abilities that

are in high demand are in a much stronger position to find
employment and negotiate better salaries and benefits than
those with skills that are in lower demand.

For example, for a number of years there has been a shortage

of nurses in most parts of the United States
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3.3 Leverage Power

EVERYTHING
CHANGING EVERYDAY
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3.4 Power Tactics in Negotiations

• Tactics in distributive negotiations tend to be

direct and assertive (little emphasis on

relationship)
• People use different tactics with different people

and depend on the situation

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3.4 Power Tactics in Negotiations

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3.4 Power Tactics in Negotiations

• Women use less competitive tactics than men

• However, a woman will use competitive tactics

when negotiating for someone else

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3.4 Power Tactics, cont.

Power Tactics include:
• Rationality: using reason and logic to present
facts or data
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3.4 Power Tactics, cont.

Power Tactics include:

• Ingratiation: being friendly to the other party
(Note: people dislike disingenuous strategies)
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3.4 Power Tactics, cont.

Power Tactics include:

•Coalition building: obtaining support of
others/forming an alliance
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3.4 Power Tactics, cont.

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3.4 Power Tactics

• Exchange: bartering or trading ( Quid Pro Quo )

• Assertiveness: direct and forceful approach, knowing

where to draw the line between being assertive and

aggressive.
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3.4 Power Tactics

• Upward appeal: obtaining support from authority

Your relationship with the other party will be better in the long
run if you can resolve the situation without involving a higher

authority

• Imposing sanctions: using coercive power

Bills you get—utilities, taxes, credit cards . The farther behind

you get in your payments, the more severe the penalty

becomes
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3.5 Tactics to Change

Power
•Four basic tactics for changing the balance of power
in a negotiation
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3.6 Hardball Tactics

The goal is to win concessions from the other party by:

• Highball/lowball: an extreme opening offer to

unbalance the others

• Bluffing: seeing who will back down first – risk to

reputation if bluffs are not followed through

• Intimidation: aggressive tactics
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3.6 Hardball Tactics

The goal is to win concessions from the other party by:

• Bogey: including unimportant issues to trade later

• Nibble: asking for additional small items

• Overwhelm with information: presenting a “blizzard”

of facts/data
• Good cop/bad cop: negotiating team - one negotiator

is hardnosed and the other is reasonable

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3.6 Hardball Tactics

A customer goes to a mask shop where the shop owner
and his manager sell products. The customer wants to
buy a mask; therefore, he was negotiating with them.
•The shop owner is persuading the customer, saying that
the facemask will protect you and your family from
Coronavirus.
•The manager says to the customer that you have to pay
90.000 vnd for a small package of 5 pieces if you want
to buy, if not and you can go

Which tactics do they use in this case ?

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3.6 Hardball Tactics

For example, imagine that you want to buy a woody
chair. Them negotiate with the seller, the set price
is 8 millions VND, you might think it is unacceptable
price, so you say can I buy it in 6 millions VND

How do they act

in this case ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

the customer will purchase the secondhand iPhone
if the seller provides headphones and a charger at
the same price

Which tactics do THE CUSTOMER use in this case ?

How do YOU act in this case ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

You will rent the house ( accepted with the price
offer from the house owner) and find out good
looking daughter / boy of House owner.

Which tactics do You use in this case ?

How do YOU act in this case ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

one party is threatening the other party with, “If you
do not sell this phone at 8 millions VND, I will buy
the same phone from the next shop who is
interested in selling it at the same price

Which tactics do You use in this case ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

The customer said he wants the furniture ready on
the weekend or to find another shop

Which tactics does he use in this case ?

If you believed the customer’s words,

What do you do if you were the seller ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

one party is threatening the other party with, “If you
do not sell this phone at 8 millions VND, I will buy
the same phone from the next shop who is
interested in selling it at the same price

Which tactics do You use in this case ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

After a long negotiation, both sides are not satisfied
with each other. Then one side says, “if you really
oppose accepting my ideal price, I will find another
person who will provide my ideal price.”

Which tactics do You use in this case ?

ANY EXAMPLE ?
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3.6 Hardball Tactics

You are violent temper boss working in the
company with the others. Inside the meeting, You
slapped the table, glared at everybody and said :

•Think about your family…..

•????? Etc.

What do you want to talk with the others ?

Which tactics do You use in this case ?

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3.6 Hardball Tactics

If you want to return the bad products that You
bought already. Surely, People will convince on the
return Policy to refuse your request.

What do you do in this case ?

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3.6 Hardball Tactics

If you want to sell the house, what kinds of
information do you want to share with them ?

Necessary Info vs Much Info ?

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3.6 Hardball Tactics: Responses

• Preventing it
• Create an ally/befriending the counterpart
early on
• Ignoring it
• Pretend you didn’t hear it or laugh it off
• Discussing it
• Maintaining your cool and having a rational
discussion about ground rules
• Responding with hardball tactics
• Understand what you are doing and why
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3.7 Information Sharing

•In distributive negotiations sharing information

is more guarded
• Focus on the facts

• Ask task-related questions

• Suggest the discussion of individual issues

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3.7 Information Sharing

•No questions about needs

• Engage in negative behaviors:

• Display negative reactions

• Note differences between proposals

• Attack arguments

• Ask for the bottom line

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3.8 Claiming Value

Goal of distributive negotiation is claiming as

much value as possible, by:
• Defending arguments to substantiate position

• Making single-issue offers

• Suggesting creative solutions that meet own

interests
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3.8 Claiming Value

• Making threats/reiterating power position

• Referring to the bottom line of counterparty

•BUT opening offers and target/resistance points

established prior to negotiation impact

significantly on final outcome
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3.9 Concessions

• What we give up in a negotiation

• Making concessions is usually a case of reciprocity
in action
• ‘Winner’s curse’ - when the negotiator’s first offer is
accepted and s/he is left feeling like they could
have done better
• The pattern of concessions can signal the direction
the negotiation might take – small or larger
concessions
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3.9 Concessions -
Logrolling
• Logrolling – making concessions on issues that

aren’t as important to gain ground on issues that

are important
• Logrolling offers higher combined profits for both

parties than purely distributive offers

when an employer agrees to raise the pay of employees if

the employees agree to pay part of the cost of their medical
insurance.
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3.10 Commitment
• This is the final step in any negotiation

• It is important to document any and all agreements

• In contract negotiations, parties make a “tentative

agreement” on single issues to indicate agreement
anticipation:
- Not binding
- But bad faith to renege on an issue that has a TA

• Noting similarities in both parties’ needs encourages

commitment
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3.10 Commitment –
keeping the process moving

Several things that can be done:

• Moving on when a particular issue gets difficult

• Offering mutual trade-offs

• Voting on proposals that present potential

resolution
• Establishing a deadline
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3.10 Commitment – Indicators

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3.10 Commitment – Indicators

Several things that can be

done to ensure a commitment
is kept:
• Public announcement

• Ensure there’s a down payment

(when money involved)

• Written agreement
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3.11 Impasse

•When the parties don’t reach an agreement

 Solutions:
•Parties can call in a third party to decide the

dispute
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3.11 Impasse

• Legal means in court of law

• Other form of alternative dispute resolution

(ADR):
- Arbitration

- Mediation