UNIT 5 Distributive Tactics QBook
INTRODUCTION Ø Most important is distributive bargaining situation is to maximize the current deal. Ø The most important tool one has to do this is information. Ø The less information you give to the other side and the more information you get about the other side, the better your deal will be. QBook
INTRODUCTION Ø In a distributive negotiation, the negotiator wants to Ø 1) find the other side’s resistance point Ø 2) influence the other side’s guesses Ø 3) influence the other side’s outcome valuations Ø 4) influence the cost of delaying or leaving the negotiation. Ø Each of these efforts will make the negotiation outcome more favorable. QBook
DIALOG (Personal Distributive Bargaining) Ø Jane: We can’t buy the newest HD television because we don’t have enough money saved. Ø Fred: Well, what is the upper limit we can afford? Ø Jane: I don’t think we can afford any of these televisions. They are all too expensive. Ø Fred: Yeah, I guess they are kind of expensive. Ø Jane: I think we can hold out for a couple more years and just keep what we’ve got. Ø Fred: That’s true. We can get by, but I was just thinking of your mother. Ø Jane: What about my mother? Ø Fred: Well, you know your parents have that Sony HD television, and your mother really is picky about the TV quality when she watches her shows. QBook
DIALOG (Personal Distributive Tactics) Ø Jane: I see what you mean. Ø Fred: And isn’t your mother going to stay with us in the summer for a month? If it was just for us, I would say we don’t really need it, but this is important for your mother also. Ø Jane: Okay, I agree we need to get a better television, but we should shop around more and compare more prices. Ø Fred: That is a good idea, but you know LG has a special offer this week. We don’t need to make any payment for two months! Ø Jane: Maybe that is a good deal. QBook
DIALOG (Business Distributive Tactics) Ø Fred: We can always find other buyers. Ø Alex: Our understanding is that you are having a hard time selling this product and you have a large inventory? Ø Fred: I don’t know where you got that information, but it is not true. This product has been selling very well. Ø Alex: We’ve heard that sales are not going so well. We can take some of that inventory off your hands, but we need a much bigger discount. Ø Fred: That is not what my managers tell me. All the information I have is that sales are strong. Ø Alex: Look, no one wants to exploit the situation, but we can walk away from this today and you’ll end up with nothing. We just don’t need this product now. Ø Fred: What kind of discount are you asking for? Ø Alex: At least 50 percent. Ø Fred: That is more than I’m authorized to approve. I’ll have to contact my boss and get directions. Ø Alex: I would agree if we weren’t facing a deadline. QBook
DIALOG (Business Distributive Tactics) Ø Fred: My authorized bargaining limit is a 40 percent discount. Ø Alex: I have my limit also, and quite honestly, this product just doesn’t have a strong demand. Ø Fred: Have you considered our new product that is in market testing now. If we lose money on this deal we may have to reconsider who we sell to in the future. Ø Alex: Of course we are interested in getting priority on your new product. In view of maintaining a good relationship, we can reduce our demand to a 40 percent discount, but that is our bottom line. Ø Fred: I know my boss is committed to maintaining a good relationship with your firm. However, as I said, we cannot take a loss on this deal. Ø Alex: Can you make your commitment more concrete? Ø Fred: I’m sure we can make a strong commitment to give you our first shipments of the new product, but first we need to complete this agreement. Ø Alex: I might be able to move down on the discount if a commitment is made on the new product. Ø Fred: I will need to check with our production department to be sure, but there should be no problem in supplying you 10, 000 units of the first production run. Ø Alex: Let’s split the difference at 35 percent and make an informal agreement on first shipment of the new product. Ø Fred: Done. QBook
VOCABULARY Ø Authorize (v): Give authority to; Give a negotiator power to decide an issue; Allow negotiator to act on his/her own. Ø Commitment (n): a promise or pledge to do something; A negotiator’s obligation that an action will be completed in the future. Ø Commit (v): Giving assurance that something is true; A negotiator’s statement of some goal or limit. Ø Exploit (v): Taking advantage of some opportunity to make a profit; Using the opposing side’s weak position to gain more than normal profit. Ø Hold Out (v): Refusing an agreement while waiting for a better alternative. Ø Informal (adj): Not written down, an agreement outside of a contract and not detailed. Ø Inventory (n): Goods ready for sale but not yet sold; Products waiting for buyers; Goods that customers may not want. Ø Limit (n): A point that cannot be passed; a boundary usually showing either the highest or lowest value. QBook
VOCABULARY Ø Payment (n): Money transferred in exchange for goods or services; Money paid for a good or service that covers part of the price with later payments completing the purchase. Ø Priority (n): Being earlier, sooner, or higher in ranking compared to others; Being closer to first on a list of buyers or sellers. Ø Production (n): The process that creates manufactured goods; The goods produced by the manufacturing process. Ø Reconsider (v): To think about again; Consider changing one’s opinion because new of new information or a changed situation. Ø Shipment (n): An amount of goods sent from the seller to the buyer. Ø Special Offer (n): A sale price; An unusual offer from the seller that gives the buyer something better than the normal offer. Ø Terms (n): Parts of an agreement that include price, amount, payment, shipping, quality and other factors. Ø Upper Limit (n): The highest acceptable level; A resistance point for the buyer. QBook
FOLLOW UP Ø Getting more information about the other side and protect secrets. Ø This is the key to successful distributive bargaining. Ø The four goals of a negotiator are: Ø 1) find the other side’s resistance point Ø 2) influence the other side’s guesses Ø 3) influence the other side’s outcome valuations Ø 4) influence the cost of delaying or leaving the negotiation. The ways to actually get this done are called tactics. QBook
FOLLOW UP 1) Find the other side’s resistance point Tactic How to do it Indirect Assessment Find out what the competitions’ resistance points are. These may be very close to the negotiator’s resistance points. Check public information, such as company announcements, stock information, and tax information. Visit the negotiator’s company, locations, stores for clues about what the resistance points may be. A company that has lots of inventory piled up in their warehouse may have a lower resistance point. Direct Assessment Ask the other side what their resistance point is. Listen carefully to what the negotiator says and watch how he/she acts. There may be clues about the resistance point. Make friends with someone on the other side. Social events may be a chance to get information about what the other side’s secrets are. QBook
2) Influence the other side’s guesses Screening FOLLOW UP Prevent any secret information from leaking out of the negotiation team. Don’t talk too much. Silence is golden in distributive negotiation. Give as little information as possible to team members. If someone on the negotiation team doesn’t know the resistance point, even if he/she talks to the other side, there is no secret to give away. Don’t allow any decisions to be made before checking back with the team leader first. Selective Presentation Only present information that makes the negotiator’s position good (don’t show anything that helps the other side). Make a clear and logical argument that supports the negotiators public position but does not tell anything about the true resistance point. Emotion Showing emotion can make the other side think the negotiator is interested, bored, or angry. These emotions can be used to convince the opposition about something that is not actually true. Asking questions and reviewing details makes the impression that the topic is important (while it may not be important at all). Looking bored or even sleepy makes the impression that the topic is not important (while it may be very important). QBook
FOLLOW UP 3) Influence the other side’s outcome valuations Logic Use a logical argument to show the other side will gain more if they change their demands. Hide Information Keep important information about the outcome secret. This may result in the other side getting something very different from what they expected. QBook
FOLLOW UP 4) Influence the cost of delaying or leaving the negotiation Outside Partner Use rules or regulations outside of the negotiation that help the negotiator. Government regulations can be used to show that some cost must be added to cover taxes, inspections, or standards testing. The negotiator can argue that it is not his/her fault, but something that has to be done. Threats to go to the police, consumer groups, or even newspapers and television news channels can be used to increase the cost for the other side if they leave the negotiation. Schedule Change QBook One side of the negotiation may be able to change meeting times and locations. This may be very inconvenient for the other side. After a few changes, the opposition will want to finish the negotiations before more changes are made.
FOLLOW UP Ø Negotiation Positions Ø Because distributive bargaining is all about getting something from the other side, it is important the negotiator be able to look like he/she is giving something up while actually losing little or nothing. Ø The key to this is to start with an opening offer that is not close to the resistance point. Once the opening offer is made, the negotiator must present the other side with an attitude that says, “I won’t give up anything, ” the tough attitude, or, “I want to help you, ” the friendly attitude. QBook
FOLLOW UP Ø If the friendly attitude is used, the opening offer should be farther from the resistance point than if the tough attitude is used. Ø Even though the other side may not like the tough attitude, this approach can make the negotiation shorter. Ø Once the other side sees how hard the negotiation is going to be, they may simply want to give up early to save time and trouble. Ø However, if the attitude is too tough, the other side may simply walk away. QBook
FOLLOW UP Ø Positions QBook
FOLLOW UP Ø If no concessions are made, the negotiation will not move forward. Ø A tough stand will give fewer concessions, and a friendly stand more. Ø In both cases, the way the concessions are given is important. Ø Concessions should become smaller and fewer concessions offered. Ø In this way, the other side will think the concessions are nearing the resistance QBook point.
FOLLOW UP Ø Concessions QBook
FOLLOW UP Ø As the negotiation nears the end, it may be difficult to reach a deal because the hardest issues may still remain or both sides have given up all they want to give up. Ø A final push is often needed to get the deal. QBook
FOLLOW UP Push to Close the Deal Provide Alternatives Make more than one offer so the other side can choose the one they like the most. Assume a Deal Act as if a deal is accepted and move on to a conclusion. If the other side does not disagree, then the deal can be concluded. Split the Difference When some differences remains near the end of the negotiation, they can be split in half in order to make the deal. Deadline Offer A time limit, such as 24 hours, is put on an offer. This pressures the other side to quickly take the offer. Sweetener Extras are offered if the deal is made right away. These extras may be something new, or something from the negotiation that was not given up in the concessions. QBook
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