CHAPTER 2 Strategy and Tactics of Distributive Bargaining

CHAPTER 2 Strategy and Tactics of Distributive Bargaining 分配型

Learning Objective 1. Grasp the basic structure of distributive bargaining and some related strategies and tactics. 2. Understand how to effectively manage distributive bargaining process, focusing on careful planning, strong execution, and constant monitoring of the other party’s reactions. 3. Apply distributive bargaining skills properly to value claiming stage of any negotiation, e. g. integrative negotiation.

Warming up Exercises 1. Any differences btwn Strategy and Tactic? 2. What does the term Distributive Bargaining (DB) mean to you?

An illustrative case • Is this scenario familiar-sounding?

Customer How much do you want for this brass dish? Storekeeper This is a beautiful antique, isn’t it? I guess I could let it go for $500. Oh come on, it’s dented. I’ll Really! I might consider a give you $175. serious offer, but $175 certainly isn’t serious. Well, I could go to $200, but I You drive a hard bargain, would never pay anything like young lady. $425 cash, right $500. Quote me a realistic now. price. It cost me a great deal more $200. than that. Make me a serious offer.

1. Distributive Bargaining (DB): Distinctive Features

DB: A summary of Distinctive Features win-lose battles, aimed at maximizing personal gain competitive environments that encourage forcing, as disputants attempt to wrestle concessions from each other toward an agreement most favorable to oneself. Q: Other terms and labels to describe DB?

1. 1 Basic Structure Key steps • Positions Taken during Negotiation. • Commitment. • Closing the Deal. The entire process of making an opening offer and then ending up with a mutually agreeable settlement is known as the negotiation dance (Raiffa 1982)

1. 1 Basic Structure: Terms and Concepts • Position: e. g. target/preferred/reservation points • Offer: e. g. initial/opening/renewed/revised • Concession • Commitment • Bargaining Zone (ZOPA)/Settlement Zone: Negotiated Agreement vs ZONA; Compromise Alternatives to a Negotiated Agreement: BATNA Settlement Point (p. 37) Bargaining Mix (p. 37): e. g. Multiple Equal Offers (MEOs) Pie= ZOPA?

1. 2 Fundamental Strategies • “Tell me the bare minimum you would accept from us, and I’ll see if I can throw in something extra. ” • “Why don’t you tell us the very maximum that you are willing to pay, and we’ll see if we can shave off a bit”

1. 2 Fundamental Strategies: Bottom line The above humorous story illustrates the essence of negotiation: How do people make sure they reach agreement if the bargaining zone is positive but claim as much of the pie as possible? Q: Any rules of thumb? NEVER reveal your reservation point

1. 2 Fundamental Strategies: the condo example e. g. The buyer’s 4 strategies available: (1) To push for a settlement close to the seller’s resistance point. (2) To convince the seller to change her resistance point. (3) If a negative settlement range exists, to convince the seller to reduce her resistance point. (4) To convince the seller to believe that this settlement is the best that is possible.

1. 2 Fundamental Strategies: Basics! 1. Discovering TOS’s Resistance Point 2. Influencing the Other Party’s Resistance Point(p. 38) )

1. 2 Fundamental Strategies: Discover…(how? ) • The more you can learn about the other party’s target, resistance point, motives, feelings of confidence, and so on, the more able you will be to strike a favorable agreement. • To influence the other party’s perception, however, they must establish some points effectively and convincingly.

1. 2 Fundamental Strategies: Influence… (how? ) • Factors are important in attempting to influence the other party’s resistance point: (1) the value the other attaches to a particular outcome; (2) the cost the other attaches to delay or difficulty in negotiations; (3) the cost the other attaches to having the negotiation aborted. • A significant factor in shaping the other person’s understanding of what is possible is the other’s understanding of your own situation.

1. 3 Tactical Tasks (p. 40) • Assess the other party’s target, resistance point, and cost of terminating negotiations • Manage the Other Party’s Impressions • Modify the Other Party’s Perceptions • Manipulate the Actual Cost of Delay or Termination

2. Effective DB process management • What do effective bargainers do?

2. Positions Taken during Negotiation (Positional bargaining) 2. 1 Opening Offers 2. 2 Opening Stance 2. 3 Initial Concessions 2. 4 Role of Concessions 2. 5 Pattern of Concession Making 2. 6 Final Offers

opening offer

2. 1 Opening Offers (pp. 47 -8) • The fundamental question is whether the opening offer should be exaggerated or modest. • There at least two reasons that an exaggerated opening offer is advantageous. • Two disadvantages of exaggerated opening offer are: (1) it may be summarily rejected by the other party; (2) it communicates an attitude of toughness that may be harmful to long-term relationships.

2. 2 Opening Stance (pp. 48 -9) • Will you be competitive or moderate? • It is important for negotiators to think carefully about the messages that they wish to signal with their opening stance and subsequent concessions. • To communicate effectively, a negotiator should try to send a consistent messages through both opening offer and stance. Box 2. 3 The power of the first move (p. 50)

2. 3 Initial Concessions (p. 49) • First concession conveys a message, frequently a symbolic one to the other party that how you will proceed. • Firmness may actually shorten negotiations, there is also the very real possibility, however, it will be reciprocated by the other. • There are good reasons for adopting a flexible position.

2. 4 Role of Concessions are central to negotiation. take-it-or-leave-it VS progression of concession Reciprocity: “Since you have reduced your demand on X, I am willing to concede on Y. ” Box 2. 4 four guidelines on how to make concessions (p. 51)

2. 5 Pattern of Concession Making (p. 51) Size of Concessions (in dollars) • Figure 2. 4 Pattern of Concession Making for Two Negotiators (p. 52) 5 =George’s concessions 4 =Mario’s concessions 3 2 1 0 1 2 3 4 Concession Number 5

2. 6 Final Offers (p. 53) “This is all I can do. ” “This is as far as I can go” VS “I went to my boss and got a special deal just for you. ”

2. 7 Commitment (pp. 53 -4) • Commitment is the taking of a bargaining position with some explicit or implicit pledge regarding the future course of action. • The purpose of commitment is to remove ambiguity about the actor’s intended course of action. • A commitment is often interpreted by the other party as a threat.

2. 7 Commitment 1. Tactical Considerations in Using Commitments 2. Establishing a Commitment 3. Preventing the Other Party from Committing Prematurely 4. Finding Ways to Abandon a Committed Position

2. 7. 1 Tactical Considerations in Using Commitments (p. 54) • Commitments exchange the flexibility for certainty of action, but they create difficulties if one wants to move to a new position. • When one makes commitments one should also make contingency plans for a graceful exit should it be needed.

2. 7. 2 Establishing a Commitment (pp. 54 -6) • A commitment statement has three properties: a high degree of finality, a high degree of specificity, and a clear statement of consequences. e. g. “We must have a 10% volume discount in the next contract, or we will sign with an alternative supplier next month. ” • Several ways to create a commitment: public pronouncement linking with an outside base increase the prominence of demands reinforce threat or promise

2. 7. 3 Preventing the Other Party from Committing Prematurely (pp. 56 -7) Approaches: • To deny his or her the necessary time. • To ignore or downplay a threat by not acknowledging the other party’s commitment, or even by making a joke about it. (e. g. “You don’t really mean that, ” OR “I know you cannot be serious about really going through with that, ” …. )

2. 7. 4 Finding Ways to Abandon a Committed Position (pp. 57 -8) • Four avenues for escaping commitment: Play a way out Let it die silently Restate the commitment Minimize the damage

2. 8 Closing the Deal (pp. 58 -9) • Several tactics are available to negotiators for closing a deal: • Provide alternatives 提供备选方案 Assume the close 假装成交 Split the differences 妥协，折中，互相让步 Exploding the offers 逼签 Sweeteners：成交刺激，成交诱饵（以优惠的条 件促使成交） “I’ll give you X if you agree to the deal. ”

2. 9 Hardball Tactics (pp. 60 -8) 高飞球 Such tactics are designed to pressure negotiators to do things they would not otherwise do, and their presence usually disguises the user’s adherence to a decidedly distributive bargaining approach. • 1 Dealing with typical hardball tactics (TBCed) • 2 Typical hardball tactics (TBCed)

2. 9. 1 Dealing With Typical Hardball Tactics • How best to respond？ Ignore them (p. 60) 不予理睬 Discuss them (p. 60) 加以讨论 Respond in kind (p. 61)正面回应，以同样的方式 回敬对方 Co-opt the other party (p. 61) 拉拢对手，化敌为 友（联合次要敌人打击首要敌人）

Lowball/Highball (pp. 62 -3) 滚地球/高飞球 Risk: the other party will think negotiating is a waste of time and will stop negotiating. The best way to respond: ask for a more reasonable opening offer from the other party, but not “anchored” by the other’s first outrageous offer. Good preparation is a critical defense against this tactic.

Bogey (pp. 63 -4) 哄骗 Negotiators using the bogey tactic pretend that an issue of little or no importance to them is quite important. This tactic is fundamentally deceptive, and it can be a difficult tactic to enact. Bogeys occurs more often by omission该做而没有做 than commission做错事. Once again, good preparation is a critical defense against this tactic. Probing with questions about why TOS wants a particular outcome. Be cautious about sudden reversals in positions taken by TOS, especially late in a negotiation.

• The Nibble (p. 64) 最后揩油，最后再咬一口 Negotiators using the nibble tactic ask for a proportionally small concession on an item that hasn’t been discussed previously in order to close the deal. • Risk: (TOS) potential to seek revenge in future negotiations. • Two ways to combat the nibble (Landon, 1997). respond with the question “What else do you what? ”; respond with your nibble on another issue/item.

A nibble case in a business context • After a considerable amount of time has been spent in negotiation, when an agreement is close, one party asks to include a clause that hasn’t been discussed previously and that will cost TOS a proportionally small amount. This amount is too small to lose the deal over, but large enough to upset TOS. (p. 64)

• Chicken (pp. 64 -5) (see Box 2. 6 Playing Chicken in int’l relations, p. 66) Negotiators using this tactic combine a large bluff with a threatened action to force the other party to “chicken out” and give them what they want. Weakness: It turns negotiation into a serious game in which one or both parties find it difficult to distinguish reality from postured negotiation positions.

Chicken (pp. 64 -5) 胆小鬼 Possible options: 1 Preparation and a thorough understanding of the situations of both parties help identify the boundary line. 2 Use of external experts to verify information or to help reframe the situation.

• Intimidation (p. 65 -7) 胁迫，威吓 Many tactics under the label of intimidation all attempt to force TOS to agree by means of an emotional poly, usually anger or fear. Another form includes increasing the appearance of legitimacy. Guilt can also be used as a form of intimidation. How to deflate the effectiveness of intimidation? discuss the negotiation process with the other party; Ignore TOS’ attempts to intimidate you. use a team to negotiate with TOS.

• Aggressive Behavior (p. 67) 激烈手段 Negotiators using this tactic is signaling a hard-nosed intransigent position and trying to force TOS to make many concessions to reach an agreement. e. g. “You can do better than that”, “Let’s not waste any time. What is the most that you will pay? ”, “What is your cost breakdown for each item? ” countermoves: halt the negotiations in order to discuss the negotiation process itself. Have a team to counter the tactic. Good preparation and understanding needs and interests relative to each party make the job easier.

6. 2 Typical Hardball Tactics • Snow Job (pp. 67 -8) 用欺骗手段来说服别人，花言巧 语 It occurs when negotiators overwhelm TOS with so much information that he or she has trouble determining which facts are real or important, and which are included merely as distractions. to counter this tactic: Not be afraid to ask questions. Instead of negotiators, technical experts discuss technical issues. Listen carefully to spot out incorrect and inconsistent information in a complete snow job package so as to question the accuracy of the whole presentation. Strong preparation counts.

3. Distributive Bargaining Skills Applicable to Integrative Negotiation (p. 68) • Many of the skills are also applicable to the latter stages of integrative negotiation when negotiators need to claim value, that is, to decide how to divide their joint gains. • Care needs to be taken, however, not to seriously change the tone of those negotiations by adopting an overtly aggressive stance at this stage.

4 Teacher’s note Chinese Textbook Approach to IB Negotiation Prevalence of Strategy and Tactics (DB) 1 My own observation 2. Zhao(2000) Zhao, Jensen J. , The Chinese Approach to International Business Negotiation, The Journal of Business Communication, 37(3), July 2000: 209 -237.