Negotiations and Distributive Negotiations Agenda Admin Questions Theory
Negotiations and Distributive Negotiations
Agenda • Admin: – Questions? • Theory: – – Negotiation Distributive negotiation Tools for distributive negotiation First offers • Debrief Bio. Pharm-Seltek • First Quiz (normally will do it at the beginning but today we will do it at the end…. You are welcome!!)
Negotiation • A social process in which conflict is resolved – Results in an allocation of resources or an agreement on how individuals will work together in the future • Five characteristics of negotiation – Two or more parties – You anticipate a better outcome as a result of the negotiation – The parties involved prefer mutual agreement to other outcomes – The parties involved understand that there will be give and take – Tangible and intangible components are involved in the negotiation
When negotiating makes sense • When you need the help of others • When others can give you more than what you can get on your own • When you are willing to give up resources valued by others • When working with another party can help you overcome challenges with other parties
Distributive negotiation • • • Competitive Win-lose Focus on claiming value Negotiators’ goals are in direct conflict Resources are limited Instrumental concerns only: do not care about the relationship with the other party
What are examples of distributive negotiation?
Tools for distributive negotiations • BATNA- Best Alternative To a Negotiated Agreement – What would you pursue if this negotiation doesn’t work? • Reservation value – What your BATNA is valued at in the negotiation – Can be dollars, points, land, flying pigs, etc… • Aspiration value – The value you aspire to in the negotiation
Z OP one f ossible A greement • The set of all possible deals that would be acceptable to both parties Seller’s reservation value Buyer’s reservation value Bargaining Zone
Z OP one f ossible A greement • Aspiration values help a negotiator know how far they might try to stretch their outcome beyond the ZOPA Seller’s aspiration value Buyer’s aspiration value Bargaining Zone
What was the Z O P A in Bio. Pharm-Seltek? one f ossible greement
Bio. Pharm • What is Bio. Pharm’s BATNA? • Is this a strong BATNA? • What is Bio. Pharm’s reservation price?
Bio. Pharm • What is Bio. Pharm’s BATNA? • Buy a plot of land build a new plant. Land will cost $500, 000. Building will cost $25 million and will take 12 months. • For each month Bio. Pharm is not producing product, it will lose $1 million in profits. Note this is not a very strong BATNA • What is Bio. Pharm’s reservation price? • Given the cost of building a new plant is $25 million that could be considered its BATNA. • However, factoring in lost profits, the FDA approval, and experienced workforce of Seltek, one could construct a reservation price closer to the $40 million available for investment.
Seltek • What is Seltek’s BATNA? • Is this a strong BATNA? • What is Seltek’s reservation price?
Seltek • What is Seltek’s BATNA? • Reconfigure the plant for general manufacturing. This would cost $3 million and will take 6 months. • Doing so will give the plant an appraised value of $10 million. Note this is also not a very strong BATNA. • What is Seltek’s reservation price? • $7 million = $10 million (appraised value) minus $3 million (cost of reconfiguration)
BS ZOPA
Seller Name Kayvon Francesca Shirin Rachelle Riley Kaitlyn Ashley Mariam Will Shau Shannon Jasmine Hiba Lukas Zaccaria Lynness Ben Marcel Dina Destanee Taylor Alex Lindsey Andrew Rachel Rasheed Michael Chloe Buyer Name Josh Alexandra and Jason Victoria Shahnaz Tara Dennis Stephane Dylan Tess sylvia nguyen Johnathan Quinn Leah Lexi Dwight Tom David Meryl Kate Breanna Zeinab Samantha Hala Saghar Melissa Elizabeth Arjun Phil Price $ 5. 50 $ 10. 00 $ 11. 50 $ 11. 75 $ 12. 00 $ 12. 40 $ 14. 80 $ 15. 00 $ 15. 30 $ 15. 50 $ 16. 00 $ 17. 00 $ 18. 20 $ 19. 00 $ 19. 50 $ 20. 00 $ 20. 20 $ 21. 00 $ 22. 70 $ 31. 00 Patent No N/S No No No N/S Yes No N/S N/S No No Extra No N/S Taxes N/S Buyer Seller N/S N/S N/S Split Buyer N/S N/S Split N/S Spilt Buyer N/S Buyer Seller N/S Seller EE Timing Extra 1 month Now Yes Month Severence Now Keep Renovations Insurance included Paten 5. 5 m Keep
Sale Price Seller Buyer (in dollars) Catherine Chiara $ 5. 50 Michael Tony $ 6. 80 Alex Martin $ 8. 00 Viktor Raluca $ 8. 10 Haya Kelly $ 10. 20 Ariana Hong $ 13. 00 Ziyaan Mohamud $ 13. 50 Karli Bojan $ 14. 25 William Louise $ 16. 00 Hassan Luc $ 16. 59 Roommate Allie $ 17. 00 Rasmus $ 24. 50 Scott & Adrian Fabian Cayce $ 37. 50 No deal Nolan & Zhaowei Alex A. Patent No N/S Yes Taxes N/S Buyer N/S N/S No N/S N/S Buyer Split N/S N/S EE's Yes yes
Compatible Issues • What were the compatible issues? • Did you use the compatible issues strategically?
Discussion Questions • Comfort level in negotiations…. • So many numbers……. . How did you deal? How can you use the negotiation checklist? • Attempts to create value?
Seller Name Kayvon Francesca Shirin Rachelle Riley Kaitlyn Ashley Mariam Will Shau Shannon Jasmine Hiba Lukas Zaccaria Lynness Ben Marcel Dina Destanee Taylor Alex Lindsey Andrew Rachel Rasheed Michael Chloe Buyer Name Josh Alexandra and Jason Victoria Shahnaz Tara Dennis Stephane Dylan Tess sylvia nguyen Johnathan Quinn Leah Lexi Dwight Tom David Meryl Kate Breanna Zeinab Samantha Hala Saghar Melissa Elizabeth Arjun Phil Price $ 5. 50 $ 10. 00 $ 11. 50 $ 11. 75 $ 12. 00 $ 12. 40 $ 14. 80 $ 15. 00 $ 15. 30 $ 15. 50 $ 16. 00 $ 17. 00 $ 18. 20 $ 19. 00 $ 19. 50 $ 20. 00 $ 20. 20 $ 21. 00 $ 22. 70 $ 31. 00 First Offer $ 10. 00 $ 15. 00 $ 10. 00 $ 12. 00 $ 13. 00 $ 12. 00 $ 17. 00 $ 16. 00 $ 9. 00 $ 8. 30 $ 15. 00 $ 14. 00 $ 13. 20 $ 15. 00 $ 25. 00 $ 15. 00 $ 21. 00 $ 15. 00 $ 20. 00 $ 18. 20 $ 16. 90 $ 20. 00 $ 24. 00 $ 22. 00
Seller Catherine Michael Alex Viktor Haya Ariana Ziyaan Karli William Hassan Roommate Scott & Adrian Fabian Nolan & Zhaowei Buyer Chiara Tony Martin Raluca Kelly Hong Mohamud Bojan Louise Luc Allie Rasmus Cayce Alex A. Sale Price (in dollars) First offer $ 5. 50 $ 0. 20 $ 6. 80 $ 30. 00 $ 8. 10 $ 16. 00 $ 10. 20 $ 15. 00 $ 13. 00 $ 20. 00 $ 13. 50 $ 12. 00 $ 14. 25 $ 20. 00 $ 16. 00 $ 50. 00 $ 16. 59 $ 17. 00 $ 24. 50 $ 45. 00 $ 37. 50 $ 25. 00 No deal $ 80. 00
First offers in negotiation • First offers can – Anchor a distributive negotiation – Help to define the ZOPA – Extreme first offers can let you make concessions (thus aggressive offers do not necessarily make you aggressive)…. but it also can backfire • Make a first offer only when you have sufficient information about your own and the other party’s aspirations and walk away points
First offers in negotiation • What if they make the first offer? ? • Re-anchor with a counter offer • Typically sale price is at the mean of the two offers • Concessions are different when dealing with an extreme offer – make smaller concessions to give the impression that you are reaching your reservation point
Making & breaking a first offer • Ignore other anchors • Rely on information, not influence • Have a strong first offer, then allow for moderation • Avoid allowing your own or others’ emotions to interfere with the negotiation
Quiz • Go to Ulearn!
- Slides: 25