International Business
Negotiation
McGraw-Hill/Irwin
1
CHAPTER TWO
Strategy and Tactics of
Distributive Bargaining
2
Three Reasons Negotiators
Should Be Familiar with
Distributive Bargaining
1. Independent situations require knowing
how this works in order to do well
2. Need to know how to counter the effects
of the strategies
3. Every situation has the potential to
require skills at the “claiming-value”
stage
3 2-3
The Distributive Bargaining
Situation
• Goals of one party are in
fundamental,direct conflict to another party
• Resources are fixed and limited
• Maximizing one’s own share of resources
is the goal for both parties
4 2-4
The Distributive Bargaining
Situation
Preparation—set a
• Target point, aspiration point
• Walkaway, resistance point
• Asking price, initial offer
5 2-5
The Distributive Bargaining
Situation
Party A - Seller
Walkaway Point
Initial Offer
Target Point
Target Point
Asking Price
Walkaway Point
Party B - Buyer
6 2-6
The Role of Alternatives to a
Negotiated Agreement
• Alternatives give the negotiator power to
walk away from the negotiation
– If alternatives are attractive, negotiators can:
• Set their goals higher
• Make fewer concessions
– If there are no attractive alternatives:
• Negotiators have much less bargaining power
7 2-7
The Distributive Bargaining
Situation
Party A - Seller
Walkaway Point
Target Point
Alternative
Initial Offer
Asking Price
Alternative
Target Point
Walkaway Point
Party B - Buyer
8 2-8
Fundamental Strategies
• Push for settlement near opponent’s
resistance point
• Get the other party to change their
resistance point
• If settlement range is negative, either:
– Get the other side to change their resistance
point
– Modify your own resistance point
• Convince the other party that the
settlement is the best possible
9 2-9
Keys to the Strategies
The keys to implementing any of the
four strategies are:
• Discovering the other party’s
resistance point
• Influencing the other party’s
resistance point
10 2-10
Four Propositions That
Suggest
How the Keys Affect the
Process
1. The higher the other party’s estimate of
your cost of delay or impasse, the
stronger the other party’s resistance
point will be.
2. 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.
11 2-11
Four Propositions That
Suggest
How the Keys Affect the
Process
3. The less the other party values an issue,
the lower their resistance point will be.
4. The more the other party believes that
you value an issue, the lower their
resistance point may be.
12 2-12
Tactical Tasks of Negotiators
• Assess outcome values and the costs of
termination for the other party
• Manage the other party’s impressions
• Modify the other party’s perceptions
• Manipulate the actual costs of delay or
termination
13 2-13
Assess the Other Party’s Target,
Resistance Point, and Costs of
Terminating Negotiations
• Indirectly
– Determine information opponent used to
set:
• Target
• Resistance points
• Directly
– Opponent reveals the information
14 2-14
Manage the Other Party’s
Impressions
• Screen your behavior:
– Say and do as little as possible
• Direct action to alter impressions
– Present facts that enhance one’s position
15 2-15
Modify the Other Party’s
Perceptions
• Make outcomes appear less attractive
• Make the cost of obtaining goals appear
higher
• Make demands and positions appear more
or less attractive to the other party –
whichever suits your needs
16 2-16
Manipulate the Actual Costs of
Delay or Termination
• Plan disruptive action
– Raise the costs of delay to the other party
• Form an alliance with outsiders
– Involve (or threaten to involve) other
parties who can influence the outcome in
your favor
• Schedule manipulations
– One party is usually more vulnerable to
delaying than the other
17 2-17
Positions Taken
During Negotiations
• Opening offer
– Where will you start?
• Opening stance
– What is your attitude?
• Competitive? Moderate?
• Initial concessions
– Should any be made? If so, how large?
18 2-18
Positions Taken
During Negotiations
• The role of concessions
– Without them, there is either capitulation
or deadlock
• Patterns of concession making
– The pattern contains valuable information
• Final offers (making a commitment)
– “This is all I can do”
19 2-19
Commitments:
Tactical Considerations
• Establishing a commitment
– Three properties:
• Finality
• Specificity
• Consequences
• Preventing the other party from committing
prematurely
– Their commitment reduces your flexibility
20 2-20
Ways to Create a Commitment
•
•
•
•
Public pronouncement
Linking with an outside base
Increase the prominence of demands
Reinforce the threat or promise
21 2-21
Commitments:
Tactical Considerations
• Ways to abandon a committed position
– Plan a way out
– Let it die silently
– Restate the commitment in more general
terms
– Minimize the damage to the relationship if the
other backs off
22 2-22
Closing the Deal
•
•
•
•
•
Provide alternatives (2 or 3 packages)
Assume the close
Split the difference
Exploding offers
Deal sweeteners
23 2-23
Dealing with Typical
Hardball Tactics
• Four main options:
– Ignore them
– Discuss them
– Respond in kind
– Co-opt the other party (befriend them)
24 2-24
Typical Hardball Tactics
• Good Cop/Bad Cop
• Lowball/Highball
• Bogey (playing up an issue of little
importance)
• The Nibble (asking for a number of
small concessions to)
25 2-25
Typical Hardball Tactics
•
•
•
•
Chicken
Intimidation
Aggressive Behavior
Snow Job (overwhelm the other party
with information)
26 2-26
Summary
Negotiators need to:
• Set a clear target and resistance points
• Understand and work to improve their
BATNA
• Start with good opening offer
• Make appropriate concessions
• Manage the commitment process
27 2-27