Ch. 13 – Negotiation

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What is negotiation? Give examples too
A decision making process among interdependent parties who don’t share identical preferences

o Job offers
o Mergers/acquisitions
o Buying a house
o Deciding what movies to watch with friends

Characteristics of Negotiation
• Parties are ITERDEPENDENT outcomes determined jointly
• Each side has something that the other side wants
• Parties engage in communication to divide and exchange resources
• Parties make offers and counteroffers until an agreement is reached
• Belief that conflicting interests exist
• Parties have incomplete knowledge about each other’s interests
Types of Negotiation (2)
1. Distributive Negotiation
• Win-lose
• Based on the belief that “your gain is my loss”/”my gain is your loss”
• Fixed amount of resources (“fixed pie”) to be divided up

2. Integrative Negotiation
• Win-win
• Based on the belief that each party has different priorities so they can both get what they want
• Issues can be added or combined to create mutually beneficial outcomes (“expanding the pie”)

What is successful negotiation?
• Where both parties walk away with a good deal
• Good deal = falls within settlement range
Settlement range
**look at picture**

Determined by each party’s TARGET and RESISTANCE POINTS

The party’s ideal outcome

Resistance points:
The party’s lowest acceptable outcome

How to determine target and resistance point
• Assess personal goals
• Do your research
• Try to gauge other party’s goals
What is BATNA? Give examples too
Best Alternative To a Negotiation Agreement

If you can’t reach an agreement, what’s your next best alternative?

o Other job offers
o Other companies you could acquire
o Other houses you could bid on

Determine your BATNA and try to figure out other party’s BATNA

Why are BATNAs good?
BATNAs give you power
o The better your BATNA, the more power you have
o If you don’t have a good BATNA, you might be desperate for any deal

A BATNA lets you know whether or not you should accept an offer
o If the agreement is better than your BATNA, TAKE IT
o If the agreement is worse than your BATNA, REJECT IT

Why is planning for negotiation important?
• Planning = CRITICAL
• Need to walk into negotiation prepared
o Set resistance and target points
o Know your BATNA try to find best possible BATNA
• Planning will tell you when to walk away from the table and when an agreement is acceptable
Distributive Tactics
Tactics that help you claim value for yourself

o Threats/Promises
♣ Threat = you’ll punish the other party if they don’t concede to your position have effect when one part has power over the other and they don’t plan on making any future negotiations
♣ Promise = giving in means you’ll get a reward in the future have effect when your side lacks power and anticipates future negotiations with other side

o Firmness
♣ Sticking to your target position, offering few concessions and waiting for the other party to give in

o Persuasion
Two-prong attack:
• One prong asserts the technical merits of the party’s position
• Other prong asserts the fairness of the target position

Persuasion = attempt to change the attitudes of the other party toward your target position

Integrative Tactics
Tactics that help you create value

o Exchange information
♣ Leads to the discovery of compatible and integrative issues
o Frame differences as opportunities
♣ Different preferences open doors for integrative solutions

o Cut costs
♣ Minimize/eliminate costs (money, time, effort) for other side, can change distributive issue into an integrative issue

o Expand the pie
♣ Bring additional issues/offers to the table
♣ Sweeten the deal with new offers that you discover the other side values (i.e. integrative issues)
♣ Discover where one side can give the other what it wants at little/no cost

o Focus on superordinate goals
♣ Outcomes that can only be achieved if the two sides collaborate

Examples of integrative tactics in Sluggers Come Home
Exchange information
• Barbara feels the deal is risky because she’s unsure about attendance projections
• The brothers are confident about the attendance figures
• This difference in perception of risk leads to the creation of the variable lease rate satisfies both parties

Cut costs
• Variable lease rate (if attendance is low, Barbara would only pay what she paid last year)

Expand the pie
• The owner’s box, the proposal of a variable lease rate, letting Barbara have control over the use of the stadium, the former major league baseball player

Focus on superordinate goals
• If Ted and Barbara come to an agreement, having her team play at Currie Field would “send a lightning bolt through the town”

Good Negotiating Strategies
• Each party should give up on integrative issues that are less important and gain on the issues that are more important requires COMMUNICATION
• Uncover compatible issues (don’t “leave value on the table”)
• Split the difference on distributive issues
Categories: Negotiation