The distributive bargaining competitive, or win-lose, bargaining is a situation where the goals of one party are usually in fundamental and direct conflict with the goals of the other party.
Resources are fixed and limited, and both parties want to maximize their share. As a result, each party will use a set of strategies to maximize his or her share of the outcomes to be obtained. One important strategy is to guard information carefully – one party tries to give information to the other party only when it provides a strategic advantage. Meanwhile, it is highly desirable to get information from the other party to improve negotiation power. Distributive bargaining is basically a competition over who is going to get the most of limited resources, which is often money. Whether or not one of both parties achieve their objectives will depend on the strategies and tactics they employed. 1
For many, the strategies and tactics of distributives bargaining are what negotiation is all about. Others are repelled by distributive bargaining and would rather walk away than negotiate this way they argue that distributive bargaining is old fashioned, needlessly, confrontational and destructive.
There are three reasons that every negotiator should be familiar with Distributive Bargaining. First, negotiators face some interdependent situations, that are distributive, and to do well in them, they need to understand how they work. Second, because many people use Distributive Bargaining strategies and tactics almost exclusively, all negotiators need to understand how to counter their effects. Third, every negotiative situation has the potential to require Distributive Bargaining skills when at the "claiming value" stage 2. Understanding Distributive Bargaining strategies and tactics is important and useful, but negotiators need to recognize that these tactics can also be counter productive and costly. Often they cause negotiating parties to focus so much on their differences that they ignore what they have in common 3. These negative effects notwithstanding, Distributive Bargaining strategies and tactics are quite useful when a negotiator wants to maximize the value obtained in a single deal, when the relationship with the other party is not important, and when they are at the claiming value stage of negotiation.
Before negotiation, both parties to a negotiation should establish their starting, target and resistance point. Starting points are often in the opening statements each party makes (i.e. the seller's listing price and the buyer's offer). The target point is usually learned or inferred as negotiations get under way. People typically give up the margin between their starting points and target points as they make concessions. The resistance point, the point beyond which a person will not go and would rather break off negotiations, is not known to the other party and should be kept secret 4.
One party may not learn the other's party resistance point even after the end of a successful negotiation. After an unsuccessful negotiation, one party may infer that the other's resistance point was near the last offer the other was willing to consider before the negotiation ended.
The spread between the resistance points, called the bargaining range, settlement range, or zone of potential agreement, is particularly important. In this area, the actual bargaining takes place, for anything outside these points will be summarily rejected between one of the two negotiators. When the buyer's resistance point is above the seller's, he is minimally willing to pay more than she is minimally willing to sell.
However, because negotiators don't begin their deliberation by talking about their resistance points, it is often difficult to know whether a positive settlement range exist until the negotiators get deep into the process. It is worthy of note that, negotiations that started with negative bargaining range are likely to stalemate. Target points, resistance points and initial offers all play on important role in Distributive Bargaining. Target point influence both negotiators outcomes, opening offers play on important role as a warning for the possible presence of hardball tactics5.
In addition to opening bids, target points and resistance points a fourth factor may enter the negotiations: and alternative outcome that can be obtained by completing a deal with someone else. In some negotiations, the parties have only two fundamental choices: (a) reach a deal with the other party, or (b) reach no settlement at all. In other negotiations, however, one or both parties may have the possibility of an alternative deal with another party.
An alternative point can be identical to the resistance point, although the two do not have to be the same. Alternative are important because they give negotiators the power to walk from any negotiation when the emerging deal is not very good. The number of realistic alternatives that negotiators have will vary considerably from one situation to another. In negotiations, where they have many alternatives they can set their goals higher and make fewer concessions. In negotiations where they have no attractive alternatives, such as when dealing with a sole supplier, they have much less bargaining power. Good distributive bargainers identify their realistic alternatives before starting discussions with the other party so that they can properly gauge how firm to be in the negotiation. Good bargainers 6 also try to improve their alternatives while the negotiation is underway.
Negotiators need to ensure that they have a clear understanding of their best alternative to a negotiated agreement (BATNA) 7. Having a number of alternatives can be useful, but it is really one's best alternative that will influence the decision to close a deal or walk away. Negotiators who have stronger BATNAs, that is, very positive alternatives to a negotiated agreement, will have more power throughout the negotiation and accordingly should be able to achieve more of their goals.
In almost all negotiations, agreement is necessary on several issues: the price, the closing date of sales renovation, price of items forgone etc. The package of issues for negotiation is refers to as the barraging mix. Each item in the mix has its own starting target and resistance points. Some items are of obvious importance to both parties, others are important only to one party. Negotiators need to understand what is important to them and to the other party and they need to take these priorities into account during the planning process 8.
Within the fundamental strategies of distributive bargaining, there are four important tactical tasks, concerned with targets, resistance points, and the cost of terminating negotiations for a negotiator in a Distributive Bargaining situation to consider:
- Assess the other party's target, resistance point, and cost of terminating negotiations
- Manager the other party's impression of the negotiators' target, resistance point and cost of terminating negotiation.
- Modify the other party's perception of his or her own target, resistance point and cost of terminating negotiation and
- Manipulate the actual cost of delaying in terminating negotiations.
POSITION TAKEN DURING NEGOTIATION
Effective distributive bargainers need to understand the process of taking positions during bargaining, including the importance of the opening offer and opening stance and the role of making concessions throughout the negotiation process. 9 At the beginning of negotiations, each party takes a position. Typically, one party will then change his or her position in response to information from the other party or in response to the other party's behaviour. Changes in position are usually accompanied by new information concerning the other's intentions, the value of outcomes and likely zones for settlement. Negotiation is interactive. It provides an opportunity for both sides to communicate information about their positions that may lead to change in those positions.
Opening Offer
When negotiation begins, the negotiator is faced with a perplexing problem. What should the opening offer be?
Research by Adam Galinsky and Thomas Mussiveiler suggest that making the first offer in a negotiation is advantageous to the negotiator making the offer. 10 It appears that first offer can anchor a negotiation especially when information about alternative negotiation outcome is not considered. Negotiator can dampen "first offer effect" by the other negotiator, however, by concentrating on their won target and focusing on the other negotiator's resistance point.
A second decision to be made at the outset of Distributive Bargaining concerns the stance or attitude to adopt during the negotiation. Will you be competitive (fighting to get the best on every point) or moderate (willing to make concessions and compromise?). Some negotiators take belligerent stance, the other party may mirror the initial stance, meeting belligerent stance with belligerence. It is important for negotiators to think carefully about the message that they wish to signal with their opening because there is a tendency for negotiators to respond in kind to distributive tactics in negotiation11. That is negotiators tend to match distributive tactics from the other party with their own distributive tactics, so negotiators should make conscious decision about what they are signaling to the other party with their opening stance and subsequent concession.
An opening offer is usually met with a counter offers and these two offers define the initial bargaining rang. Sometime the other party will not counter offer but will simply state that the first offer is unacceptable and ask the opener to come back with a more reasonable set of proposals. Note that it is not an option to escalate one's opening offer that is, to set an offer further away form the other party's target point that one's first offer. Opening offers, opening stance, and initial concessions are elements at the beginning of a negotiation that parties can use to communicate how they intend to negotiate an exaggerated opening offer, a determined opening stand, and a very small opening concession signal a position of firmness. Firmness can create a climate in which the other party may decide that concessions are so meager that he or she might as well capitulate and settle quickly rather than drag things out. Paradoxically, firmness may actually shorten negotiation12
However, negotiations can be flexible. There are several good reasons for adopting a flexible position. 13 First, when taking different stances throughout the negotiation, one can learn about the other party's target and perceived possibilities by observing how he or she respond to different proposals. Negotiators may want to establish a comparative rather than a competitive relationship, hoping to get a better agreement. In addition, flexibility keeps the negotiations proceeding; the more flexible one seems the more the other party will believe that a settlement is possible.
Final Offers
Eventually a negotiator wants to convey the message that there is no further room for movement that the present offer is the final one. A good negotiator will say, "this is all I can do" or "this is as far as I can go". Sometimes, however, it is clear that a simple statement will not suffice; an alternative is to use concessions to convey the point. The final offer has to be large enough to be dramatic yet not so large that it creates the suspicion that the negotiator has been holding back and that there is more available on other issues in the bargaining mix. 14
Closing the Deal
After negotiating for a period of time, and learning about the other party's needs, positions, and perhaps resistance point, the next challenge for a negotiator is to close the agreement. Several tactics are available to negotiators for closing a deal, 15 choosing the best tactic for a given negotiation is as much as a matter of art as science. These tactics are:
- Provide Alternatives
- Assume the Close
- Split the Difference
- Exploding Offers
- Sweeteners
Hardball Tactics
We now turn to a discussion of hardball tactics in negotiation. Many popular books of negotiation discuss using hardball negation tactics to beat the other party. 16 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. They also can backfire, and there is evidence that every adversarial negotiator is not effective negotiators. 17 Many negotiators consider these tactics out-of-bounds for any negotiation situation. 18
The followings are the hardball tactics
- Dealing with Typical Hardball Tactics
- Ignore Them
- Discuss Them
- Respond in Kind
- Co-opt the Other Party
- Typical Hardball Tactic
- Good Cop-Bad Cop
- Lowball/Highball
- Bogey
- The Nibble
- Chicken
- Intimidation
- Aggressive Behaviour
- Snow Job
CONCLUSION:
On the final analysis, Distributive Bargaining Tactics and Strategies discussed above is intended to help negotiators understand the dynamics of Distributive Bargaining and thereby obtain a better deal. A thorough understanding of these concepts will allow negotiators who are not by nature not comfortable with Distributive Bargaining to manage distributive situations proactively.
ENDNOTES
- Walton and mckersie, 1965
- See lax and sebenius, 1986
- Thompson and Hoebec, 1996
- Missner, 1980
- Raiffa, 1982
- Fisher and Ertel, 1998
- Fisher, Ury and Patton, 1991
- Watkins, 2002
- Tutzaver, 1992
- Galinsky and Mussweiler, 2001
- Weingart, Prietula, Heider and Genovese, 1999
- See Ghosh, 1996
- See Rapoport, Erev, and Zwick, 1995
- Walton and Mckersie, 1965
- See Cellich, 1997; Girard, 1989
- See Aaronson, 1989, Brooks and Odiorne, 1984
- Girard, 1989
- Carr, 1968
- See Fisher, Ury and Patton, 1991
INTEGRATIVE NEGOTIATION
When a negotiation is integrative, it means that negotiation is based on interest or otherwise negotiation strategy which lay emphasis on win-win situation. The goal of Integrative Negotiation is to make the parties' interest compatible, so that both sides can win. That is, reach an agreement that satisfies their need. The goals of the parties are integrative. Negotiations are not mutually exclusive. If one party achieves its goals, the other is not precluded from achieving its goals as well. The fundamental structure of integrative negotiation situation is such that, it allows both sides to achieve their objective. 1
While Integrative Negotiation Strategies are preferable, they are not always possible. Sometimes parties' interests really are opposed as when both sides want a larger share of fixed resources.
CHARACTERISTIC OF INTEGRATIVE NEGOTIATION
- It focus on commonalties rather than differences
- It attempt to address needs and interests, not positions
- It commit to meeting the needs of all involved parties
- Exchange information and ideas
- Invent options for mutual gain
- Use objective criteria for standard of performance.
Past experience, based perceptions and truly distributive aspects of bargaining makes it remarkable that integrative agreements occur at all. But they do, largely because negotiators work hard to overcome inhibiting factors and search assertively for common ground. Those wishing to achieve integrative results find that they must manage both the contest and the process of negotiation in order to gain the cooperation and commitment of all parties. Key contextual factors include:
- Creating a free flow of information
- Attempting to understand the other negotiator's real need and objective
- Emphasizing the commonalties between the parties and minimizing the differences
- Searching for solutions that meet the needs and objectives of both sides.
KEY STEPS IN INTEGRATIVE NEGOTIATION PROCESSS
There are four major steps in the Integrative Negotiation Process:
- Identify and define the problem
- Understand the problem and bring interests and needs to the surface
- Generate alternative solution to the problems
- Evaluate those alternatives and select among them.
Increasing Value to Buyer
Claiming Value
Creating Value Pareto efficient frontier
Increasing Value to Seller
The first three steps of the Integrative Negotiation process are important for "Creating Value". While the fourth step o the Integrative Negotiation Process, the evaluation and selection of alternatives INVOLVE "CLOUMING Value". Claiming value involves many of the distributive bargaining skills discussed earlier.
1. IDENTIFY AND DEFINE THE PROBLEM
The problem identification step is often the most difficult one and it is even more challenging when several parties are involved. Negotiator need to consider five aspects when identifying and defining the problems.
- Define the problem in a way that is mutually acceptable to both sides.
- State the problem with an eye toward practicality and comprehensiveness
- State the problem as a goal and identify the obstacles to attaining this goal.
- Depersonalize the problem
- Separate the problem definition from the search for solution.
2. UNDERSTAND THE PROBLEM FULLY
Identify interest needs – Many writers have stressed that a key step in achieving an Integrative Agreement is the ability of the parties to understand and satisfy each others interest.2 Identifying interest is a critical step in the Integrative Negotiation Process. Interests are the underlying concerns, need or desires that motivate a negotiator to take a particular position. However, in as much as satisfaction may be difficult and understanding of the underlying interest may permit them to invent solutions that meet their interest. More so, several types of interests may be at stake in a negotiation and that type may be intrinsic (the parties value it in and of itself) or instrumental (the parties value it because it helps them derive other outcomes in the futures. 3
TYPES OF INTERESTS
- Substantive Interests - related to the focal issues under negotiation
- Process Interests are related to the way a dispute is settled
- Relationship Interests – indicate that one or both parties value their relationship with each other and do not want to take actions that will damage it.
- Finally, Lax and Sebenius point out that "the parties may have interests in principles concerning what is fair, what is right, what is acceptable, what is ethical, or what has been done in the past and should be done in the future".
Some observation on Interests
- There is almost always more than one type of interest underlying a negotiation
- Parties can have different types of interest at stake
- Interest often stem from deeply rooted human needs or values
- Interest can change
- Surfacing Interests is not always easy or to one's best advantage
- Focusing on interests can be harmful
- Generate alternative solutions.
The search for alternative is the creative phase of the Integrative Negotiation. Once the parties have agreed on a common definition of the problem and understood each others interests, they need to generate a variety of alternative solution. The objective is to create a list of options or possible solution to the problem; evaluating and selecting from among those options will be their task in the final phase. Several techniques have been suggested to help negotiators generate alternative solutions. These techniques fall into two general categories. 4
i. Redefining the Problem or Problem Set:
This technique call for the parties to define their underlying needs and develop alternatives to meet them. Five different methods for achieving integrative agreements have been proposed and are highlighted below: 5
ii. Expand the pier:
This involves beginning negotiations with shortage of resources, this is not possible for both parties to satisfy their interests or obtain their objectives under current condition. A simple solution is to add resources – expand the pie.
a. Logroll – for logrolling to be successful, parties are required to find more than one issues in conflict and to have different priorities for those issues. 6 Logrolling is frequently done by trial and error as part of the process of experimenting with various packages of offers that will satisfy everyone involved. However, logrolling may be effective when the parties can combine two issues, but not when the parties take turns in successive negotiation.
More so, logrolling is not only effective in inventing options but also as a mechanism to combine options into negotiated packages. Neale and Bazerman identify a variety of approaches in addition to simply combining several issues into a package. 7 Three of these in particular, relate to the matters of outcome probabilities, and timing in other words what is to happen, the likelihood of it happening and when it happens.
b. Exploit differences in risk preference.
c. Exploit differences in time preferences
- Use nonspecific compensation – A third way to generate alternatives is to allow one person to obtain his objectives and pay off the other person for accommodating his interests. For non-specific compensation to work, the person doing the compensating needs to know what is valuable to the other person and how seriously she is inconvenienced.
- Cut the costs for compliance: Through cost cutting, one party achieves her objectives and the others costs are minimized if she agrees to go along.
- Find a bridge solution: This involve a situation whereby parties invent new options that mete all their respective needs.
3. GENERATING ALTRNATIVE SOLUTIONS TO THE PROBLEM AS GIVEN:
In addition to the techniques mentioned above, there are several other approaches to generating alternative solution. These approaches can be used by the negotiators themselves or by a number of other parties. Several of these approaches are commonly used in small groups. These include:
- Brainstorming: In brainstorming, small groups of people work to generate as many possible solutions to the problem as they can. Someone records; the solutions without comment, as they are identified participants are urged to be spontaneous, even impractical and not to censor anyone's ideas. The success of brainstorming depends on the amount of intellectual stimulation that occurs as different ideas are generated. The
- Avoid judging or evaluating solutions
- Separate the people from the problem
- Be exhaustive in the brainstorming process
- Ask outsider
However, the disadvantage of brainstorming is that it does not solicit the ideas of those who are present at the negotiation.
4. EVALUATE AND SELECT ALTERNATIVES:
The fourth stage in the Integrated Negotiation Process is to evaluate the alternatives generated during the previous phase and to select the best ones to implement. When the challenge is a reasonable, simple one, the evaluation and selection steps may be effectively combined into a singly step. For those uncomfortable with the Integrative Process, though we suggest a close adherence to a series of distinct steps: definitions and standards, alternative, evaluating and selection. The following guidelines should be used in evaluating options and reaching a consensus. 8
- Narrow the range of solution options
- Evaluate solution on the basic of quality, and acceptability
- Agree to the criteria in advance of evaluating options
- Be willing to justify personal preferences
- Be alert to the influence of intangibles in selecting options
- Use subgroups to evaluate complex options
- Take time out to cool off
- Explore different ways to logroll.
FACTORS THAT FACILITATE SUCCESSFUL INTEGRATIVE NEGOTIATION
We have stressed that successful Integrative Negotiation can occur if the parties are predisposed to finding a mutually acceptable joint solution. Many other factors contribute to a predisposition toward problem solving and a willingness to work together to find the best solution. These factors are also the preconditions necessary for more successful integrative negotiation. These factors includes:-
- some common objective or goal
- faith in one's problem – solving ability
- a belief in the validity of one's own position and the other's perspective
- The motivation and commitment to work together.
- Trust
- Clear and accurate communication
In conclusion, whether a negotiation is distributive or integrative, negotiation should focus on substance which will produce a mutually beneficial agreement at lower cost and also focus on relations in which the parties maintain civil relations of mutual recognition and respect and improve their joint problem solving ability.
ENDNOTES
- Walton and mckersie, 1965
- Raiffa, 1982
- Fisher and Ertel, 1998
- Weingart, Prietula, Heider and Genovese, 1999
- See Ghosh, 1996
- See Rapoport, Erev, and Zwick, 1995
- See Cellich, 1997; Girard, 1989
- See Aaronson, 1989, Brooks and Odiorne, 1984
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