STRATEGY AND TACTICS OF DISTRIBUTIVE BARGAINING

STRATEGY & TACTICS OF DISTRIBUTIVE BARGAINING

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
1. Walton and mckersie, 1965
2. See lax and sebenius, 1986
3. Thompson and Hoebec, 1996
4. Missner, 1980
5. Raiffa, 1982
6. Fisher and Ertel, 1998
7. Fisher, Ury and Patton, 1991
8. Watkins, 2002
9. Tutzaver, 1992
10. Galinsky and Mussweiler, 2001
11. Weingart, Prietula, Heider and Genovese, 1999
12. See Ghosh, 1996
13. See Rapoport, Erev, and Zwick, 1995
14. Walton and Mckersie, 1965
15. See Cellich, 1997; Girard, 1989
16. See Aaronson, 1989, Brooks and Odiorne, 1984
17. Girard, 1989
18. Carr, 1968
19. See Fisher, Ury and Patton, 1991