Negotiation Strategies
Chapter 1: The nature of negotiation
Negotiation: a process by which two or more parties attempt to resolve their opposing interests.
—> There is a conflict of needs and desires between two or more parties and they must search for a
way to resolve the conflict.
—> The parties negotiate by choice, because they think they can get a better deal by negotiating
than by simply accepting what the other side will voluntarily give them or let them have. There are
many situations where negotiation is possible, but the parties fail to recognize the opportunity.
—> When we negotiate, we expect a ‘give-and-take’ process that is fundamental to our
understanding of the word negotiation. We expect that both sides will modify or move away from
their opening statements, requests, or demands. They will come to a compromise or find a solution
that meets the objectives of all parties.
—> Successful negotiation involves the management of tangibles (e.g. the price or the terms of
agreement) and the resolution of intangibles (the underlying psychological motivations that may
(in)directly influence the parties during a negotiation; e.g. the need to ‘win’, beat the other party).
Conflict: ‘’sharp disagreement or opposition, as of interests, ideas, etc.’’ and includes ‘’the
perceived divergence of interest, or a belief that the parties’ current aspirations cannot be achieved
simultaneously’’. It results from ‘’the interaction of interdependent people who perceived
incompatible goals and interference from each other in achieving those goals’’.
Elements that contribute to conflict’s destructive image (i.e. conflict is bad):
1. Competitive, win-lose goals: both parties cannot simultaneously achieve their objectives.
2. Misperception and bias: as conflict intensifies, perceptions become distorted.
3. Emotionality: emotions overwhelm clear thinking, and the parties can become irrational.
4. Decreased communication: parties communicate less with those who disagree with them;
when they do, it is often an attempt to defeat, demean or debunk the other’s view or to
strengthen one’s own prior arguments.
5. Blurred issues: the central issue in the dispute become blurred and less well defined.
1
,Conflict diagnostic model: helpful to analyze any dispute and determine how easy or difficult it
will be to resolve.
Dual concerns model: two-dimensional framework that postulates that people in conflict have two
independent types of concern, namely substantive outcome and relational outcome.
—> Substantive outcome: how much concern do I have for my own desired outcome?
—> Relational outcome: how much concern for the relationship with the other?
The dual concerns model lead to five possible strategies for conflict management:
• Avoidance: do not negotiate;
• Competition: similar to distributive negotiation, win-lose;
• Collaboration: similar to integrative negotiation, win-win;
• Accommodation: I let you win, lose-win, relationship is more important;
• Compromise: I gain/lose some, you gain/lose some.
2
,Chapter 2: Strategies and Tactics of Distributive Bargaining
Distributive Bargaining Situation: i.e. competitive or win-lose bargaining; the goals of one party
are in fundamental and direct conflict with the goals of the other party. Resources are fixed and
limited, and everyone wants to maximize their own share.
—> One important strategy is to guard information carefully, only when it provides a strategic
advantage. Who is getting the most of a limited resource (often money)?
—> Target point (or aspiration): the preferred price of the buyer; the point at which a negotiator
would like to conclude negotiations - his optimal goal.
—> The seller and the buyer often both have a walkaway or resistance point (a negotiator’s
bottom line), which leads to a range of possible outcomes. The final offer does not equal this
walkaway point.
—> The bargaining takes place in the bargaining range (i.e. settlement range, zone of potential
agreement): anything outside these points will be rejected by one of the two negotiators.
—> In sum, negotiators need to: 1) set a clear starting, target and resistance point, 2) understand
and work to improve their BATNA, 3) start with a good opening offer, 4) make appropriate
concessions and 5) manage the commitment process.
Crucial elements of a negotiation: B&B.
• Bargaining Mix: multi-item negotiations, each with different target points such as price, waiting
time and extra’s and different walk-away points.
—> For example, for selling a house, it can be the date of sale.
• BATNA: Best Alternative To a Negotiated Agreement; gives negotiators the power to walk away.
However, they are usually less attractive than the preferred agreement.
—> Negotiators who have a strong BATNA will have more power throughout the negotiation.
Alternatives can be so powerful that they can even influence first offers and outcomes of
negotiation when they are not certain. Negotiators with stronger BATNAs are more likely to make
the first offer in a negotiation and appear to negotiate better outcomes.
—> As opposed to the WATNA: Worst Alternative To a Negotiated Agreement.
Commitment: the taking of a bargaining position with some explicit or implicit pledge regarding
the future course of action. The purpose of a commitment is to remove ambiguity about the
negotiator’s intended course of action.
3
, —> A commitment is often interpreted by the other party as a threat: if the other does not comply
of give in, some set of negative consequences will occur.
Several tactics when closing a deal:
• Provide alternatives: these alternatives are more or less equivalent in value.
• Assume the close: negotiators can act as if the decision has already been made.
• Split the difference: the most popular closing tactic; the negotiator gives a brief summary of the
negotiation and then suggest to just split the difference, since things are so close.
• Exploding offers: contains an extremely tight deadline in order to pressure the other party to
agree quickly; an extreme version of manipulating negotiating schedules. For example, offering a
very attractive salary, but saying that the offer will expire in 24 hours.
• Sweeteners: saving a special concession for the close.
Positions taken during negotiations:
• Initial concessions: yes or no, and how high?
• Patterns
• Opening offer: do you take initiative? The first offer has a benefit.
—> Anchoring effect: the first offer has an anchoring effect, since people make assumptions
based on this; dropping the anchor around which prices you have to negotiate.
• Opening attitude: is it competitive or moderate? You will likely get the same behavior in return.
• Final offer (making a commitment): has to be explicit (‘this is my final offer’) and by doing that,
you increase the status of the offer, putting pressure on the counterpart.
• Closing the deal: split the difference at the end, seems fair, but you have to think about the
consequences, is it the most beneficial for you?
Hardball tactics (selection): putting power on the counterpart; may be unethical.
• Good cop/bad cop: two persons create a lot of pressure on the counterpart; one person stresses
the benefits and the other one stresses the threats.
• Lowball/highball: using extreme offers, either high or low, to change the anchor of potential
negotiation settlements; this could work because of the anchoring effect or its shocking effect.
—> The extreme starting offer can cause the other party to reevaluate their own opening offer
and move closer to or beyond their resistance point.
—> Risk: the other party can think it is a waste of time to negotiate the offer.
4
