BUS403: Negotiations and Conflict Management (2016.A.01)

3a. Identify and explain the principles, strategies, and tactics of effective negotiation and professional relationship management

• Define and describe the difference between a strategy and a tactic.
• Name some key negotiation tactics parties use to support distributive, integrative, and mixed-motive negotiation strategies.

A negotiation strategy refers to the overall plan you decide to use and follow to achieve your goals. In Unit 1 we learned that when selecting a negotiation strategy that involves collaboration, an approach employing competition, accommodation, avoidance, or compromise strategies can be more or less effective.

Tactics are the tools of strategy. For example, tactics describe the techniques or methods you decide to use to build a stronger relationship with the other party to ensure an outcome that more effectively supports your strategic goals. For example, negotiation tactics may include pretending to walk away from a negotiation, bluffing, or responding to a proposal with silence.

Some tactics, such as sharing information, are more effective when your goal is to achieve a mutually-desirable outcome – to create joint value. On the other hand, each party may employ competitive tactics in a distributive or mixed-motive negotiation, to emphasize the need to obtain a satisfactory outcome – to claim value. Remember that tactics can be ethical and unethical. If the parties aim to build honesty and trust, employing deceptive tactics, such as withholding relevant information, will negatively-impact future relationships.

3b. Identify and assess the variables in negotiations

• Define the variable factors in a distributive negotiation: asking price, target price, reservation point, walk-away point, and alternative solution.
• How do these factors affect the zone of possible agreement (ZOPA)?
• Define and explain some typical subjects for concession in bargaining.

In a distributive (win-lose) negotiation, one party gets what they want most, but the other party may be forced to relinquish something they value. Examples of variable factors in negotiation include asking price, target price, reservation points, walk-away points, and alternative solutions.

During a negotiation, the items negotiators consider subject to trade-off or concession may have a positive or negative impact on the variables above. Typical concessions include money, time, resources, responsibilities, and autonomy.

Review how these variables affect the ZOPA in Distributive Bargaining. Review a brief example of a distributive approach in Negotiations. Review the negotiation process, prenegotiation, and making concessions in Collaborate to Negotiate.

 

3c. Develop reliable planning techniques

• Define and list four activities negotiators should accomplish during the prenegotiation stage of negotiation.
• What questions should negotiators ask during the investigation phase of negotiation?

We often find ourselves in situations where we are asked to provide information or give responses we are not prepared to give. We frequently need time to review our options before we can make an informed decision about our best alternative. Prior planning and preparation will help you achieve a satisfactory agreement that is in your best interest.

For example, you should determine your best alternative to a negotiated agreement (BATNA) before you enter a negotiation so you are prepared to negotiate. Arrive at the bargaining table with a clear definition of your goals and be able to name the concessions you would be willing to make or trade. Once you have identified and evaluated your best alternatives, you can measure any proposals you are asked to accept against your optimal standard or best case scenario.

3d. Explain the difference between distributive and integrative negotiation

• For a distributive negotiation, explain why a competitive or collaborative strategy is more appropriate.
• For an integrative negotiation, explain why a competitive or collaborative strategy is more appropriate.

During a distributive negotiation, your objective is to obtain the best terms from your negotiation, regardless of whether you and the seller become friends. You probably do not want to make any concessions because you are not interested in forming a relationship. For example, you are not planning to make any future purchases from the seller.

Consider the variables we use when considering buying a car. Let's assume price is a major factor in your decision-making. What is the highest price you are willing to pay? What would you like to pay? What additional factors, such as low mileage, an extended warranty, or additional features, might convince you to pay a higher price? You have researched the alternative models available. Consider the seller. What is the published selling price? What price does the seller want, and what is the lowest price they will accept? At what point will you or the seller walk away from the negotiation?

In our car buying example, the outcome is important to each party. The buyer wants to pay the least amount, and the seller wants to receive the highest amount of money. Neither party is planning to negotiate a future transaction – building or preserving a relationship is not important. The seller may not get their target price and the buyer may need to pay more than planned. The seller may have other buyers lined up and the buyer may have better alternatives. Each can walk away from the transaction if they cannot agree.

Now let's consider an employee who is asking their employer for a raise. If the employee likes their job, they may work with their employer to find other ways to pay for a salary increase or accept other types of compensation acceptable to both parties in lieu of a raise, such as more vacation, a parking space, or other benefits. Unlike the car purchase, the employee and employer want to achieve a mutually-agreed-upon salary outcome and preserve their relationship.

This situation calls for a collaborative or problem-solving approach. Both parties want to achieve a satisfactory outcome for themselves and each other. Another term for this approach is integrative negotiation.

3e. Describe the concepts of Game Theory

• Define a zero-sum game.
• Explain how a negotiator's expectations may affect their attitude toward negotiating in a zero-sum game situation, and whether they adopt a competitive or collaborative negotiation strategy.
• Explain how the Prisoner's Dilemma illustrates game theory.

Wikipedia describes game theory as "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers". A zero-sum game takes place in a competitive negotiation where the goals of the parties are interconnected: when one person achieves their goal the second person does not. One person's success negatively impacts the other. For example, in this distributive situation, both parties compete for a limited or fixed resource, such as a "fixed pie", which may have six slices. When one party takes one slice, the second party only gets five, rather than the whole pie. When one party wins, the second one loses.

According to the Prisoner's Dilemma, two prisoners would be better off if they cooperated with each other and remained silent when being interrogated. However, each side has an incentive to defect and maximize their own gains by accusing their partner of committing the crime. This may reduce their own jail time if their partner remains silent, but they are not sure the other will cooperate. If they both accuse the other, they will both go to jail. In the end, both sides suffer because they fail to work together and tried to maximize their own gain.

3f. List the phases of negotiation and their relevance to an effective negotiating outcome

• Why is it important to gather information before beginning a negotiation?
• What should you do if the other party rejects your best offer?

As we reviewed in Unit 1, thorough preparation is key to any successful negotiation because it will help you avoid choosing an inferior or suboptimal alternative. The five traditional phases of negotiation include investigation, determine your best alternative to a negotiated agreement (BATNA), presentation, bargaining, and closure.

During the first phase of negotiation (investigation phase), each party should determine what they want to achieve from the negotiation (their goals), and what they are willing to concede or not concede during the bargaining phase to reach an agreement. When you are armed with this knowledge, you can make informed choices during the negotiation. A negotiator ignores this information-gathering phase at their peril.

During the fifth and final phase of negotiation (closure), you may gain some valuable insight if the other party rejects your best and final offer. Ask them what it would take to reach an agreement if you were to negotiate further. Your willingness to learn from your opponent may prompt them to re-open the door to negotiations you may have assumed were closed.

Unit 3 Vocabulary

This vocabulary list includes some terms that may help you answer some of the review items above and some terms you should be familiar with to be successful in completing the final exam for this course.

• Alternative solution
• Asking price
• Collaborative negotiation strategy
• Competitive negotiation strategy
• Concessions
• Distributive negotiation
• Game theory
• Integrative negotiation
• Investigation stage
• Outcome
• Prenegotiation stage
• Problem-solving approach
• Prisoner's dilemma
• Relationship
• Reservation point
• Strategy
• Tactic
• Target price
• Third-party negotiations
• Variables
• Walk-away point
• Zero-sum game