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Chapter 6

Chapter 6. Strategy. Strategy versus Tactics. 6-2. What is the difference between strategy and tactics? Some use the terms interchangeably Strategy defined = overall approach to a bargaining situation Tactics defined = techniques used during the process

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Chapter 6

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  1. Chapter 6 Strategy

  2. Strategy versus Tactics 6-2 • What is the difference between strategy and tactics? • Some use the terms interchangeably • Strategy defined = overall approach to a bargaining situation • Tactics defined = techniques used during the process • Charlene Barshefsky, U.S. trade representative: “Strategy comes first – objectives determine a broad negotiation strategy which is set awayfromthetable, tactics are techniques used atthetable”

  3. Negotiation Skills 6-3 • Skill 6.1: Identify three keys – time (deadlines), information, power • Skill 6.2: Develop an increments of concessions strategy • Skill 6.3: Consider using a principled negotiation strategy (focus on interests, not positions) • Skill 6.4: With multiple issues consider a MESOor Economic Matrix strategy • Skill 6.5: Consider applying a 3-D Negotiation approach

  4. Chapter Case: West Coast Music Inc. 6-4 • Kevin Carter, president of West Coast Music, a chain of 12 family-owned music stores, negotiates leased space in malls • Five lease issues are critical: • 1. rent • 2. monthly maintenance charge • 3. store allowance for carpeting, fixtures • 4. length of contract • 5. mall location (a. high traffic, b. main floor, c. second floor)

  5. Key Strategy Elements 6-5 • Overall a negotiation strategy should consider three critical situational elements: • Time • “80/20” rule • Deadline strategies: • Conceal your deadline • Declare an earlier deadline • Find the other side’s deadline • Information • “The heart of negotiations” – shapes strategy, reality • Preparation is key - side with more info. has edge • BATNA is the most important • Power • Whole process is about power, ego, leverage • Balance between parties is a key factor

  6. Five Strategies for Various Situations

  7. Tactics for Success:Use Time to Your Advantage 6-7 1. Have patience: Remember “80/20” rule 2. Be persistent: Reframe – seek new information or real interests; wait for better timing 3. Move quickly when possible: Opportunity for a quick resolution on an issue may pass 4. Deadlines: Don’t panic – often can be moved, eliminated 5. Know counterparts timelines: Easier to gain concessions as it nears 6. Make time work for you: Move slowly with perseverance

  8. Traps to Avoid:Protect Your BATNA 6-8 1. Before negotiating set a specific BATNA – and stick to it 2. Write it down on paper and refer to it when receiving an offer 3. Never reveal your BATNA but you can increase the perception of your power to gain leverage

  9. Strategy 1: Increments of Concession 6-9 • Focus on “The Number” – distributive process of finding a settlement point • Increments of concessions defined = pattern of concessions that leads the other party to guess your BATNA, and thus a settlement point • Possible concession patterns: • Split the difference = even division between the last two offers • Equal increments = equivalent concessions • Decreasing increments = smaller concessions, appear to be closing in on a value = “the number”

  10. Increments of Concessions: Split the Difference 6-10 • Seller’s listed price = $390,000 (and does not make any counteroffers) • Pattern A: Split the difference (50/50) • Buyer’s 1st offer = $310,000 (range = $310,000 -390,000) • 2nd offer = $350,000 (range = $350,000 – 390,000) • 3rd offer = $370,000 (range = $370,000 – 390,000) • 4th offer = $380,000 • What is the buyer’s BATNA?

  11. Increments of Concessions:Equal Increments 6-11 • Pattern B: Equal increments of $20,000 • Buyer’s 1st offer = $310,000 (range = $310,000 – 390,000) • 2nd offer = $330,000 (range = $330,000 – 390,000) • 3rd offer = $350,000 (range = $350,000 – 390,000) • 4th offer = $370,000 • What is the buyer’s BATNA?

  12. Increments of Concessions:Decreasing Increments 6-12 • Pattern C: Decreasing increments ($20,000; $10,000; $5,000) • Buyer’s 1st offer = $310,000 (range = $310,000 - $390,000) • 2nd offer = $330,000 (range = $330,000 - $390,000) • 3rd offer = $340,000 (range = $340,000 - $390,000) • 4th offer = $345,000 • What is the buyer’s BATNA?

  13. Strategy 2: Principled Negotiations 6-13 • From Getting to Yes, key elements: • Focus on interests, not positions: • Interests = needs, desires, concerns, fears that lead to “why” • Positions = specific demand • Separate people from positions • People negotiate – are affected by egos, feelings, anger • “Step into their shoes” to discover their reasoning • Focus on objective criteria • Facts, principles, standards can be used to frame an offer • Develop mutual-gains options • A settlement must be superior to no agreement for both parties • Propose options with gains for both parties

  14. The Positions versus Interests of Smith and Jones

  15. Strategy 3: Multiple EquivalentSimultaneous Offers(MESOs) 6-15 • MESO steps: • Identify and prioritize issues, estimate their weights (relative value) to both parties • Identify different likely outcomes for each issue, set one as the standard = 100 points, then set relative value of others • Create at least three equivalent offers (approximately equal point values)

  16. Why Is the MESOStrategy Appealing to Others ? 6-16 • People prefer to be given choices – many options, rather than a single offer • One MESO option is likely to be a greater value to them – can lead to further discussion, settlement • It gives them input– they can discuss the values, weights, etc. • But…consider… • MESO strategy requires multiple issues with realistic alternative outcomes • MESO can be a complex process • MESO requires a party to reveal some of its own interests

  17. Calculating MESO Options

  18. Strategy 4: The Economic Matrix 6-18 • Similar to MESO strategy (avoids weights) • May be more useful than MESO if all issues can be given estimated dollar values • Core elements: • Brings several economic issues into one proposal • Limits the total value of all issues (increase in one must be offset by a decrease in another) • Provides options of equal value to the other party to consider

  19. Strategy 4: The Economic Matrix Advantages 6-19 • Focus is on the total value of all issues, not distribution of each issue • Positive response by other party which is given choices – and may prefer one option • Matrix presents valuable data, allows discussion and input on values

  20. Strategy 5: 3-D Negotiation 6-20 • Useful if negotiations stall, reach impasse, or power is imbalanced • Lax and Sebenius view negotiation in “3-D”: • 1st dimension – tactics used at the table • 2nd dimension – deal design (including specifics) • 3rd dimension – the setup of the whole negotiation • Setup includes: parties, issues, BATNAs, timing, information • Thus, 3-D strategy = review all the elements of the setup, change one to influence the outcome • Examples: Bring a new third party into the negotiation; improve your BATNA; shift the priorities of the issues; seek offers from other parties

  21. The Three Dimensions of Negotiations

  22. Summary of Strategiesand Likely Use Situations 6-22

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