Saturday, December 1, 2012

N02: Strategy and Tactics of Distributive Bargaining

 
 



In a distributive bargaining situation, 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 of the outcomes to be obtained. Distributive bargaining is basically a competition over who is going to get the most of the limited resource.
 
There are two reasons that every negotiator should be familiar with distributive bargaining. First, some interdependent situations that negotiators face are distributive, and to do well in them negotiators need to understand how they work. Second, because many people use distributive bargaining strategies and tactics almost exclusively, all negotiators will find it important to know how to counter their effects.
 
            Distributive bargaining is basically a conflict situation, where in parties seek their own advantage sometimes through concealing information, attempting to mislead, or using manipulative actions. All these tactics can easily escalate interaction from calm discussion to bitter hostility. Yet negotiation is the attempt to resolve a conflict without force, without fighting. Further, to be successful, both parties to the negotiation must feel at the end that the outcome was the best they could achieve and that it is worth accepting and supporting. Hence, effective distributive bargaining is a process that requires careful planning, strong execution, and constant monitoring of the other party’s reactions. Finally, distributive bargaining skills are important when at the value claiming stage of any negotiation. This is discussed in more detail in the next chapter on integrative negotiation.
 
            The behaviors and perspectives are the main components of the integrative process such as, identifying and defining the problem, generating alternative solutions. Finally, they must share a motivation and commitment to work together, to make their relationship a productive one, and work hard to establish and maintain that trust. They must be clear and accurate communication about what each one wants and an effort to under stand the other’s needs. The strategy and tactics of integrative negotiation greatly facilitated by common goals to achieve their objective.
 
 
Question
1. Explain how these factors can affect the process of distributive bargaining?
They have four major propositions:
1. The other party’s resistance point will vary directly with his or her estimate of the cost of delay or aborting negotiations.
2. The other’s resistance point will vary inversely with his or her cost of delay or aborting.
3. A resistance point will vary directly with the value the other party attaches to that outcome.
4. The other’s resistance point varies inversely with the perceived value the first party attaches to an outcome.
 
2. What are the four fundamental strategies to increase business revenues?
Strategy One: Increase the number of people who are aware of and interested in your products. In other words, generate more prospects. There are literally hundreds of ways to get more visible to your target market, and every business owner should have at least five to ten marketing tactics at work all the time in order to attract more prospects.
 
Strategy Two: Increase your conversion rate so that more prospects buy from you. Visibility is not enough. You also need to hone your sales process to convert prospects to customers. For instance, many online businesses incorrectly focus first on driving traffic to their website when a more profitable strategy would be to focus first on having a website that converts more visitors to customers.
 
Strategy Three: Increase the average price per sale. Many businesses have an opportunity to earn more money per sale by bundling products, adjusting pricing, cross-selling, and changing the products or service portfolio.
 
Strategy Four: Increase the number of sales per customer over time. In today’s economy, it is expensive to attract new customers. Therefore, customer loyalty or a high lifetime value of a customer is essential to the survival and success of almost every business. It is crucial to have a business with products, services, a service model, and relationship marketing that keeps customers coming back and has them raving about your business to others. Business owners need to put in place a process and systems to build on going relationships, continue to provide value to customers, and be the first business a customer thinks to call when they have a need.
 
 
3. What BATNA are?
In negotiation theory, the best alternative to a negotiated agreement or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached. BATNA is the key focus and the driving force behind a successful negotiator. A party should generally not accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations, such as relationship value, time value of money and the likelihood that the other party will live up to their side of the bargain. These other considerations are often difficult to value, since they are frequently based on uncertain or qualitative considerations, rather than easily measurable and quantifiable factors.

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