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  • Chapter 6 Strategy

  • Strategy versus TacticsWhat is the difference between strategy and tactics?Some use the terms interchangeablyStrategy defined = overall approach to a bargaining situationTactics defined = techniques used during the process Charlene Barshefsky, U.S. trade representative:Strategy comes first objectives determine a broad negotiation strategy which is set away from the table, tactics are techniques used at the table6-2

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

  • Chapter Case: West Coast Music Inc.Kevin Carter, president of West Coast Music, a chain of 12 family-owned music stores, negotiates leased space in mallsFive lease issues are critical:1. rent 2. monthly maintenance charge3. store allowance for carpeting, fixtures4. length of contract5. mall location (a. high traffic, b. main floor, c. second floor)6-4

  • Key Strategy ElementsOverall a negotiation strategy should consider three critical situational elements:Time80/20 ruleDeadline strategies:Conceal your deadlineDeclare an earlier deadlineFind the other sides deadlineInformationThe heart of negotiations shapes strategy, realityPreparation is key - side with more info. has edgeBATNA is the most importantPowerWhole process is about power, ego, leverageBalance between parties is a key factor 6-5

  • Five Strategies for Various Situations

  • Tactics for Success: Use Time to Your Advantage1.Have patience: Remember 80/20 rule2.Be persistent: Reframe seek new information or real interests; wait for better timing3.Move quickly when possible: Opportunity for a quick resolution on an issue may pass4.Deadlines: Dont panic often can be moved, eliminated5.Know counterparts timelines: Easier to gain concessions as it nears6.Make time work for you: Move slowly with perseverance

    6-7

  • Traps to Avoid:Protect Your BATNA1.Before negotiating set a specific BATNA and stick to it2.Write it down on paper and refer to it when receiving an offer3.Never reveal your BATNA but you can increase the perception of your power to gain leverage6-8

  • Strategy 1: Increments of ConcessionFocus on The Number distributive process of finding a settlement pointIncrements of concessions defined = pattern of concessions that leads the other party to guess your BATNA, and thus a settlement pointPossible concession patterns:Split the difference = even division between the last two offersEqual increments = equivalent concessionsDecreasing increments = smaller concessions, appear to be closing in on a value = the number6-9

  • Increments of Concessions: Split the DifferenceSellers listed price = $390,000 (and does not make any counteroffers)Pattern A: Split the difference (50/50)Buyers 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 buyers BATNA?6-10

  • Increments of Concessions:Equal IncrementsPattern B: Equal increments of $20,000 Buyers 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 = $370,000What is the buyers BATNA?

    6-11

  • Increments of Concessions:Decreasing IncrementsPattern C: Decreasing increments ($20,000; $10,000; $5,000)Buyers 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 = $345,000What is the buyers BATNA?6-12

  • Strategy 2: Principled Negotiations

    From Getting to Yes, key elements:Focus on interests, not positions: Interests = needs, desires, concerns, fears that lead to whyPositions = specific demandSeparate people from positionsPeople negotiate are affected by egos, feelings, angerStep into their shoes to discover their reasoningFocus on objective criteriaFacts, principles, standards can be used to frame an offerDevelop mutual-gains optionsA settlement must be superior to no agreement for both partiesPropose options with gains for both parties6-13

  • The Positions versus Interests of Smith and Jones

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

  • Why Is the MESOStrategy Appealing to Others ?People prefer to be given choices many options, rather than a single offerOne 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.ButconsiderMESO strategy requires multiple issues with realistic alternative outcomesMESO can be a complex processMESO requires a party to reveal some of its own interests6-16

  • Calculating MESO Options

  • Strategy 4: The Economic MatrixSimilar to MESO strategy (avoids weights)May be more useful than MESO if all issues can be given estimated dollar valuesCore elements:Brings several economic issues into one proposalLimits 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 consider6-18

  • Strategy 4: The Economic Matrix AdvantagesFocus is on the total value of all issues, not distribution of each issuePositive response by other party which is given choices and may prefer one option Matrix presents valuable data, allows discussion and input on values6-19

  • Strategy 5: 3-D NegotiationUseful if negotiations stall, reach impasse, or power is imbalancedLax and Sebenius view negotiation in 3-D:1st dimension tactics used at the table2nd dimension deal design (including specifics)3rd dimension the setup of the whole negotiationSetup includes: parties, issues, BATNAs, timing, informationThus, 3-D strategy = review all the elements of the setup, change one to influence the outcomeExamples: Bring a new third party into the negotiation; improve your BATNA; shift the priorities of the issues; seek offers from other parties 6-20

  • The Three Dimensions of Negotiations

  • Summary of Strategiesand Likely Use Situations6-22