Effective Negotiation - Fundamentals of Integrative Negotiation and Distributive Negotiation

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Describe on descriptive and integrative negotiation.Include Seller and buyer figure (zona, zopa, reserve point,aspiration point)

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<ul><li><p>Effective Negotiation </p><p> Negotiation is described as a discussion between two or more people who are trying to </p><p>solve their problem [1]. The word negotiation itself comes from a Latin expression negotiatus which means to carry on business [3]. Negotiation has been done in our day to day activities such as distributing the chores to be done by each family members or even </p><p>bargaining on a product or service. Several form of negotiation was introduced by Roger </p><p>Fisher, William Ury and Bruce Pattons in their book Getting to Yes (1991) which are: [2] </p><p> Hard bargaining Assuming our opponent as our enemy and we can only win when </p><p>our opponent lose. This imply on a competitive and aggressive way of bargaining. </p><p> Soft bargaining Opposite of hard bargaining where the relationship with opponent </p><p>is important and we easily give in. Normally we will be taken advantage and </p><p>agreement can be reach easily but seldom a good solution. </p><p> Principled negotiation Effective negotiation with each other with five fundamental </p><p>principles that are:[4] </p><p>i. Separate people from the problem </p><p>ii. Negotiate about interest, not positions </p><p>iii. Provide option for mutual gain </p><p>iv. Insist on objective decision criteria </p><p>v. Know your BATNA (best alternative to a negotiated agreement) </p><p>Theoretically, negotiation is divided into two types which known as distributive </p><p>negotiation and integrative negotiation. Those two types of negotiation works in a different </p><p>situations either a win-win outcome are possible or an unavoidable win-lose conflicts. </p><p>Distributive negotiations are used in everyday occurrence such as purchasing a house which </p><p>only have one issue which is the price and normally in a term of win-lose. Integrative </p><p>negotiations in the other hand might have more than one issue and in ongoing basis which </p><p>provide a win-win solution. Example of integrative negotiation is Cartoon case study which </p><p>have 3 issues that are the financial payment terms, how many runs of episode and the price </p><p>that are negotiated between a buyer company and seller company. </p><p>Distributive negotiation or also known as hard-bargaining negotiation tends to adopt </p><p>an extreme position. It is sometime referred to as the distribution of a fixed pie because </p><p>there is a limited amount of thing being divided among the peoples involved with a fixed </p><p>value and the peoples involve usually had never have previous interactive relationship, nor to </p><p>do so again in the future. In order to reach a realistic outcome, let the other party tell us what </p><p>they are willing to give up and it is the best to keep our information out of other party and </p><p>suggest alternatives we can offer but willingly compromise. </p><p>Integrative negotiation is the combination of techniques in attempt to improve the </p><p>quality of the negotiation by providing alternative solutions without assuming there is a fixed </p><p>pie to be divided between peoples involve. Also known as principled negotiation or interest-</p><p>based negotiation, it focus on the interest of the parties rather than the illogical starting point </p><p>which approaches negotiation as shared problem and the principled criteria is the basis of </p></li><li><p>agreement. In general, Integrative negotiation implies some cooperation and involves creative </p><p>problem solving aiming for mutual gains. </p><p>Negotiation between parties rises when there is a conflict of interest, some ambiguity </p><p>about the right solution and opportunity to compromise and reach deals that might satisfy </p><p>both parties. Table 1 summarize the two types of negotiations and its characteristics. </p><p>Characteristic Distributive Integrative </p><p>Outcome/ Technique Win-Lose Win-Win </p><p>Issues involved Single, simple, several </p><p>issues one at a time Multiple, complex </p><p>Motivation Individual gain Mutual gains </p><p>Relationship Short term Long or short term </p><p>Position One have more power Similar power </p><p>Strategy Maximize share of a fixed </p><p>pie Expand the Pie by creating </p><p>value and claiming share </p><p>Interest Keep interest hidden Share interest with other </p><p>party </p><p>Ability to make trade-off Not Flexible Flexible </p><p>Solution Fixed Pie Creative </p><p>Table 1: Distributive versus Integrative negotiations </p><p>Principled Negotiation </p><p> The best-known conflict resolution book, Getting to Yes, first published in 1981 by </p><p>Roger Fisher and William Ury introduce principled negotiation as the interest-based approach </p><p>to negotiation. The book proposes five fundamental principles of negotiation: </p><p>i. Separate people from the problem </p><p>ii. Negotiate about interest, not positions </p><p>iii. Provide option for mutual gain </p><p>iv. Insist on objective decision criteria </p><p>v. Know your BATNA (best alternative to a negotiated agreement) </p><p>Separating the people from the problem means separating relationship issues from </p><p>substantive issues, and dealing with them independently. People problems, Fisher, Ury and </p><p>Patton observe, tend to involve problems of perception, emotion (fear, anger, distrust and </p><p>anxiety), and communication. While there is an "objective reality," that reality is interpreted </p><p>differently by different people in different situations, perceptions are important because they </p><p>define the problem and the solution. Effective negotiation may be very difficult to achieve </p><p>when different parties have different understandings which is what we have been calling </p><p>framing problems. </p></li><li><p>Negotiating about interests means negotiating about things that people really want and </p><p>need, not what they say that want or need. Often, these are not the same. People tend to take </p><p>extreme positions that are designed to counter their opponents positions. If asked why they </p><p>are taking that position, it often turns out that the underlying reasons--their true interests and </p><p>needs--are actually compatible, not mutually exclusive. </p><p>By focusing on interests, difference of opinion parties can more easily fulfil the third </p><p>principle which is providing options for mutual gain. This means negotiators should look for </p><p>new solutions to the problem that will allow both sides to win, not just fight over the original </p><p>positions which assume that for one side to win, the other side must lose. </p><p>The fourth rule is to insist on objective criteria for decisions. While not always </p><p>available, if some outside, objective criteria for fairness can be found, this can greatly </p><p>simplify the negotiation process. If union and management are struggling over a contract, </p><p>they can look to see what other similar companies have agreed to use as an outside objective </p><p>criteria. If people are negotiating over the price of a car or a house, they can look at what </p><p>similar houses or cars have sold for. This gives both sides more guidance as to what is "fair," </p><p>and makes it hard to oppose offers in this range. </p><p>Lastly, Fisher, Ury, and Patton advise negotiators to know what their alternatives are. </p><p>If you dont know what your alternatives to a negotiated agreement are, you might accept an </p><p>agreement that is far worse than the one you might have gotten, or reject one that is far better </p><p>than you might otherwise achieve. For this reason, Fisher, Ury, and Patton stress the </p><p>importance of knowing and improving your BATNA before you conclude negotiations. </p><p> Thompsons Pyramid Model </p><p>Integrative negotiation, according to negotiation researcher Leigh Thompson of </p><p>Northwestern University, can be described as both a process and an outcome of negotiation. </p><p>The parties involved seek to integrate their interests and therefore produce negotiated </p><p>outcomes that exceed those normally achieved through distributive bargaining. Thompson </p><p>further suggests a pyramid model of integrative agreements, as illustrated in the Figure 1. In </p><p>this model, Level 1 agreements are those in which both parties achieve an outcome that is </p><p>better than their reservation point, and thus is within the ZOPA. Level 2 agreements produce </p><p>an outcome that is even better for both parties than Level 1 agreements, possibly by </p><p>introducing a new issue for which both parties have a similar objective. Finally, Level 3 </p><p>agreements are those for which it is impossible to improve the outcome from the perspective </p><p>of both parties, one in which any change that would benefit one party would harm the other </p><p>party. Parties ideally seek to reach Level 3 agreements, and therefore leave nothing on the </p><p>table. Integrative negotiators do not stop at Level 1; they seek to gain the benefits of higher, </p><p>mutually beneficial levels 2 and 3. </p></li><li><p> Figure 1: Pyramid Model of Integrative Agreements </p><p>In reality it is more likely that negotiators can achieve Level 1 agreements in which </p><p>both parties exceed their reservation points and BATNAs or, through the development of new </p><p>options, that they can negotiate Level 2 agreements that create additional value for both </p><p>parties above the minimums achieved in Level 1. Level 3 agreements can be described as </p><p>Pareto optimal because they represent improvements above Level 2 for both parties and </p><p>achieve an agreement that cannot be improved for one party without harming the other party. </p><p>Thus, the outcome of any level of an integrative negotiation is superior to that of a </p><p>distributive negotiation. </p><p>Effective negotiation will happen when the outcome is wining for all including separating </p><p>the people from the problems, focusing on mutual interest, inventing options for mutual gain, </p><p>and use objective criteria. In order to have much more comprehensive perception toward that, </p><p>some important terms should be defined as shown in Figure 2. </p><p>ZOPA [including aspiration, reserve point, surplus] is an acronym which means a </p><p>negotiation Zone of Possible Agreement. It is the range or area in which an agreement is </p><p>satisfactory to both parties involved in the negotiation process. It is also referred to as the </p><p>"Contracting Zone". Negotiation ZOPA or the Contracting Zone is the range between each </p><p>parties Reserve Point, and is the overlap area that each party is willing to pay or find </p><p>acceptable in a negotiation. </p><p>ZONA meanwhile means Zone of No Agreement. It is the range between both parties </p><p>aspiration point and reservation point. Aspiration point for seller will be the highest point </p><p>they target to achieve and vice versa for buyer which hope to receive the minimum point </p><p>possible. Reservation point for both seller and buyer is the point which mark the minimum </p><p>price range that the seller affords to lose and the buyer able to pay. </p></li><li><p> Figure 2: Distributive Negotiation of Seller and Buyer [3] </p><p>Trade-off </p><p>It is sometimes referred to as a Concession where one or more parties to a </p><p>negotiation engage in compromising on issues under negotiation and do so either willingly or </p><p>unwillingly. Figure 3 demonstrate the requirement of trade-offs in negotiation. </p><p>Figure 3 : Requirement of trade-offs in negotiation </p></li><li><p>Time Pressure </p><p>Time is comparable to money which are invested, spent, saved, and wasted. Time </p><p>pressure is the perception that time is scarce. Researchers such as van der Kleij and De Dreu </p><p>indicated the following consequences of time pressure. At the individual level, time pressure </p><p>leads to: </p><p> Faster performance rates, because people stop considering multiple </p><p>alternatives </p><p> Lower performance quality, due to the engagement in superficial rather than </p><p>thorough and systematic processing of information, and </p><p> More heuristic information processing, as a result of refraining from critical </p><p>searching of a given seemingly adequate solution or judgment. </p><p>At group level, increasing levels of time pressure narrows team members focus on a </p><p>limited range of task in both team interaction patterns and team task performance. Groups </p><p>working under time pressure attend to all of the information available but then selectively </p><p>discuss only information that seems especially relevant [6]. They also found that under high </p><p>time pressure group members see task completion as their main interaction objective, and the </p><p>group attempts to reach consensus and complete the task as quickly as possible, but at the </p><p>sacrifice of quality. Groups under mild or no time pressure can, in contrast, consider a wider </p><p>set of task features, devote their resources to performing on the task as well as possible, and </p><p>tend to employ more effortful systematic information processing that gives serious </p><p>considerations to all possible alternative solutions for a task [6]. </p><p>Escalation of commitment </p><p>Escalation of commitment refers to the psychological condition whereby people </p><p>continue to support or believe in something that is repetitively failing. In managerial decision </p><p>making escalation of commitment can refer to either continuing with a failed project. It may </p><p>also refer to overestimating ones own managerial capacity or ability. This is an extension of </p><p>problem solving where people do not accept they do not have a solution or they have to let </p><p>go. With escalation of commitment there is a compulsion to not let go. This can be where you </p><p>have an emotional, psychological or financial investment that may be failing and has led to an </p><p>irrational compulsion to stick with it or even escalate your commitment. Example of </p><p>escalation of commitment can be in a stock investment where you average down on a falling </p><p>stock price or in gambling as you chase losing bets. Other examples are in auctions for art </p><p>and houses where an emotional attachment combines with ego. </p><p>Winners curse </p><p>This event occurs when an under aspiring negotiator sets their target or aspirations </p><p>points too low at the outset of a negotiation and is granted an immediate agreement by their </p><p>negotiating counterpart. They win the negotiation but seems like they did not achieved a good </p><p>result though they received the desired request. </p></li><li><p>Social Dilemma </p><p>Social dilemmas are formally defined by two outcome-relevant properties: </p><p> Each person has an individual rational strategy which yields the best outcome </p><p>(or pay-off) in all circumstances (the non-cooperative choice, also known as </p><p>the dominating strategy); </p><p> If all individuals pursue this strategy it results in a deficient collective </p><p>outcomeeveryone would be better off by cooperating (the deficient </p><p>equilibrium). </p><p>Researchers frequently use the experimental games method to study social dilemmas </p><p>in the laboratory. An experimental game is a situation in which participants choose between </p><p>cooperative and non-cooperative alternatives, yielding consequences for themselves and </p><p>others. These games are generally depicted with an outcome matrix representing valuable </p><p>outcomes for participants like money or lottery tickets. The dilemma will involve more than </p><p>two people as done in the game. </p><p>Prisoners Dilemma </p><p>The Prisoners Dilemma Game was developed by scientists in the 1950s. The cover </p><p>story for the game involved two prisoners who are separately given the choice between </p><p>testifying against the other (non-cooperation with ones partner) and keeping silent </p><p>(cooperation with ones partner). The outcomes are such that each of them is better off </p><p>testifying against the other but if they both pursue this strategy they are both worse off than </p><p>by remaining...</p></li></ul>