Chapter 6Chapter 6

StrategyStrategy

Strategy versus TacticsStrategy versus Tactics What is the difference between strategy and What is the difference between strategy and

tactics?tactics? Some use the terms interchangeablySome use the terms interchangeably Strategy defined = overall approach to a Strategy defined = overall approach to a

bargaining situationbargaining situation Tactics defined = techniques used during the Tactics defined = techniques used during the

process process Charlene Barshefsky, U.S. trade Charlene Barshefsky, U.S. trade

representative:representative:““Strategy comes first – objectives determine Strategy comes first – objectives determine

a broad negotiation strategy which is set a broad negotiation strategy which is set awayaway fromfrom thethe tabletable, tactics are techniques , tactics are techniques used used atat thethe tabletable””

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Negotiation SkillsNegotiation Skills Skill 6.1: Identify three keys – Skill 6.1: Identify three keys – time time

(deadlines), information, power(deadlines), information, power Skill 6.2: Develop an Skill 6.2: Develop an increments of increments of

concessionsconcessions strategy strategy Skill 6.3: Consider using a Skill 6.3: Consider using a principled principled

negotiation strategynegotiation strategy (focus on interests, (focus on interests, not positions)not positions)

Skill 6.4: With multiple issues consider a Skill 6.4: With multiple issues consider a MESOMESO or or Economic MatrixEconomic Matrix strategy strategy

Skill 6.5: Consider applying a Skill 6.5: Consider applying a 3-D 3-D NegotiationNegotiation approach approach

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Chapter Case: Chapter Case: West Coast Music Inc.West Coast Music Inc.

Kevin Carter, president of West Coast Kevin Carter, president of West Coast Music, a chain of 12 family-owned music Music, a chain of 12 family-owned music stores, negotiates leased space in mallsstores, negotiates leased space in malls

Five lease issues are critical:Five lease issues are critical: 1. rent 1. rent 2. monthly maintenance charge2. monthly maintenance charge 3. store allowance for carpeting, fixtures3. store allowance for carpeting, fixtures 4. length of contract4. length of contract 5. mall location (a. high traffic, b. main 5. mall location (a. high traffic, b. main

floor, floor,

c. second floor)c. second floor)

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Key Key Strategy ElementsStrategy Elements Overall a negotiation strategy should consider Overall a negotiation strategy should consider

three critical situational elements:three critical situational elements: TimeTime

““80/20” rule80/20” rule Deadline strategies:Deadline strategies:

Conceal your deadlineConceal your deadline Declare an earlier deadlineDeclare an earlier deadline Find the other side’s deadlineFind the other side’s deadline

InformationInformation ““The heart of negotiations” – shapes strategy, The heart of negotiations” – shapes strategy,

realityreality Preparation is key - side with more info. has edgePreparation is key - side with more info. has edge BATNA is the most importantBATNA is the most important

PowerPower Whole process is about power, ego, leverageWhole process is about power, ego, leverage Balance between parties is a key factorBalance between parties is a key factor

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Five Strategies for Various Situations

Tactics for Success:Tactics for Success: Use Time to Your AdvantageUse Time to Your Advantage

1.1. Have patience: Remember “80/20” ruleHave patience: Remember “80/20” rule2.2. Be persistent: Reframe – seek new information Be persistent: Reframe – seek new information

or real interests; wait for better timingor real interests; wait for better timing3.3. Move quickly when possible: Opportunity for a Move quickly when possible: Opportunity for a

quick resolution on an issue may passquick resolution on an issue may pass4.4. Deadlines: Don’t panic – often can be moved, Deadlines: Don’t panic – often can be moved,

eliminatedeliminated5.5. Know counterparts timelines: Easier to gain Know counterparts timelines: Easier to gain

concessions as it nearsconcessions as it nears6.6. Make time work for you: Move slowly with Make time work for you: Move slowly with

perseveranceperseverance

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Traps to Avoid:Traps to Avoid:Protect Your BATNAProtect Your BATNA

1.1. BeforeBefore negotiating set a negotiating set a specificspecific BATNA – and stick to itBATNA – and stick to it

2.2. Write it downWrite it down on paper and refer to on paper and refer to it when receiving an offerit when receiving an offer

3.3. Never revealNever reveal your BATNA but you your BATNA but you can increase the can increase the perception of your perception of your powerpower to gain leverage to gain leverage

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Strategy 1: Increments of Strategy 1: Increments of ConcessionConcession

Focus on “The Number” – distributive process Focus on “The Number” – distributive process of finding a settlement pointof finding a settlement point

Increments of concessions defined = pattern Increments of concessions defined = pattern of concessions that leads the other party to of concessions that leads the other party to guess your BATNA, and thus a settlement guess your BATNA, and thus a settlement pointpoint

Possible concession patterns:Possible concession patterns: Split the differenceSplit the difference = even division between the = even division between the

last two offerslast two offers Equal incrementsEqual increments = equivalent concessions = equivalent concessions Decreasing incrementsDecreasing increments = smaller concessions, = smaller concessions,

appear to be closing in on a value = “the number”appear to be closing in on a value = “the number”

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Increments of Concessions: Increments of Concessions: Split the DifferenceSplit the Difference

Seller’s listed price = $390,000 (and does not Seller’s listed price = $390,000 (and does not make any counteroffers)make any counteroffers)

Pattern A: Split the difference (50/50)Pattern A: Split the difference (50/50) Buyer’s 1Buyer’s 1stst offer = $310,000 (range = $310,000 - offer = $310,000 (range = $310,000 -

390,000)390,000) 22ndnd offer = $350,000 (range = $350,000 – 390,000) offer = $350,000 (range = $350,000 – 390,000) 33rdrd offer = $370,000 (range = $370,000 – 390,000) offer = $370,000 (range = $370,000 – 390,000) 44thth offer = $380,000 offer = $380,000

What is the buyer’s BATNA?What is the buyer’s BATNA?

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Increments of Concessions:Increments of Concessions:Equal IncrementsEqual Increments

Pattern B: Equal increments of $20,000 Pattern B: Equal increments of $20,000 Buyer’s 1Buyer’s 1stst offer = $310,000 (range = offer = $310,000 (range =

$310,000 – 390,000)$310,000 – 390,000) 22ndnd offer = $330,000 (range = $330,000 – offer = $330,000 (range = $330,000 –

390,000)390,000) 33rdrd offer = $350,000 (range = $350,000 – offer = $350,000 (range = $350,000 –

390,000)390,000) 44thth offer = $370,000 offer = $370,000

What is the buyer’s BATNA?What is the buyer’s BATNA?

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Increments of Concessions:Increments of Concessions:Decreasing IncrementsDecreasing Increments

Pattern C: Decreasing increments Pattern C: Decreasing increments ($20,000; $10,000; $5,000)($20,000; $10,000; $5,000) Buyer’s 1Buyer’s 1stst offer = $310,000 (range = offer = $310,000 (range =

$310,000 - $390,000)$310,000 - $390,000) 22ndnd offer = $330,000 (range = $330,000 offer = $330,000 (range = $330,000

- $390,000)- $390,000) 33rdrd offer = $340,000 (range = $340,000 offer = $340,000 (range = $340,000

- $390,000)- $390,000) 44thth offer = $345,000 offer = $345,000

What is the buyer’s BATNA?What is the buyer’s BATNA?

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Strategy 2: Principled Strategy 2: Principled NegotiationsNegotiations

From From Getting to YesGetting to Yes, key elements:, key elements: Focus on interests, not positionsFocus on interests, not positions: :

Interests = needs, desires, concerns, fears that lead Interests = needs, desires, concerns, fears that lead to “why”to “why”

Positions = specific demandPositions = specific demand Separate people from positionsSeparate people from positions

People negotiate – are affected by egos, feelings, People negotiate – are affected by egos, feelings, angeranger

““Step into their shoes” to discover their reasoningStep into their shoes” to discover their reasoning Focus on objective criteriaFocus on objective criteria

Facts, principles, standards can be used to frame an Facts, principles, standards can be used to frame an offeroffer

Develop mutual-gains optionsDevelop mutual-gains options A settlement must be superior to no agreement for A settlement must be superior to no agreement for

both partiesboth parties Propose options with gains for both partiesPropose options with gains for both parties

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The Positions versus Interests of Smith and Jones

Strategy 3: Multiple Strategy 3: Multiple EquivalentEquivalent Simultaneous Simultaneous

OffersOffers (MESOs)(MESOs) MESO steps:MESO steps:

Identify and prioritize issues, estimate Identify and prioritize issues, estimate their weights (relative value) to both their weights (relative value) to both partiesparties

Identify different likely outcomes for Identify different likely outcomes for each issue, set one as the standard = each issue, set one as the standard = 100 points, then set relative value of 100 points, then set relative value of othersothers

Create at least three equivalent offers Create at least three equivalent offers (approximately equal point values)(approximately equal point values)

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Why Is the MESOWhy Is the MESOStrategy Appealing to Strategy Appealing to

Others ?Others ? People prefer to be given People prefer to be given choiceschoices – many – many

options, rather than a single offeroptions, rather than a single offer One MESO option is likely to be a One MESO option is likely to be a greater greater

valuevalue to them – can lead to further to them – can lead to further discussion, settlement discussion, settlement

It gives them It gives them inputinput – they can discuss the – they can discuss the values, weights, etc.values, weights, etc.

But…consider…But…consider… MESO strategy requires multiple issues with MESO strategy requires multiple issues with

realistic alternative outcomesrealistic alternative outcomes MESO can be a MESO can be a complex processcomplex process MESO requires a party to MESO requires a party to revealreveal some of its own some of its own

interestsinterests

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Calculating MESO Options

Strategy 4: The Economic Strategy 4: The Economic MatrixMatrix

Similar to MESO strategy (avoids weights)Similar to MESO strategy (avoids weights) May be more useful than MESO if all issues May be more useful than MESO if all issues

can be given estimated dollar valuescan be given estimated dollar values Core elements:Core elements:

Brings several economic issues into one Brings several economic issues into one proposalproposal

Limits the total value of all issues (increase in Limits the total value of all issues (increase in one must be offset by a decrease in another)one must be offset by a decrease in another)

Provides options of equal value to the other Provides options of equal value to the other party to considerparty to consider

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Strategy 4: The Economic Strategy 4: The Economic Matrix AdvantagesMatrix Advantages

Focus is on the total value of all Focus is on the total value of all issues, not distribution of each issueissues, not distribution of each issue

Positive response by other party Positive response by other party which is given choices – and may which is given choices – and may prefer one option prefer one option

Matrix presents valuable data, allows Matrix presents valuable data, allows discussion and input on valuesdiscussion and input on values

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Strategy 5: Strategy 5: 3-D Negotiation 3-D Negotiation

Useful if negotiations stall, reach impasse, or Useful if negotiations stall, reach impasse, or power is imbalancedpower is imbalanced

Lax and Sebenius view negotiation in “3-D”:Lax and Sebenius view negotiation in “3-D”: 11stst dimension – tactics used at the table dimension – tactics used at the table 22ndnd dimension – deal design (including specifics) dimension – deal design (including specifics) 33rdrd dimension – the setup of the whole negotiation dimension – the setup of the whole negotiation Setup includes: parties, issues, BATNAs, timing, Setup includes: parties, issues, BATNAs, timing,

informationinformation Thus, 3-D strategy = review all the elements of Thus, 3-D strategy = review all the elements of

the setup, change one to influence the outcomethe setup, change one to influence the outcome Examples: Bring a new third party into the Examples: Bring a new third party into the

negotiation; improve your BATNA; shift the negotiation; improve your BATNA; shift the priorities of the issues; seek offers from other priorities of the issues; seek offers from other parties parties

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The Three Dimensions of Negotiations

Summary of StrategiesSummary of Strategiesand Likely Use Situationsand Likely Use SituationsStrategyStrategy Negotiation SituationNegotiation Situation

Strategy 1: Increments of Strategy 1: Increments of ConcessionsConcessions

Distributive bargaining (one Distributive bargaining (one issue/usually price)issue/usually price)

Strategy 2: Principled Strategy 2: Principled NegotiationsNegotiations

Integrative bargainingIntegrative bargaining

Strategy 3: Multiple Strategy 3: Multiple Equivalent Simultaneous Equivalent Simultaneous Offers (MESOs)Offers (MESOs)

Multiple issues each with Multiple issues each with multiple outcomesmultiple outcomes

Strategy 4: The Economic Strategy 4: The Economic MatrixMatrix

Multiple issues each with Multiple issues each with multiple outcomes – all can multiple outcomes – all can be given estimated dollar be given estimated dollar valuevalue

Strategy 5: “3-D” Strategy 5: “3-D” NegotiationsNegotiations

Negotiations stall, reach an Negotiations stall, reach an impasse, or power is impasse, or power is imbalancedimbalanced

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