PART ONE LETTER FORMATS Chapter PARTS OF A LETTER 1 STYLES 2 MAILING 3

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UNIT 4Distributive Bargaining
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INTRODUCTION

• During a basketball game, every time one team
  scores two points, the other team falls behind.
• There is no way for both sides to gain points at
  the same time.
• As one side wins, the other side loses.
• This kind of competition is called win-lose.
• In negotiation, win-lose is also called
  distributive bargaining.
• Every time one side gains something, the other
  side loses something.

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DIALOG(Personal Distributive Bargaining)

• Fred and Jane negotiating over a slice of pizza
• Jane There is only one slice of leftover pizza,
  and there is nothing else in the refrigerator.
• Fred It has been a really busy day today, and
  Im really hungry.
• Jane Well, Im hungry too.
• Fred To tell you the truth, I havent eaten all
  day.
• Jane Frankly, I dont see how this one slice can
  satisfy you.
• Fred You know I love pizza.
• Jane Yes, but I kind of like it too.
• Fred You are being uncooperative.
• Jane You are being inflexible.

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DIALOG(Business Distributive Bargaining)

• Alex and Fred are negotiating and both dont want
  to give anything (distributive bargaining).
• Alex Our price of 25.50 USD per unit is firm.
• Fred Unless you lower your price, we cant
  agree.
• Alex This is our bottom line. There is no
  flexibility on this issue.
• Fred To be honest, we cannot sell this product
  in the market at this price.
• Alex Because of our emphasis on quality, we
  dont have any space to maneuver. This is the
  lowest we can offer.

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DIALOG(Business Distributive Bargaining)

• Fred We cannot make progress if you dont agree
  to a 20 percent discount. This is the highest we
  can offer.
• Alex There is simply no way we can give you a
  discount.
• Fred If you are so unyielding, this negotiation
  will reach a deadlock.
• Alex If you dont accept this offer, we will
  have to withdraw the package.
• Fred That is an ultimatum we cannot accept. If
  you cannot give us a discount, we will have to
  find another supplier.
• Alex There is no reason to become hostile. The
  25.50 price really is our final offer.

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DIALOG(Business Distributive Bargaining)

• Fred We can agree on the need to wrap up this
  deal, so we will offer 21. We cannot make this
  offer again.
• Alex The implication of this price is that we
  lose 4.50 on each unit. Although I would like to
  give you what you want, we cannot take a loss on
  this deal.
• Fred This is pointless. Our customers simply
  wont pay more.

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VOCABULARY

• Deadlock (n) Negotiations stop because both
  sides will not change their demands.
• Final Offer (n) The last offer Often used to
  pressure the other side The bottom line.
• Firm (adj) Unchangeable An offer or part of an
  offer that cannot be changed.
• Hostile (adj) Not friendly A negotiator who is
  strongly against something.
• Maneuver (v) The negotiators flexibility to
  compromise, Changing options in the negotiation.
• Pointless (adj) A negotiation or an offer that
  is not helpful an offer that is not useful.
• Take a loss (phrase) Losing money on the offered
  deal A way to reject an offer that is not
  favorable.

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VOCABULARY

• Ultimatum (n) A final demand that cannot be
  refused or negotiation will end.
• Uncooperative (adj) A negotiator or team that
  will not compromise.
• Unyielding (adj) A negotiator who does not give
  in A negotiation position that is not changed.
• We cannot make this offer again (phrase) Giving
  pressure to the opposition through a time limit
  After some time, the current offer will be
  cancelled.

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FOLLOW UP

• In distributive bargaining, the goals of both
  sides are in conflict.
• Resources are fixed, like a pizza. If Fred takes
  one slice of pizza, that means Jane will get one
  slice less.
• If Fred wants more and Jane wants more, someone
  will win and someone will lose.

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FOLLOW UP

• For the buyer, a distributive negotiation begins
  with what the best deal is (the target point) and
  the worst deal that is still acceptable (the
  resistance point).

• A target point is the actual desired result,
  while anything beyond the resistance point cannot
  be accepted. Both the target point and the
  resistance point are secret and should not be
  told to the seller.

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FOLLOW UP

• The seller has a public price the buyer can see,
  which may be the list price.

• At the start of the negotiation, one value is
  public (everyone can see it), while two values
  are secret.

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FOLLOW UP

• The first step if for the buyer to decide how
  much the first offer (initial offer or starting
  offer) should be.
• The first offer should be lower than the target
  point. Since the seller will try to raise the
  price, the buyer should begin under his/her
  target so as to increase the chance of getting
  close to the desired target.

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FOLLOW UP

• If the buyers first offer is too low for the
  seller, the seller will not want to sell.
• This means the first offer must be higher than
  the sellers resistance point.
• This point, however, is secret and the buyer must
  try to guess that it is.
• All negotiation must fit between the two
  resistance points. This is called the bargaining
  zone.

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FOLLOW UP

• The Buyers View
• If the price is too low for the seller, he/she
  will walk away from the negotiation.
• If the price is too high for the buyer, he/she
  will walk away from the negotiation.

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FOLLOW UP

• Each side must have their own goals clear and
  guess what the other sides secrets.
• The buyers first offer must not be below the
  sellers resistance point (too low), while also
  trying not to go above the sellers target point.
  
• Higher than the sellers target point, the seller
  will agree to the offer quickly.

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FOLLOW UP

• A buyers first offer would be best if it is
  above the sellers resistance point while also
  below the sellers target point.
• Starting out below the buyers own target point
  is also a good idea, because the price will rise
  during negotiation.

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FOLLOW UP

• The Buyers View