Integrative Negotiations - Everybody Wins Something (usually)

Distributive Negotiations - the Fixed Pie

By its mere nature, there is a limit or finite amount in the thing being distributed or divided amongst the people involved. Hence, this type of negotiation is often referred to as 'The Fixed Pie'. How many times has somebody shouted out, 'Who wants the last piece of pizza?' Everyone looks at each other, then the pizza slice, and two or more hands rush to grab it.

In the real world of negotiations, two parties face off with the goal of getting as much as possible. The seller wants to go after the best price they can obtain, while the buyer wants to pay the lowest price to achieve the best bargain. It's really just good old plain haggling.

A distributive negotiation usually involves people who have never had a previous interactive relationship, nor are they likely to do so again in the near future. Simple everyday examples, would be when we're buying a car or a house. Purchasing products or services are simple business examples where distributive bargaining is often employed. Remember, even friends or business acquaintances can drive a hard bargain just as well as any stranger.

Integrative Negotiations - Everybody Wins Something (usually)

The word integrative means to join several parts into a whole. Conceptually, this implies some cooperation, or a joining of forces to achieve something together. Usually involves a higher degree of trust and a forming of a relationship. Both parties want to walk away feeling they've achieved something which has value by getting what each wants.

In the real world of business, the results often tilt in favour of one party over the other because, it's unlikely that both parties will come to the table at even strength, when they begin the talks.

Nonetheless, there are many advantages to be gained by both parties, when they take a cooperative approach to mutual problem solving. Generally, this form of negotiation is looking to forming a long term relationship to create mutual gain. It is often described as the win-win scenario.

[5] Four key concepts

[6]BATNA

First, having a good alternative to negotiation contributes substantially to a negotiator's power. A negotiator with very strong alternatives does not need the negotiation in order to achieve at least a satisfactory outcome.[31] In their 1981 bestseller, Getting to Yes,[32] Roger Fisher and William Ury coined the term "BATNA" (best alternative to a negotiated agreement) to refer to this type of negotiating power. When parties have many options other than negotiation, they have more leverage in making demands. Therefore, parties should develop a strong understanding of their alternatives before participating in negotiations. Making one's BATNA as strong as possible, and then making that BATNA known to one's opponent, can strengthen one's negotiating position.

[7]Reservation Price

[8] ZOPA

If the parties believe that their ideal solution is not available and that foreseeable settlement is better than the other available alternatives, the parties have a "Zone of Possible Agreement" (ZOPA). This means that a potential agreement exists that would benefit both sides more than their alternatives do.

However, it may take some time to determine whether a ZOPA exists. The parties must first explore their various interests, options, and alternatives. If the disputants can identify their ZOPA, there is a good chance that they will come to an agreement. But if they cannot, negotiation is very unlikely to succeed.

[9] Creating value through trade

By analyzing interests, you can often discover ways to create valu e—to enlarge the pie—and avoid focusing only on claiming value, or getting the biggest possible slice of

a small pie.

When exploring interests, keep in mind the three basic principles for creating value in negotiations:

Seek out shared interests. Look for things that you and your counterpart both care about and can achieve better by combining your resources.

Propose mutually beneficial trades. Identify things that are more valuable (costly) to your counterpart than to you, and trade them for things that are more valuable to you than your counterpart. For example, Daniel is willing to give up some compensation if Ken will agree to locate the engineering group in Austin.

Secure insecure contracts. If you don’t fully trust each other, find ways to minimize your vulnerability and thus avoid the defensiveness that constrains value creation. By getting clear guarantees about what happens if the business is sold, for example, Daniel might feel more secure about entering into an employment agreement.

[10] Planning the negotiations

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