However, if good will is what you seek, then creating value is a better strategy. First off, it is a good strategy because the person you are negotiating with will consider the deal to be more fair. Secondly, both parties should end up receiving a fair share of the newly created value. And finally, in a strictly competitive negotiation, one party ends with a much larger portion of the pie (or even the whole thing), and so there is a chance that you would end up being the loser if you stick to the competitive style of negotiation. When you create value, you should both end up as winners.
Sunday, February 22, 2015
The tension between creating and claiming value
In a negotiation, I believe that the tension between creating value and claiming value comes about because when you create new value and then divide that value between the two parties, you have to give up some of the value that you might have received had you simply stuck to a competitive strategy. When you attempt to create value, you have to take a more cooperative approach and therefore you do have to reveal some of your information that in a more competitive approach you'd keep closer to your vest. Once that information is revealed, you expose yourself to losing some of your value.
Sunday, February 15, 2015
Negotiation role play - Universal Computer Company
In our negotiation role play, I was given the role of the Crawley Plant Manager.
As mentioned in the article "Three Approaches to Resolving Disputes: Interests, Rights, and Power", "questions of who is more powerful turns on who is less dependent on the other". In the case study, on one hand, the Crawley Plant manager seemed to be in the power position in the negotiation because the Phillips Plant was dependent on the Crawley plant to supply the modules, so therefore Crawley had a good amount of power. However, looking at it in a rights-based way, it seemed that the Phillips plant clearly had the right to expect quality parts from the Crawley Plant. This made it difficult for me to take a power-based position in the negotiation.
Both parties in this dispute had a mutual interest in having a higher acceptance rate for the modules. Crawley's interest would be to sell more parts to Phillips without the expense of taking bad parts back or having to repair bad parts. Another interest of Crawley would be to maintain a good reputation. Ultimately, it was in both companies' interest to get the parts into the Phillips plant with minimal faulty parts, so that production can continue and customers can be served.
As this negotiation played out, the four criteria to compare costs and benefits were apparent.
The first criteria was the transaction costs. For the Crawley plant, agreeing to a high acceptance rate would be a higher transaction cost for Crawley. However, at the Phillips plant there was the loss of production and so that was a high transaction cost for them. Our final agreement tried to balance the transaction costs between the two parties, with Crawley agreeing to a higher acceptance rate on the parts that weren't typically falling below the 95% rate, and agreeing to a reasonable acceptance rate on the 12 parts that were failing at a higher percentage rate.
The next criteria was satisfaction with outcomes. In our negotiation, both parties were satisfied with the results because it seemed fair and both parties agreed to take some responsibility for the faulty parts.
The third criteria, effect on the relationship, was taken into account during the negotiation. Since the two plants must continue to work together and because both plants' ultimate goal is for the Universal Computer Company's products to be sold, we were careful during our negotiation not to alienate the other party. We often used statements such as "I understand your need for that", or "we both want the same thing" to convey our understanding of the other party and to keep the relationship intact.
The fourth criteria, recurrence, was taken into account in our final agreement, in which Crawley agreed to revisit the issue down the road and make any changes to the agreement that might be necessary.
Overall, I think that our final agreement was more interest-based than power-based or rights based, and we came up with a win-win solution in the end.

Both parties in this dispute had a mutual interest in having a higher acceptance rate for the modules. Crawley's interest would be to sell more parts to Phillips without the expense of taking bad parts back or having to repair bad parts. Another interest of Crawley would be to maintain a good reputation. Ultimately, it was in both companies' interest to get the parts into the Phillips plant with minimal faulty parts, so that production can continue and customers can be served.
As this negotiation played out, the four criteria to compare costs and benefits were apparent.
The first criteria was the transaction costs. For the Crawley plant, agreeing to a high acceptance rate would be a higher transaction cost for Crawley. However, at the Phillips plant there was the loss of production and so that was a high transaction cost for them. Our final agreement tried to balance the transaction costs between the two parties, with Crawley agreeing to a higher acceptance rate on the parts that weren't typically falling below the 95% rate, and agreeing to a reasonable acceptance rate on the 12 parts that were failing at a higher percentage rate.
The next criteria was satisfaction with outcomes. In our negotiation, both parties were satisfied with the results because it seemed fair and both parties agreed to take some responsibility for the faulty parts.
The third criteria, effect on the relationship, was taken into account during the negotiation. Since the two plants must continue to work together and because both plants' ultimate goal is for the Universal Computer Company's products to be sold, we were careful during our negotiation not to alienate the other party. We often used statements such as "I understand your need for that", or "we both want the same thing" to convey our understanding of the other party and to keep the relationship intact.
The fourth criteria, recurrence, was taken into account in our final agreement, in which Crawley agreed to revisit the issue down the road and make any changes to the agreement that might be necessary.
Overall, I think that our final agreement was more interest-based than power-based or rights based, and we came up with a win-win solution in the end.
Saturday, February 7, 2015
Good Cop, Bad Cop at Rehobeth
My husband decided on a delta type kite that you could take apart and that had bungies on the cross pieces so that it would fold down more compactly than a regular kite. The price listed on the kite was $44.00. I thought that that was too expensive. So I began to play the "bad cop" to my husband's "good cop" as was talked about in Reading 1.3 as one of the ten hard-bargaining tactics. I complained to my husband in front of the store owner that I thought that the kite seemed to be much more complicated to assemble and take down than the other types of Delta kites, and that we instead would want to consider one of the much cheaper $29.99 models.
During the negotiation, we also discovered that the only kite left of this model was the display model, so I also expressed reservations about having to take the display model.
The store owner then tried one of the other hard-bargaining tactics by belittling my alternatives, trying to convince me that the more expensive kite wasn't hard to put together and that the cheaper kites were not as good. I still stuck to my position, and continued the bad cop role by quietly taking my husband aside (but in view of the owner) and expressing concern about spending so much on the kite, especially since I was unsure that I would be able to put it together easily.
The owner eventually offered to sell us the display model of the kite for $35.99 and ended up throwing in a roll of kite string as well (enlarging the pie)
While this was a very insignificant negotiation, it did follow some of the negotiation tactics and I was actually aware of the process while we were involved in it. My reservation price in this negotiation was really the $44.00, though my aspiration price was to get at least 5.00 off. The BATNA in the negotiation was to purchase the other less expensive kite for $29.99. Once I found out that only the display model was left in stock, I knew I could likely get even a better price than my aspiration.
Subscribe to:
Posts (Atom)