SALES AND RETAIL MANAGEMENT

UNIT 2

NEGOTIATION AND BARGAINING

DEFINITION- The term negotiation refers to a strategic discussion intended to resolve an issue
in a way that both parties find acceptable. Negotiations involve give and take, which means one or
both parties will usually need to make some concessions.

OR

A sales negotiation is a discussion between a buyer and a seller to make a sales deal. These
negotiations allow sellers to address a buyer's concerns about a purchase by reestablishing the value
of the product or service and making compromises. These discussions also allow sellers and buyers to
part ways amicably if necessary.

The Stages of the Negotiation Process

Regardless of what you're negotiating over or with whom, negotiation usually involves several distinct
steps.

1. Preparation

Before negotiations begin, there are a few questions it helps to ask yourself. Those include:

 What do you hope to gain, ideally?

 What are your realistic expectations?
 What compromises are you willing to make?
 What happens if you don't reach your end goal?

Preparation can also include finding out as much as you can about the other party and their likely point
of view. In the case of the SUV negotiation above, you could probably find out how much room the
dealer has to bargain by looking up actual sales prices for that vehicle online.

Also, marshal any facts that will help you make a persuasive case. If you're negotiating for a new job or
a raise at work, for instance, come armed with concrete examples of your accomplishments, including
hard numbers if possible. Consider bringing testimonials from satisfied clients and/or coworkers if that
will buttress your case.

Many experienced negotiators consider preparation to be the single most important step in the entire
process.

2-Exchanging Information
Once you're prepped for the negotiation, you're ready to sit down with the other party. If they're
smart, they have probably prepared themselves, as well. This is the point at which both sides will
present their initial positions in terms of what they want and are willing to give in return.

Being able to clearly articulate your wishes is critical to the negotiation process. You may not get
everything on your wish list, but the other party, if they want to reach a deal, will have a better idea of
what it might take to make that happen. You will have a better idea of their position, and where they
might be willing to bend, as well.

3-Bargaining

Now that both parties have laid out their case, you're ready to start bargaining.

An important key to this step is to hear the other party out and refrain from being dismissive or
argumentative. Successful negotiating involves a little give and take on both sides, and an adversarial
relationship is likely to be less effective than a collegial one.

Also bear in mind that a negotiation can take time, so try not to rush the process or allow yourself to be
rushed.

Closing the Deal

Once both parties are satisfied with the results, it's time to end the negotiations. The next step may be
in the form of a verbal agreement or written contract. The latter is usually a better idea as it clearly
outlines the position of each party and can be enforced if one party doesn't live up to their end of the
bargain.

Tips for Successful Negotiation

Some people may be born negotiators, but many of us are not. H ere are a few tips that can help.

 Justify Your Position. Don't just walk into negotiations without being able to back up your
position. Bring information to show that you've done your research and you're committed to
reaching a deal.
 Put Yourself in Their Shoes. Remember that the other side has things it wants out of the deal,
too. What can you offer that will help them reach their goal (or most of it) without giving away
more than you want to or can afford to?
 Keep Your Emotions in Check. It's easy to get caught up in the moment and be swayed by your
personal feelings, especially ones like anger and frustration. But don't let your emotions cause
you to lose sight of your goal.
 Know When to Walk Away. Before you begin the negotiating process, it's a good idea to know
what you'll accept as a bare minimum and when you'd rather walk away from the table than
continue to bargain. There is no use trying to reach a deal if both sides are hopelessly dug in.
Even if you don't want to end negotiations entirely, pausing them can give everyone involved a
chance to regroup and possibly return to the table with a fresh perspective.

Negotiation approaches
Each type of negotiation falls into one of two categories. Below is a description of each negotiation
approach and tips for making the most of each approach:

Distributive negotiation

Distributive negotiation, sometimes called zero-sum negotiation or win-lose negotiation, is a bargaining

approach in which one person succeeds only if another person loses. A distributive negotiation usually
involves a discussion of a single issue.

For example, a sales business wants to enter a contract with a vendor for IT services. The business wants
the most IT services for the lowest price possible, while the IT vendor intends to provide the lowest
number of resources for the highest price. Each party's desire to get a better deal represents a
distributive negotiation approach.

Below is a list of tips for success in a distributive negotiation:

 Be persistent. When you're taking a distributive approach to negotiation, persistence and polite

assertiveness can help you fulfill your interests.
 Make the first offer. In a distributive negotiation, you can make the first offer to begin the
bargaining in your favor.
 Don't communicate your minimum favorable outcome. It's important to aim high in
distributive negotiations to ensure successful bargaining. You can withhold any information on
the minimum you're willing to accept from bargaining for the best results.


Integrative negotiation

Integrative negotiation, sometimes called win-win or collaborative negotiation, is a bargaining approach

where negotiating parties attempt to reach a mutually beneficial solution. Unlike distributive
negotiations, integrative negotiations can involve multiple issues.

For example, an established fashion company and a cosmetics startup company agree to collaborate on
a product geared toward their shared target market. They negotiate a contract that allows the cosmetics
startup to gain greater exposure and the fashion company to reach its financial and marketing goals.

Here are a few tips you can use in an integrative negotiation:

 Take a principled approach. You can discuss your principles during an integrative negotiation to
build trust with the other party.
 Discuss your needs and interests openly. Communicating your goals in an integrative
negotiation can promote transparency and a positive relationship.
 Use bargaining to solve problems. In integrative negotiation, both parties can use negotiations
as an opportunity for collaborative problem-solving.

Key Differences Between Distributive Negotiation and Integrative Negotiation

The difference between distributive and integrative negotiation are explained hereunder:

 1. Distributive Negotiation connotes a negotiation technique wherein the parties try to gain
maximum value for themselves, from definite resources. Conversely, Integrative Negotiation can
be described as negotiation strategy which attempts to settle the dispute, with a mutually
acceptable solution.
2. Distributive Negotiation is a competitive strategy, whereas integrative negotiation uses a
collaborative approach.
3. Distributive Negotiation has a win-lose orientation. On the contrary, integrative negotiation is
based on win-win orientation.
4. When the resources are limited, distributive negotiation is better. As against, the integrative
negotiation is used when the resources are in abundance.
5. In distributive negotiation, the parties self-interest and individual profit motivate the parties.
Unlike, in integrative negotiation mutual interest and gain act as a motivation for the parties
involved.
6. Distributive Negotiation discusses only one issue at a time, whereas multiple issues are taken
into account in an integrative negotiation.
7. The communication climate is open and constructive in an integrative negotiation. In contrast,
controlled and the selective environment is there in a distributive negotiation.
8. When the relationship between parties does not have a high priority, distributive negotiation is
used. On the other hand, integrative negotiation is used when the parties try to develop a long-
term relationship with one another and have a very high priority.

The Five Styles of Negotiation

An effective negotiation strategy depends on having a solid understanding of each of the five
negotiation styles. Here’s a closer look at each style:

1. 1. Accommodating: Accommodating negotiators prioritize maintaining the relationship between

the negotiating parties. Those who exhibit the accommodating style seek to satisfy the other
party's needs while minimizing the level of conflict involved in the negotiation.
2. 2. Avoiding: Negotiators with an avoiding style prefer to remain objective and avoid creating
tension. They’ll often defer responsibility to a counterpart in an attempt to remain neutral. They
do not actively pursue their own interests or the interests of the other party.
3. 3. Collaborating: The collaborative negotiation style is a joint problem-solving technique. It aims
to create a win-win scenario. Collaborative negotiators are great at finding innovative solutions
to complex problems. By working together with the other party, those exhibiting the
collaborating style aim to find creative solutions that satisfy the needs of all parties involved.
4. 4. Competing: Competitive negotiators are results-oriented and focused on getting their own
way. They do not focus on the relationship with the other party or maintaining a good rapport.
Those with a competitive negotiation style are usually less willing to compromise and, in
extreme cases, can be aggressive.
5. 5. Compromising: The compromising style aims to find a middle ground that is mutually
beneficial to all parties. However, it is different from the collaborative style in that it does not
aim for a win-win scenario. Instead, compromising negotiators seek a solution in which both
parties sacrifice part of what they want for resolution. Think of haggling for a lower price at a
flea market—the buyer offers the seller a lower price, hoping they’ll meet
4 types of negotiation

Below is a list of negotiation types:

1. Principled negotiation

Principled negotiation is a type of bargaining that uses the parties' principles and interests to reach an
agreement. This type of negotiation often focuses on conflict resolution. This type of bargaining uses an
integrative negotiation approach to serve the interests of both parties. There are four elements to a
principled negotiation:

 Mutual gain: The integrative approach to a principled negotiation invites parties to focus on

finding mutually beneficial outcomes through bargaining.
 Focus on interests: Negotiators can identify and communicate their motivations, interests and
needs in principled negotiation.
 Separate emotions from issues: In principled negotiation, parties can reduce emotional
responses and personality conflicts by focusing on the issues rather than how the problems
make them feel.
 Objectivity: Parties in a principled negotiation can agree to using objective criteria as a baseline
for negotiations. Examples of objective criteria in negotiations include market rates, expert
opinions, laws and industry standards.
For example, the leaders of two departments for a large company often argue over the resources for
each department. The two leaders enter a principled negotiation to discuss solutions. They listen to each
other's positions and decide to base resource allocation on the percentage of revenue each department
generates for the company. The department leader who receives more resources agrees to support the
other department's functions, and the two leaders reach a compromise.

2. Team negotiation

In a team negotiation, multiple people bargain toward an agreement on each side of the negotiation.
Team negotiations are common with large business deals. There are several personality roles on a
negotiation team. In some cases, one person may perform more than one role. Here are some common
roles on negotiation teams:

 Leader: Members of each team in a negotiation usually appoint a leader to make the final
decisions during negotiations.
 Observer: The observer pays attention to the other party's team during a negotiation, discussing
their observations with the leader.
 Relater: A relater on a negotiation team works on building relationships with the other team
members during bargaining.
 Recorder: A recorder on a negotiating team can take notes on the discussions of a negotiation
meeting.
 Critic: While this may sound like a negative role, having a critic on the team during negotiations
can help you understand an agreement's concessions and other negative results.
 Builder: A builder on a negotiation team creates the deal or package for a bargaining team. They
can perform financial functions during negotiations, calculating the cost of an agreement.

3. Multiparty negotiation

A multiparty negotiation is a type of bargaining where more than two parties negotiate toward an
agreement. An example of a multiparty negotiation is bargaining between multiple department leaders
in a large company. Here are a few of the challenges of multiparty negotiations:

 Fluctuating BATNAs: BATNA stands for best alternative to a negotiated agreement. With

multiple parties in a negotiation, each party's BATNA is more likely to change, making it harder
for parties to agree. Each party can evaluate its BATNA at each negotiation stage to understand
the results of a proposed agreement.
 Coalition formation: Another challenge of multiparty negotiations is the possibility for different
parties to form coalitions or alliances. These alliances can add to the complexity of bargaining.
Coalitions can agree to a specific set of terms to help all parties reach an agreement.
 Process-management issues: Managing the negotiation process between multiple parties can
lead to a lack of governance and miscommunications. People in multiparty negotiations can
avoid these issues by choosing a leader willing to collaborate with others toward an agreement.

4. Adversarial negotiation
An adversarial negotiation is a distributive approach in which the most aggressive party in a negotiation
achieves an agreement that serves their interests. Here are a few examples of adversarial negotiation
tactics:

 Hard bargaining: Hard bargaining is a strategy in which one party refuses to compromise in an

agreement.
 Future promise: A person using this tactic can promise the other party a future benefit in
exchange for current concessions. You can counteract this tactic by asking for the future
promise in writing.
 Loss of interest: Another adversarial negotiation tactic is loss of interest, in which one party
pretends they've lost interest in pursuing an agreement.

DIFINITION-In the social sciences, bargaining or haggling is a type of negotiation in which the buyer and
seller of a good or service debate the price or nature of a transaction. If the bargaining produces
agreement on terms, the transaction takes place.

 Bargaining is a simple form of the distributive negotiation process that is both competitive and
positional. Meaning bargaining doesn't seek to create value but instead focuses on negotiators
claiming value. Bargaining very often revolves around a single issue—usually price.
There are three main classifications of bargaining topics:
o mandatory
o permissive and
o Illegal.
 Negotiation and bargaining are common terms for discussions aimed at reaching agreement in
interdependent situations, that is, in situations where parties need each other in order to reach
their goals.

CONFLICT AND DISPUTE RESOLUTION

According to John Burton (1990), a dispute is a short-term disagreement that can result in the
disputants reaching some sort of resolution; it involves issues that are negotiable. Conflict, in
contrast, is long-term with deeply rooted issues that are seen as “non-negotiable” (1990).
 Conflict resolution is a way for two or more parties to find a peaceful solution to a disagreement
among them. The disagreement may be personal, financial, political, or emotional. When a
dispute arises, often the best course of action is negotiation to resolve the disagreement.
 Conflict resolution is the process that two or more parties use to find a cordial solution to a
problem. Conflicts can occur between friends and family members, but also between coworkers,
clients, and customers.
Conflict resolution strategies
Following these strategies can ensure a positive outcome from the dispute-

1. Negotiation

Negotiating can be hard, but it’s crucial when it comes to conflict resolution. Negotiating means putting
your differences aside and working together to come to a conclusion. Negotiation helps you build better
relationships in the workplace because it shows that you’re willing to let go of your ideals to find a
solution that works for everyone involved. When you can successfully negotiate a solution with
someone, that puts you ahead in the workplace and will lead to greater efficiency.

2. Meditation
Most people are familiar with having a mediator from back in our elementary school days, but this
strategy can still be applied even in the workplace. The mediation strategy involves enlisting a neutral,
unbiased third party who can help you come to a conclusion. Sometimes, having another person
involved in a discussion is all you need to find a solution.

With a mediator, you’re able to get a completely unbiased opinion of the situation. For example, if
you’re having an argument over a project with a coworker, you can ask another coworker who is
unrelated to the project to be your mediator. This way, they can give an opinion that’s simply based on
facts and isn’t influenced by personal feelings.

3. Arbitration

Arbitration involves having a third party that acts as a “judge” who will make the final decision to end
the dispute. This person will listen to both sides of the argument and then come to a decision based on
the evidence that is presented to them. This decision will be final and the parties involved in the dispute
cannot appeal the decision. However, they can try to negotiate certain aspects of the decision.

The goal of this strategy is to have a completely unbiased third opinion who makes a decision that is
based fully on the evidence that was presented to them.

4. Litigation

In litigation, the parties involved in the dispute will go in front of a judge or a judge and jury who will
hear both sides of the argument, weigh the evidence, and then make a decision. The judge and jury can
just be any people who are not directly involved in the conflict.