Week 6: Distributive and Integrative Negotiation

QUESTION

Week 6: Distributive and Integrative Negotiation

Based on your experience or readings, discuss the two different types of negotiation, along with their preparation, strategies, and tactics. In preparation for development and implementation of a strategic supplier alliance which of these types would be most useful? Framing is generally considered the determination of what issues are at stake in a negotiation. Why is framing critical to understanding the negotiating issues, defining the expectations and preferences of the parties to the negotiation, selecting the information/data to support each party’s position or case, and evaluating the outcomes actually achieved during the negotiation? What is the role of Purchasing and Supply Management professionals in preparation for and negotiation of a one-time purchase of a major capital equipment item?

ANSWER

Forms of Business Negotiations

Types of Negotiations

In many business undertakings, conflicts surface between parties. One of the major ways to resolve business conflicts is through negotiation. Negotiation simply involves bringing the issue of contention on the table and discussing it between disagreeing parties, with a view of coming up with terms agreeable by both parties (Noe, Hollenbeck, Gerhart, Wright, 2003). There are two forms of business negotiations:

1. The distributive strategy of negotiation: also referred to as ‘the fixed pie strategy’. In this negotiation strategy, shares or portions of a resource that is finite (limited), are allocated to the parties. The parties, therefore, view each other as adversaries, because there are only a few resources left for taking. During the debate over who gets what, parties strive to put in an effort to grab the larger portion of resources (Lewicki, Saunders, Minton, Roy, 2011). Each negotiating team seeks to have a good understanding of the rival team’s competitive position. Each party battles for resources available, by acting reserved and defensive. At the end of the negotiations, one party benefits or is at an advantage, while the other loses.
2. The integrative strategy of negotiation: this strategy, unlike distributive strategy, involves collected efforts that benefit all the negotiating parties. Parties do not focus on getting the larger share of resources. Joint efforts of all parties are pushed towards getting the highest total payoff or the total amount of resources, by cooperation. The parties see each other as collaborators or friends toward a shared goal (Guttman, Maes, 1998). This negotiation strategy ends with all the parties benefiting from the achieved total payoff.

From time to time, businesses are faced with the task of preparing themselves for formation of business alliances, for example, a strategic supplier alliance of producers. In such cases, the integrative negotiation strategy would be the best option, to enable the alliance members to focus on the shared goal of success. It would also maintain friendship amongst the alliance members, which would be healthy for each business.

Framing and its Benefits in Negotiations

The determination of the issues at stake in a business negotiation is referred to as Framing. In framing, a party usually illustrates or defines the issues of contention with a view to winning an argument, reach an agreement, or close deals (Putnam, Holmer, 1992). For instance, a party willing to buy a certain appliance states the type of appliance they need, and the price they are willing to pay. The seller understands that the issue the buyer is concerned about is the price. He, in turn, states the advantages the appliance he is selling with have, and how it will help the buyer. This reframing by the seller makes the buyer buy the appliance, even though expensive because it made his focus on the benefits of the appliance, rather than the cost. Framing, therefore, is a technic that requires business wit to win deals and negotiations.

Role of Purchasing and Supply Management in Negotiation

The purchases and supply team is tasked with the acquiring of every resource or item required by a business for its daily operations. The team strives to achieve the best-fit item at the least price possible, without compromise in quality (Noe, Hollenbeck, Gerhart, Wright, 2003). Negotiation with suppliers is, therefore, a crucial part of any purchase. Major capital equipment items are purchased once in the lifetime of a company. These are very crucial, expensive, and high maintenance items in a business. The purchases management prepares well for the negotiation of such an item to ensure that they get the best item, of the required specifications and standard, at a reasonable price that shall be equivalent of the item’s value.

References

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2003). Gaining a competitive     advantage. Irwin: McGraw-Hill.

Lewicki, R. J., Saunders, D. M., Minton, J. W., Roy, J., & Lewicki, N. (2011). Essentials of    negotiation. Boston, MA: McGraw-Hill/Irwin.

Guttman, R. H., & Maes, P. (1998, May). Agent-mediated integrative negotiation for retail   electronic commerce. In International Workshop on Agent-Mediated Electronic       Trading (pp. 70-90). Springer, Berlin, Heidelberg.

Putnam, L. L., & Holmer, M. (1992). Framing, reframing, and issue development.