Quản trị kinh doanh - Chapter 14: Bargaining and negotiations

1Chapter 14:Bargaining andNegotiationsPurchasing and Supply Chain Management, 3rd edition, Copyright 2013, W. C. Benton Jr., All rights reservedContentBargainingDistributive bargaining Integrative bargainingDistributive bargaining experiment Formal negotiation 2BargainingExplicit bargainingAn interaction where parties with certain disagreements confer and exchange ideas about a possible solution until a compromise is reached or the bargaining is terminated3NegotiationThe preliminary discussion to bargainingThe terms bargaining and negotiation have been used interchangeably.4Two-party BargainingBilateral monopoly system or two-party bargainingBargaining that occurs between two parties who possess resources the other desiresThe 2 types of two-party bargaining:Distributive bargainingPsychologyIntegrative bargaining Economics5Distributive BargainingDefinition:Bargaining where the total gains is “distributed” between the two parties involved, and each party usually wants as much as it can getWithout some degree of cooperation either party can block the bargainingCan use game theoryVarying sum bargainingZero-sum bargaining6Payoff SystemFactors related to the payoff system:The amount that has to be exceeded if the bargainer is to realize a profitThe cost of time spent in bargainingThe cost of failure to reach agreementAdded benefits achieved by obtaining a specific threshold valueQualitative or quantitative variations in the general level of payoff valuesWhether payoffs are based solely on one’s own profit schedule or are based, in whole or in part, on the degree to which one’s profits exceed those of othersWhether conflict is constant-sum or varying-sumPenalties the bargaining opponent (or perhaps a third party) is likely to impose for failure to yield7Payoff System FactorsBreakeven Point The amount that must be exceeded in the bargaining interaction in order to obtain a profitBargaining is often an attempt to convince the other person to accept a lower value than the one he or she maintains is necessaryBargainer’s resistance to making concessions is positively correlated toThe time required to make a further concession the probability of withdrawing from the negotiations8Psychological Bargaining FrameworkSix major factors affecting bargaining:91. General bargaining predispositions2. Payoff system3. Social relationship with the opponent4. Social relationship with significant others5. Situational factors6. Bargaining strategyOutcomeBargaining StrategyTougher bargaining strategyMore extreme opening positionFewer concessionsSmaller concessions A consistent tough bargaining strategy (not fair) could result in:High transaction costsLack of future agreementsReplacement of the bargaining opponentThe best strategy:Always reciprocating both the frequency and the magnitude of the other bargainer’s concessionsTough but fair10ContentBargainingDistributive Bargaining Integrative BargainingDistributive Bargaining Experiment 11Distributive Bargaining ExperimentExamines the effect of the contingency compensation on both buyers and sellersSituationAn agreement has to be reached on the specifications of the product to be bought and the money to be paidBoth the seller and the buyer can make concessions12Distributive Bargaining Experiment (cont.)Findings:The buyer’s initial offer is always above the seller’s reservation priceThe negotiator’s payment system has significant effects When only one party is contingently rewarded,the effect is to shift the settlement in that party’s favor. When both parties are contingently rewarded,There is a much longer and more difficult negotiation process.13Distributive Bargaining Experiment (cont.)Implication:Contingent rewards make a difference in negotiation outcomesPurchasing organizations need to be aware of the salesperson’s reward systemManagement must develop stronger contingencies to encourage purchasing effectiveness14Formal NegotiationSeller’s PerspectiveVS.Buyer’s Perspective15The Buyer’s Procedure for a Formal Negotiation16Select team and chief negotiatorDetermine objectivesPrepare a price/cost analysisDetermine bargaining strengthDevelop the planSet strategy based on objectives Develop tactics to achieve the strategyFollow-upQuestions?17