Question

Type the Short Answer Questions

1. Define distributive bargaining and list two situations when distributive bargaining strategies are useful.
2. What are the advantages of an extreme opening offer? What are the disadvantages of an extreme opening offer?
3. What are the advantages of adopting a flexible position?
4. What are the risks involved when using hardball tactics?
5. What are the strategies for responding to hardball tactics?

Answer 1

1. Distributive bargaining is bargaining strategy in which one party gains only if other party loses something. Under this negotiation strategy, two parties such as firms allocate resources such as land, capital and labor between them. It is also called zero sum strategy as each party try to maximum use of fixed resources to gain.

The distributive bargaining can be found in real life situations such as salary negotiation between employer and employee and price bargaining between buyer and seller. Consider the case of an employee bargaining for a salary of $2000/ month in a manufacturing unit whereas the manufacturer is willing to give only $1700/month salary to its employees. Therefore, the outcome of the distributive bargaining may be a salary value between $1700 and $2000 such as $1800 that may ultimately results loss of $200 to the manufacturing company and gain of $100 for employee. Another case will be a buyer bargaining the price of electronic camera in an electronic market. The market price of electronic camera is $300 but buyer is willing to pay only $200 for the electronic camera. If seller after price bargaining with buyer agree to sell the electronic camera at $200, it will mean loss of $100 to seller and gain to buyer. However in reality, selling price is always kept high by sellers so that there is scope of price bargaining with buyers.

2. An extreme opening offer is offer made by one party to other in extreme circumstances. It is helpful in resolving land or property disputes between two parties and other disputes that cannot be settled through legal process. When cost of settling a land, property ownership and other disputes through judicial process become time consuming and quite expensive, extreme opening offer by one party may lead to settlement of dispute with other party. But unconscious offers made by negotiator in general negotiation process other than disputes is always not effective in getting long term gains. A firm may try to acquire a land at the price higher than existing price for its expansion project. But the success of the new project depends on several market factors and therefore, acquisition of land at higher cost may or may not yield benefits to the firm in the future.

3. Flexible position in the negotiation process helps negotiators in quick arriving at an agreed conclusion or result. Under this negotiation strategy, both parties agree to adopt flexibility during negotiation process. Even a smaller concession by one party may yield a fruitful outcome such as finalization of trade agreement between two companies. The flexible negotiation strategy saves time and cost of negotiators and increase mutual cooperation between them.

4. Hardball tactics are the negotiation strategy of negotiators to finalize deals through coercion, small concessions or intimidation. It involves risks such as failure of negotiation deal and mistrusts between people.

5. The hardball tactics is negotiation strategy being adopted by a party who holds dominant position over other party such as employer and employees. The strategies to respond the hardball tactics are ignoring threat factor and identifying negotiators who are more flexible than others for deal negotiation. Another strategy to counter hardball tactics of negotiators is legal recourse i.e., finding settlement of a matter through courts.