Okay, let's take a look at the dialogue here because in a dialogue, we can see a
really good example of this. Now,
sometimes we have a dialogue with the family, and then sometimes you have a
dialogue with a business. Let's begin with the family, so I want you to see in a
very simple way what this is kind of all about. So, Freddy and Jane are negotiating
over a slice of pizza they found in the refrigerator, I guess leftover pizza right,
it's really common. Jane says: There is only one slice of leftover pizza, and
there's nothing else in the refrigerator.
Fred says: It has been a really busy day today, and I'm really hungry.
Jane responds: Well, I'm hungry too.
And Fred answers: To tell you the truth, I haven't eaten all day.
Okay, now remember in a negotiation we need to have two things, right?
What do we need to have? We need to have something in common, and we need to have
something different.
What are we finding out here? Fred and Jane have something in common, right?
They both want to eat, it's time for dinner and they both want to eat. Now
then, they're going to find out they have something that's not uncommon. That is
Fred would like to eat the piece of pizza and Jane would like to eat the
pizza, pizza. But, there's only one piece so how are they going to do that? That's
we end up with this distributive idea, it already looks like things are getting
distributive.
There we go, Fred tries to say: I'm really hungry, I haven't eaten all day. And
Jane says: Frankly, I don't see how this one slice can satisfy you.
Okay, so now we begin to lay out the parameters.
What are your goals? And Jane tries to tell Frank your goal is to eat so that
you're not hungry, but hey this piece of pizza is so small
you'll still be hungry anyway. So, if you let me eat it, if you let me eat it, I won't
be hungry because I'm smaller than you, I'm shorter than you,
I don't need to eat as much as you. But, you maybe you are fat and you want to
eat so much, you're not going to be happy anyway so let me have it.
Fred says: Well, you know I love pizza. Now, so Fred is adding some more now. Well ,it's
not just that I want to not be hungry, I really like to eat it.
Jane responds: Yes, but I kind of like it too. And Fred says: You are being
uncooperative. Now, here we go with the same idea that we had last unit that is
one side telling the other side they're not working together, they're not trying to
find a solution.
They're trying to do something to stop the negotiation. Here we say
uncooperative. And Jane says: you are being inflexible, I think we saw this
word the last unit. Inflexible, you don't want to change. Of course, if we negotiate
both sides have to change something otherwise, we'll never come to a
conclusion.
Okay, now then let's jump over to a business example. And in a business
example, what we're going to look at is the negotiation in a distributive
situation. Now
last unit, I think we're looking at planning for negotiation and now let's
just look at negotiation. So, let's begin.
Alex and Fred are negotiating and both don't want to give anything, they don't
want to give up. Because if they give up anything and the other side will get
something, and so that will cause one side to lose and one side to win, in both
sides here don't want to lose.
So, let's take a look at this, a very common situation they are negotiating over
price.
Alex says: Our price of 25.50 USD per unit is firm.
Fred says: Unless you lower your price, we can't agree. And Alex responds:
This is our bottom line, there is no flexibility in this issue. And Fred says:
To be honest, we cannot sell this product in the market at this price. And Alex
comes back with: Because of our emphasis on quality, we don't have any space to
maneuver. This is the lowest we can offer. So, you see both sides are giving a very
clear reasons why they can't change, right?
Alex is saying: The price is 25. 50 and Fred is saying: That's too high, you must
lower. And then, from then on, they just keep saying no I can't.
Both sides say: They cannot change, both sides have reasons ,such as quality ,such
as market the man. All of these things they keep using as the reasons for not
wanting to change. So, here we can see this must be distributive, because both
sides are really going strongly to not give in. Fred says: We cannot make
progress,
meaning we cannot come to a conclusion, we cannot finish the negotiation, we
cannot make progress. If you don't agree to a 20-percent discount, this is the
highest we can offer. Alex says: There is simply no way we can give you a discount.
So not only can I not give you twenty percent, I can't give you any discount.
And Fred responds with: If you are so unyielding, same as inflexible. Unyielding,
this negotiation will reach a deadlock, a deadlock over. Alex responds with: If you
don't accept this offer, we will have to withdraw the package. Withdraw means take
back, so that we have no more negotiation, take back.
Fred responds with: That is an ultimatum,
we cannot accept. If you cannot give us a discount,
we will have to find another supplier. So, here you can see both sides are very
firm. Both sides are not giving in anything and Alex responds: There is no
reason to become hostile, the 25.50 price really is our final offer. So, don't
become hostile, hostile meaning don't fight, you don't need to get angry, don't
fight this is I can't give you anything even if you get angry I can't give you
everything.
Anything you want, I can't give you any discount. So in this case we can see
they're not making much progress, are they? let's going on a little bit more
here. Fred says: We can agree on the need to wrap up this dea,l so we will offer 21.
We cannot make this offer again. So, now he changes the price to 21. So, he is
giving in a little bit. And Alex says: The implication of this price is that we
lose 4.50 on each unit. Although I would like to give you what you wan, we
cannot take a loss on this deal.
Now, this is very common, right? Where buyer or some especially a seller will
say if I sell for this price, I'm going to lose money.
This price is too low, it's under my cost. It is very normal strategy, many people use
this. And Fred says: This is pointless. Our customers simply won't pay more. So even
if, even if I give you what you want, I can't make money either. So one-side of
things. If I sell for so low, I won't make money and the other side says, if I buy for
so high my customers won't buy and I lose money.