Differences Between Distributive Bargaining & Integrative Bargaining
When you’re a business owner, it’s inevitable that you will have to engage in some type of negotiation, whether it involves your employees, a vendor, a customer or a potential investor. The challenge, however, is that if you don’t enter into those negotiations with a strong strategy, you will likely settle for less and will get less than you settled for, which is a losing situation. That’s why it’s important to understand the differences between distributive bargaining and integrative bargaining, because it can help you decide which strategy to pursue, based on the stance taken by the person or the people involved in the negotiation.
Distributive Bargaining Elements
There are some instances in which you are negotiating for what are known as fixed resources, which typically means the price of a product or service. In these situations, you may need to adopt a distributive bargaining strategy, which is based on the idea that your gain means the other party’s loss. In other words, your goal is to negotiate in such a way that when you reach an agreement, you have given up less than the other party. Your goal is to win as much as you can during the negotiation, and, typically, that means that the other party has to give up something.
There is not enough for everyone to get what they want, so when one side gets something, the other side loses something. For example, let’s say a vendor’s “walk-away” price for a service is $5,000, but your “walk away” price is $4,800. Your goal is to get the vendor as close to your walk away price as possible without blowing the deal. If you get that vendor to agree to $4750, that vendor loses $250 and you lose $50, which means you gave up less than the other party.
Integrative Bargaining Elements
There are some negotiations in which it’s in your interest to find a solution in which both parties feel as if they gained something in the deal. This is known as integrative bargaining, and the best way to think about this strategy is that it’s a “win-win” for both parties. The idea is that you’re negotiating in such a way that you take the other party’s wants, needs, fears, and concerns into the equation. Instead of simply worrying about losing less than the other party, you are looking for a solution in which both parties have to give up something to finalize the deal.
Using the previous illustration of negotiating with a vendor, integrative bargaining would seek to ensure that both you and the vendor lost an equal amount. With that in mind, you would agree to a price of $4,900, which means that the vendor loses $100 in the negotiation, and you also lose $100. You would both leave the negotiation table, with both of you feeling that you compromised but took each other’s wants and needs into consideration.
Difference Between Distributive and Integrative Bargaining
The primary difference between these two bargaining strategies is that in distributive bargaining, you don’t take the other party’s needs into consideration when making a deal. You are simply concerned with losing less than the other party, and all your focus is on getting a better deal than the other side.
In contrast, integrative bargaining begins with the assumption that both parties need to feel as if they gave up an equal amount or that they compromised equally to complete a deal. Distributive bargaining is often filled with conflict, because both parties maintain an intractable position in their attempt to lose less than the other side. Integrative bargaining is typically less fraught with tension, as both sides enter the negotiation with the willingness to compromise to achieve a consensus.
The Economic Times: Definition of ‘Distributive Bargaining’
Harvard Law School: Use Integrative Negotiation Strategies to Create Value at the Bargaining Table
JMG The Business Professor: Integrative, Distributive, and Compatible Bargaining
Veterinary Business Advisors, Inc.: Successful Negotiations: Strategies for Salary, Benefits and More
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