Negotiation is a skill that permeates our personal and professional lives, but it takes on various forms and approaches.
There are times when outcomes are clearly win-lose or just purely bargaining. In situations like these, position-based negotiation, also known as positional bargaining, is one approach to negotiation that centers on asserting and defending positions to reach favorable agreements.
But what are the key characteristics of position-based negotiation and what are some pitfalls we should be aware of?
What is Position-Based Negotiation aka Positional Bargaining?
Position-based negotiation is a method of bargaining where parties define their initial positions, often extreme, and make concessions to reach an agreement. This approach is characterised by
- focusing on positions
- concession-making
- limited information sharing
- commonly employed in high-stakes negotiations
Also, read our blog post on “how to negotiate” for a better understanding!
A Deeper Look at Position-Based Negotiation’s Characteristics:
Focus on Positions
In position-based negotiation, the emphasis is placed on the positions taken by each party as opposed to the parties’ interests.
Without focusing too much on uncovering interests, negotiators declare their starting points and then work towards an agreement through compromise. For instance, in a salary negotiation, an employer may start with a low initial salary offer, and the employee may start with a high one. Both parties then adjust their positions through this process.
Examples of How Positions Can Be Used
- In a real estate deal, the buyer might initially offer a significantly lower price than the asking price, while the seller aims for a higher price. They then meet somewhere in the middle. Anchoring and managing the zone of possible agreement (ZOPA) are used here.
- During a labour union agreement, workers may demand substantial wage increases while the company aims to control costs. The final agreement will involve both sides making concessions.
Read more about negotiation fundamentals here!
Importance of Concessions
Despite the likelihood of using hardball tactics, concessions are still a pivotal component of positional bargaining.
You can force your counterparty to reciprocate by providing the initial concession, gradually moving closer to a mutually acceptable agreement. Making concessions can be a crucial element in building trust and rapport among parties.
Examples of How Concessions Can Be Used
- In a business acquisition, the buyer might offer to take on certain liabilities of the seller while the seller agrees to a lower purchase price.
- In international diplomacy, nations may exchange concessions on trade tariffs and security agreements to foster cooperation.
Read our blog post on client communication for a better understanding!
Limited Information Sharing
One of the key characteristics of Position-based negotiation is the limited information sharing. Parties may strategically withhold information or provide partial details to gain an advantage. This approach can create a sense of uncertainty that can be leveraged during agreements.
Examples of How Limited Information Sharing Can Be Used
- In a vendor-client debate, the vendor may not disclose their production costs, giving them room to adjust prices in response to the client’s initial offer.
- In a legal settlement, one party may withhold crucial evidence until a late stage, leading the other party to agree to more favourable terms in exchange for its disclosure.
Check out our blog post on the keynote speaker here!
High-Stakes Negotiations
This approach is often deployed in high-stakes scenarios, where the outcome can have far-reaching consequences. It allows parties to be competitive and assertive while striving for advantageous agreements.
Examples of How This Approach Can Be Effective
- Union and Management Labor Disputes: In labor negotiations, positional bargaining is often seen when unions demand specific wage increases or benefits, and management counters with cost-cutting measures. For example, in 2019, General Motors (GM) faced a strike by the United Auto Workers (UAW) union1. UAW’s position was based on securing better wages, healthcare, and job security, while GM’s position focused on reducing costs and improving operational efficiency. Both sides initially held firm to their positions, resulting in prolonged negotiations.
- Price Negotiations Between Buyers and Suppliers: A common business example involves price negotiations between buyers and suppliers. A buyer may offer a fixed price for a product, while the supplier may demand a higher price due to rising production costs. Each side often starts with rigid positions before compromising. In industries like construction or manufacturing, this positional bargaining can lead to significant delays.
- Mergers and Acquisitions: In mergers and acquisitions (M&A), companies sometimes engage in positional bargaining over the sale price. For example, when Disney acquired 21st Century Fox, both sides engaged in positional bargaining over the valuation of Fox’s assets. Disney initially offered $52.4 billion, but after a competitive bid from Comcast, Fox’s position was strengthened, forcing Disney to increase its offer to $71.3 billion.
Pitfalls of Positional Bargaining
However, there are also pitfalls to avoid when engaging in positional bargaining. Positional bargaining is very closely associated with win-lose mindsets, which could end up taking negotiations off course. Here are three pitfalls to bear in mind if you are engaging in position-based negotiation:
- Producing unwise agreements due to not backing down
“Tough guy” negotiators who bargain over positions are typically reluctant to back down. They become so interested in saving face that they lose sight over actually valuable options on the table.
- Overemphasis on positions could drag out the process
In negotiations, the outcome tends to fall in the middle of the zone of possible agreement. Focusing too much on positions could lead to minuscule concessions on both sides, dragging out the negotiation to an ultimately similar outcome that could have been reached faster without positional bargaining.
- Positional bargaining can harm relationships – Using positional bargaining on the wrong party
Positional bargaining could lead to your counterparty refusing to deal with you in the future if other options exist. The ideal scenario to use position-based negotiation in is with parties you do not want to build long-term relationships with.
Final Thoughts
In conclusion, position-based negotiation is a method that places a strong emphasis on positions, concessions, and limited information sharing and is frequently used in high-stakes negotiations. When used at the right time and place, negotiators can leverage key characteristics to boost their skills and maximize success.
At Necademy, we know that this approach might not fit every scenario perfectly. Still, it remains an effective and essential asset in the negotiation toolbox, helping achieve favourable outcomes even under challenging conditions.
Our courses also cover the difference between collaborative negotiation and positional bargaining.
Joining one of our courses will put you on par with over 10,000 leading lawyers from Fortune 500 companies to Tier 1 law firms globally, boosting your negotiation skills to new heights.
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