I was the buyer in the Texoil Negotiation. I was offered $750,000 and immediately counter-offered $375,000 to re-anchor the position. This is because the first offer can otherwise exert a lot of influence. The target prices were clearly far apart; this is where the preparation start proves value and moves the seller to approach his reservation price. Specifically, I prepared objective rationale for my arguments and listed all the factors that I believe could influence the seller. Despite this, the seller would not go under $553.000, which still higher than my total budget. A negative bargaining zone was the barrier.
To overcome this barrier, we should have used integrative bargaining by creating value and expanding the “pie”. Acting as a team rather than competitors, thinking outside the box and brainstorming ideas/solutions could have resulted in a successful deal, maximizing outcomes. For example, using comparative advantage to utilize strengths and trade on differences. They could have offered staff training or services after the holiday. We could have offered free fuel for a period. The job offer could have potentially adjusted the price to create a positive bargaining zone. With a $75,000 job to the seller, the reservation price is revised.
The case reminds us that we should always try to work through the other party’s interest. Interests define the problem. Interests can allow unilateral concessions. Behind opposed positions, we could have aligned certain interests to come up with a solution. This would allow me to understand why the other party cannot go below $553,000. Such bargaining strengthens our long-run relationship, creates mutual gain and builds trust. This method would have allowed me to be softer on the person, but hard on the problem. Different people have different personalities, as I have learnt. Approaches are different but the problem is the same.
With the positional bargaining approach there was a direct conflict between the relationship and substance via a contest of will. By putting myself into their shoes, I could have more clearly understood the problem and not just had a price contest. Finally, in the real world, I would have used objective criteria to prove my trust and resolve the issue. Through principled negotiation I could have brought in scientific merit through research. For example, a customer questionnaire for customer loyalty and valuation on the business, sharing it with the buyer.