On February 1, US President Trump officially hit Canada, Mexico and China with the "tariff stick", launching the first round of tariff offensive since taking office. In three executive orders, he imposed a 25% tariff on Mexican and most Canadian goods, and a 10% tariff on goods from China, kicking off a trade war that could hinder global economic growth and reignite inflation.
About 90 minutes after Trump made his statement, in Ottawa, Canada's capital, the U.S. national anthem was replaced by boos before the start of a National Hockey League game between the Ottawa Senators and the Minnesota Wilderness.
Canada, Mexico and China have all announced countermeasures!
It is well known that Trump is the author of The Art of the Deal, but in fact, the book was written by a ghostwriter named Tony Schwartz. Interlude: Regarding ghostwriting, we have introduced it in this article: Spare, Open, Shoe Dog. Who Is the Ghostwriter behind all Three?
No matter how you view Trump, his negotiating skills are worth studying. His business thinking has not only affected global trade, but also provided a classic case for corporate negotiations. If you have read "The Art of the Deal" or have paid attention to Trump recently, you will find that all his transaction concepts are typical representatives of a model called "distributive bargaining" - a strategy that emphasizes zero-sum games and maximizing short-term benefits.
But the question is, is this strategy applicable to all business scenarios? Is there a more sustainable negotiation model in business operations?
In this episode of Roots & Wings, a podcast dedicated to business owners, leaders, and professionals, David and I dive into two key negotiation approaches: Distributive Bargaining vs. Integrative Bargaining. Understanding the difference can mean the survival and growth of your business in unpredictable times.
Prefer to read? Catch all the highlights below:
Distributive Bargaining: A Short-Term Strategy for Zero-Sum Games
What is distributive bargaining?
The core concept of distributive negotiation is "winners and losers" . The two negotiating parties compete for limited resources, and the goal is to make themselves get more and let the other party get less. This negotiation method is suitable for scenarios where "resources are limited and the interests of both parties are in conflict", such as:
Real estate transactions (buyers want to buy at a low price, sellers want to sell at a high price)
Procurement negotiations (buyers push for lower prices, sellers want a premium)
Bid negotiation (multiple companies vying for the same contract, with only one winner)
Typical Cases of Distributive Negotiation
(1) Trump’s trade war
Trump can raise tariffs, but other countries can also retaliate. He cannot force others not to respond. International negotiations are not a zero-sum game with no simple winners and losers, but a system that can continuously create value.
Furthermore, negotiations are not binary choices. For example, China’s choices are not simply:
• (a) purchase soybeans from U.S. farmers, or
• (b) Do not buy soybeans.
China can also:
• (c) Purchase soybeans from Russia, Argentina, Brazil, Canada, etc.
This variety of options completely deprives the distributive negotiator of control. He cannot simply exert pressure to win the deal, nor can he define the outcome of the negotiation.
(2) Corporate procurement negotiations: Lowest price does not necessarily mean the winner
Many companies adopt extreme price-cutting strategies when negotiating with suppliers, trying to gain short-term cost advantages through distributive negotiations. However, this approach may bring the following problems:
Reduced product quality : Suppliers may reduce product quality due to low profits, thus affecting the company's brand reputation.
Disruption of long-term cooperation : Suppliers may be reluctant to establish long-term cooperation with buyers and even choose competitors as higher priority customers in the future.
Therefore, excessive use of distributive negotiation may gain benefits in the short term, but in the long run, the company may lose greater opportunities.
The biggest risk in distributive negotiations: bad reputation
In a one-time transaction, such as bargaining with the cabinet manufacturer for the casino you built to see if you can pay less, you don't have to worry about your reputation or the next deal. If you screw over the manufacturer, he may not take your order next time, and you can switch to another one.
But there is another way to negotiate, namely integrative bargaining . In this model, the interests of both parties are not completely opposed, and a mutually beneficial agreement can be reached. It is not like a fixed piece of cake to be divided by two people, but more like a baker and a caterer working together, where they can discuss how many cakes to make, what price to set, and how to continue to cooperate after this transaction.
Integrative Bargaining: A long-term win-win strategy
What is integrative negotiation?
The core concept of integrative negotiation is "win-win". The two parties in the negotiation do not simply compete for fixed resources, but achieve common interests by creating value. Its core characteristics include:
Expand the pie, not just divide it
The interests of both parties are not completely contradictory, and they can find a win-win situation
Think long-term, not one-time transactions
Integrative negotiation is more suitable for scenarios involving long-term cooperation, complex supply chains, and multiple stakeholders , such as:
Mergers and acquisitions (buyers and sellers work together to optimize business structure and achieve greater growth)
Supply chain cooperation (cooperating with suppliers to optimize production processes rather than simply lowering prices)
Strategic alliances (companies collaborate to develop new markets rather than compete)
Typical cases of integrative negotiation
(1) Starbucks’ supply chain management: win-win situation with suppliers
Starbucks has long insisted on integrated negotiations to establish long-term partnerships with global coffee bean suppliers, rather than simply pursuing low-price purchases. Its core initiatives include:
The company is willing to pay above-market prices to ensure farmers can maintain profitability
Providing interest-free loans to farmers for infrastructure improvements, such as optimizing irrigation systems.
Help suppliers improve their planting techniques and coffee bean quality. Starbucks has invested in establishing farmer support centers in major coffee-growing areas to help suppliers improve their agricultural techniques.
Provide long-term contracts to ensure stable income for suppliers
Promoting sustainable agriculture and enhancing brand social responsibility
This negotiation strategy ensures long-term supply chain stability , improves coffee quality, and enhances Starbucks’ brand value; at the same time, farmers gain more stable incomes and support for sustainable agricultural development .
(2) Labor negotiations between the NBA and the players’ union: win-win integrated negotiations
The labor negotiations between the NBA (National Basketball Association) and the National Basketball Players Association (NBPA) are a typical example of integrated negotiations. In the NBA history, players and team owners (the league) have negotiated many times on issues such as salary sharing and contract systems, and even a lockout occurred.
In the 2011 labor-management negotiations, the two sides were deadlocked:
Team owners hope to reduce players' share of salaries and increase the league's overall profitability.
The players hope to maintain high salaries while striving for better contract protection.
How to achieve win-win results?
The NBA and the players' union finally adopted an integrated negotiation approach rather than a simple zero-sum game:
Re-adjustment of revenue sharing : In the past, players took 57% of league revenue, and the owners thought it was difficult to maintain operations. After negotiations, both parties agreed to adjust it to players taking a floating share of 50%-51%, so that the team also has enough profit space.
Optimize contract terms : The league promises to improve player protections, such as raising the minimum salary, shortening rookie contract restrictions, and giving players earlier access to free market opportunities.
Increase business opportunities : The league and the players' union will work together to develop new markets (such as China) and increase the commercial value of basketball through globalization, benefiting everyone.
In the end, this negotiation not only avoided a long lockout, but also increased the NBA's overall revenue. Players received more reasonable salary guarantees, and team owners also ensured the sustainability of the business model.
Trump started with distributive negotiations, but the globalized world requires integrative negotiations. In the business world, even seemingly antagonistic negotiations can find a win-win situation through integrative negotiations. This has many similarities with corporate strategic cooperation, brand alliances, and even investment negotiations.
How to choose the appropriate negotiation model?
Different business scenarios require different negotiation methods, and the overall trend is: short-term transactions may be suitable for distributive negotiations, but long-term cooperation relies more on integrative negotiations.
Negotiation Mode | Applicable Scenarios | Advantage | Shortcoming |
Distributive Negotiation | Price negotiation, short-term purchase, bidding | Quick results and maximum short-term benefits | It is easy to destroy the relationship and difficult to sustain |
Integrative Negotiation | Long-term cooperation, supply chain management, M&A negotiations | Mutual benefits, win-win situation, enhance trust and create long-term value | It takes time and patience, and you may need to make concessions in the early stages |
When formulating negotiation strategies, companies should weigh the pros and cons and choose an appropriate negotiation model based on their own long-term development goals.
Summary: The essence of business negotiation is to create value
In the business world, negotiation is not just a game of distributing benefits, but also a process of creating value . Distributive negotiation is suitable for competition with limited resources, while integrative negotiation is more suitable for complex business environments and long-term cooperation.
Successful business leaders are often not just winners, but people who can make all stakeholders benefit together. A true negotiation expert is not someone who only fights for the cake, but someone who knows how to make the cake bigger so that everyone can get more.
Which negotiation style does your business favour — and why? In your industry, can integrative negotiation help create more value?