NEGOTIATION AND YOUR BUSINESS: DON’T “GIVE AWAY THE STORE”!

What is negotiation?

Negotiation is a process “by which two or more parties attempt to resolve their opposing interests.”¹ It is a conflict resolution tool.

Again, negotiations may be viewed as “discussions aimed at reaching an agreement”²; “the action or process of conferring with another so as to arrive at the settlement of some matter”³

All negotiation situations have basic features common to them all.
Lewiki et al 2009⁴ identifies six (6) characteristics of negotiation situations, namely

a.     There are two or more parties.

  Negotiation is a process between individuals, within groups, and between groups

b.    There is a conflict of needs and desires between the two or more parties.

c.     Parties involved in a negotiation situation negotiate by choice.

d.    Parties expect a give-and-take process. Although there is a lot of strenuous arguments for what they each want, ultimately both sides will adjust their demands to reach a final agreement

e.    People or groups who negotiate, prefer to negotiate rather than to fight openly, permanently break off contact or got to a higher authority to serve as an arbiter.

f.    Successful negotiations deals with the management of tangibles as opposed to intangibles. Tangibles basically refer to the key terms of the contract – for example- whereas intangibles are the underlying emotional and psychological motivations that may directly or indirectly affect the parties during a negotiation.

BEFORE ever you negotiate these factors must be present. If they are not then what you are involved in is not a negotiation where the two parties win – a win-win situation – but a bargaining, a competitive win-lose situation, that would leave one party feeling like Alexander the Great and the other like Darius at the Battle of Guagamela in 331 BC.

When should you not negotiate?

J.C. Levinson et al in their book Guerrilla Negotiating: Unconventional Weapons and Tactics to Get What You Want⁵ list situations you should NOT negotiate.

You should not negotiate when:

1.   You could lose everything.

In such a case, choose other options rather than negotiating

2.  You are already running at capacity. There is no need to negotiate then just raise prices.

3.   The demands are immoral or unethical.

The other party may ask you to do something illegal, immoral or otherwise unethical – say giving kick-backs to government officials or accepting a bribe.  “If you tell lies to get business, if you involve in shady business practices…or in other unethical business practices… in the long run, the effects are damaging.”⁶

4.  You don’t care.

If you have no stakes whatsoever in the outcome and have nothing to gain, then do not negotiate. As an example, a company you buy raw materials from has a by-product X from its plant. It intends to sell X at a really low price, since it is occupying space in the store and would expire after three months. It has already been in the store for a month now. The company asks you if you’d be interested in buying at 1/10^th of the normal costs in the market. You do not need X and you currently have no installed capacity to process or even to store it. You have no means of trading in X within three months. 

5.   You are pressed for time.

A lack of time may pressure you into making mistakes. In fact in most cases when you don’t have time, you’d settle for less than you would under normal circumstances. As an example you might be offered a very good contract with attractive financials but then be told that the offer expires in 48 hours. Corporations use these tactic – exploding offers – in a negotiation to “prevent the other party from continuing to search for a potentially superior offer”⁷

6.   They act in bad faith

If they start acting in bad faith, it is time to stop negotiating. If you can’t trust their negotiating you may not be able to trust their agreement. In this case stick to your guns, do not negotiate. You may even discredit them

7.   When waiting would improve your position.

Let’s say you deal in a good which is slowly becoming the fad. A customer wants a large quantity of the good at a price you deem too low based on your estimated projections. Drag the negotiations. Wait it out. Or maybe you’ll have a new technology soon or another opportunity may present itself. If the odds are good that you will gain ground by waiting, wait.

8.   You are not ready

If you’re not ready just say “no”. There’s a reason athletes prepare for competitions even though their daily life is usually dedicated to the sport of their choice. If you do not prepare you start the negotiations from a weakened position and will ultimately lose out.

References

1.   Roy J. Lewicki, Bruce Barry, David M. Saunders. Negotiation (International Ed.). Mc Graw Hill, 2010.

2.   Hornby A.S. Oxford Advanced Learner’s Dictionary. Oxford University Press, 1995

3.   Editors of Merriam-Webster. Webster’s New Encyclopedic Dictionary. Merriam-Webster Inc., 2002

4.   Roy J. Lewicki, Bruce Barry, David M. Saunders. Negotiation (International Ed.). Mc Graw Hill, 2010.

5.   Levinson J.C., Smith M.S.A., Wilson O.R. Guerrilla Negotiating: Unconventional Weapons and Tactics to Get What You Want. John Wiley & Sons Inc., 1999

6.   Feyitimi A.O., Why Having A “Must-Win” Mentality May Actually Be Damaging To Your Business. www.feyitalksbiz.blogspot.com, 2012

7.   Roy J. Lewicki, Bruce Barry, David M. Saunders. Negotiation (International Ed.). Mc Graw Hill, 2010.

How can you ensure successful negotiations? What are some negotiating tactics you should be aware of and how can you successfully overcome them? What should you do if the other party starts ‘fighting dirty’? I will consider these questions in the next part of the Negotiation series, a paper entitled: “Negotiating: Untangling the Chinese Puzzle.”