Negotiation

Negotiation is a planned and prudent discussion technique that leads to a permanent solution to a problem or conflict. The solution should be acceptable to all members. It aims to achieve maximum benefit for all parties but, at the same time, resolves the issue strategically.

The process solves disputes despite everyone having different opinions and objectives. There is some compromise involved even though the aim is justified. Negotiation occurs during buying or selling, debt reduction, maintaining peace, or settling legal proceedings. There should be a proper understanding of the problem and mutual trust among parties to achieve the best result.

• The negotiation process is a discussion technique where all parties settle conflicts and problems peacefully.
• All members should know the issue well and trust each other to achieve maximum benefit.
• Members achieve their objective through some compromise but, at the same time, try to justify one’s own needs and points of view.
• It is usually done during purchase and sale, maintaining peace, settling legal issues, asking for benefits, settling debt, etc., at a business, personal or political level.

Negotiation skills involve using a plan of action wherein the parties consider their points while solving a conflict peacefully. The process goes on till an agreeable resolution is reached, where, with a certain level of compromise, all parties accept the solution.

The process involves each party presenting their argument and trying to defend their positions simultaneously while hearing the points raised by other parties. As a result, a deal may take a few hours, months, or years to settle, depending on the level of the conflict.

Good negotiation techniques help reduce debt, pay a reasonable purchase price, make a profitable sale, get better contract terms, etc. Even while accepting a job offer, it is necessary to negotiate so that the candidate receives compensation matching the skill and experience level, ensuring a better future growth potential.

Some principles followed in the negotiation process are given below:

1. Good relations – Members must have good relations among themselves to make the process smooth and exciting.
2. Genuine interest – Parties should have a genuine interest in settling the dispute.
3. Quest for a fair deal- There should be a pursuit to get a fair value in the process that benefits all parties.
4. Commitment – Members should listen to each other's views and solve the problem.
5. Best Alternative To a Negotiated Agreement (BATNA) – Each member must always have an alternate way to deal with the problem. If the solution is unsatisfactory, they should be confident enough to back out and solve it another way.
6. Healthy communication – There must be healthy and transparent communication among members so that each one understands the other’s point of view.

Some strategies are followed while executing a negotiation process.

1. A clear objective – Each party must know why they want to negotiate a deal and what conditions are uncomfortable.
2. Understanding one’s worth – It is essential to understand one's value in the field, which will give confidence and take a stance while making a decision.
3. Understanding the viewpoint of other members – Negotiation always involves listening to others’ arguments and pointing out one’s view.
4. Emotional control – Parties should have control over their emotions so that in case of any conflict, they can stick to what is morally and legally correct without getting carried away by sentiments.

The art of negotiation involves some stages, as given below:

1. Preparation – It is crucial to prepare for the process by collecting relevant information about possible situations, queries, and arguments. There should be proper clarity and understanding.
2. Discussion – Discussion is the next step, where members present their views and problem and listen to others.
3. Clarifying the goals – There should be clarity regarding each member's purpose or solution.
4. Negotiate for a profitable solution – Then, parties negotiate by pointing out the pros and cons, future benefits, opportunities, etc.
5. Agreement of all parties – Thus, all members must agree to the final solution for mutual benefit with some compromise from all.
6. Implementation – The final step is the implementation. All members must agree to follow the decision taken unanimously.

Given below are the various types of negotiation techniques:

1. Integration – This is the type of technique that is individual interest and merit-based. One party’s problem is compensated with another party’s gain. Thus, methods and ideas are reorganized and reconstructed to benefit everyone.
2. Text-based agreements – Contracts and agreements are drafted, which all parties will accept and sign. For example, there might be an existing draft, and parties may reframe them or take a stance closely resembling the ideas in the current draft.
3. Distribution-based – A fixed value or benefit is distributed among all parties in this process. Thus, a party will pick up the best benefit level and slowly give away some part to reach a standard agreement.
4. Bad faith – This negotiation does not lead to a conclusion because the party may appear to negotiate but has no intention to solve the problem.

Let us look at some examples to understand the concept.

Example #1

Mark is planning to buy land from Land Expert Ltd. He has checked the latest market price and clarified with his friends and relatives who recently bought houses nearby.

Thus, he wants to get the best deal for his purchase. Land Expert Ltd has a group of professional negotiators well-known for implementing the art of negotiation during any sale.

Mark has well prepared himself regarding the area, land features, benefits of the place, drawbacks, payment methods, and expectations from the purchase.

During the discussion, he refers to his set of questions, clarifies all doubts, and is finally satisfied that the new purchase will meet all his requirements. But the real estate dealers are quoting a higher price, which is 15% extra, citing that the local government is under discussion to build a highway near that land. Since the fact still needs to be clarified, Mark wants to avoid paying the extra amount.

Thus, after many discussions, it is decided that Mark will pay the extra amount but not as a price for this land. Instead, it will be a percentage of the down payment for additional land. The other land will be booked in his name, and when in the future, if the price rises, then he will sell this different land, and the new buyer will pay Mark 15% of the new land price and the rest to Land Expert Ltd.

From the above case, good negotiation skills can result in mutual benefit. For example, mark paid extra money as demanded by Land Experts Ltd, but he got another land in his name, which he can sell in the future to earn a profit. Similarly, Land experts Ltd got 20% extra upfront which they can immediately invest and, at the same time, gain from the future sale of that land.

Example #2

Amazon finally closed the purchase deal of Metro-Goldwyn-Mayer (MGM). Critics say the negotiation has resulted in a $4 billion extra payment, but it is worth it. After the purchase, Amazon’s vault will be double that of Netflix. Many other companies, including Apple, have tried to buy MGM but Amazon succeeded. Though it has compromised with the extra amount, Amazon now has full access to MGM’s entire entertainment library.

Example #3

Starbucks Corporation, the American MNC running a coffeehouse chain globally, has decided to start negotiating contracts in its various US stores, which have agreed to unionize. However, the worker's unions are still determining the proposal since Starbucks has always been against the unionization of its workers.

There are some advantages and disadvantages to the process.

Advantages

1. Speedy resolution of conflicts.
2. Publicity of problems can be avoided.
3. The process is under the control of the members.
4. Due to direct participation, there is more transparency and fairness.
5. Better collaboration and good relations, even though the members may still need to conclude a fair deal.
6. There is always room for further negotiations due to better communication.

Disadvantages

1. No members can be forced to continue negotiation if a final settlement is not reached.
2. It does not have any legal binding.
3. Sometimes, essential or relevant parties may be excluded, affecting the process.
4. All parties may not get equal power or authority.
5. There may need to be trust and transparent communication among members.
6. Parties may try to stick to their requirements and opinions, which delays the process.

Negotiation refers to the peaceful settlement of conflicts or disputes through talks or entering into mutually agreed-upon contracts. In contrast, mediation uses a third party to settle disputes.

Now let us look at some differences between negotiation and mediation.

After considering all parties' points, negotiation solves problems through peaceful talks and mutual agreement. However, the members elect arbitrators to oversee the negotiation and solve issues.

Now let us look at some differences between negotiation and arbitration.

This article has been a guide to Negotiation & its meaning. We explain its principles, types, examples, advantages, and differences with mediation & arbitration. You may also find some useful articles here -

• Distributive Bargaining
• Disintermediation
• Counterparty