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NEGOTIATION
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CHAPTER 7
aspirations and circumstances. Preparation should provide information about
your counterpart, which you can validate during the negotiation.
Keep in mind that ‘fastball’ negotiations rarely work. Excessive pressure on
one or other of the parties will lead to an unsatisfactory result. It is therefore
wise to allow enough time for all eventualities and to expect more protracted
negotiations.
The agenda in preparation should be objectives, information, strategy, and roles.
7.4.1 OBJECTIVES
Prior to negotiations, all potential issues for discussion during the negotiation
should be itemised. These are called variables and are particularly important
during the preparation phase of the negotiation process.
For each of these issues (or package of issues) the parameters should be
determined, i.e., the highest or most favoured position; and the lowest or limit
beyond which there will be no settlement. These must be fixed for each variable:
• What the organisation would
LIKE
to achieve (L), i.e., the most favoured
position.
• What the company
INTENDS
to achieve (I), i.e., the realistic settlement point.
• What
MUST
be achieved (M), i.e., no concession beyond this point.
The most favoured position and lowest limit of the counterpart should also
be assessed. The overlap between the organisation’s most favoured position
and lowest limit, and those of the counterpart is the Bargaining Arena (BA). A
settlement is only possible if a BA exists.
Consider the following scenario. Company A has an ongoing requirement for
large quantities of packaging tape and has established that the market price
varies between R2.72 and R5.91, excluding VAT, per roll, depending on supplier,
brand and quantity ordered. Quality is not a major factor as the company’s
positioning is that of the cheapest in the marketplace. Supplier B is aware of
all of the above and consequently goes into an unprepared negotiation with A,
hoping to win the order. To appear competitive, B offers an opening gambit of
R3.01 excluding VAT.
Good negotiators will automatically halve any opening offer made, without
regard for the consequences. Yet B is surprised whenAmakes a counter-offer of
R1.50. The result is panic and eventually B is negotiated down to a unit price of
R2.27, far below the normally accepted lowest market price. The consequence
is that A is delighted while B is left with a commitment to supply large quantities
of tape at an almost zero margin. Furthermore, news of the deal is leaked into
the market by A and every supplier feels pressure over the coming months.