jim.shamlin.com

The Art of the Master Competitor

Competitive negotiation is the strategy that most people association with negotiation and deal-making. It tends to be prevalent in negotiation with external parties (vendors, customers, regulators, and rivals) - but is highly uncommon (and often counterproductive) in dealing with internal parties (coworkers and colleagues).

In general, the competitive strategy is used when the importance of the outcome is high, but the importance of the relationship is low. This can lead to a very hostile and combative situation in which each party attempts to get what it wants and minimize what it has to concede to the other in return.

The Impact of Competition on Relationships

By its nature, a competitive approach may be seen as damaging to relationships - though the authors assert that this is not necessarily true. If you are tough, but fair you may find that you win the respect of the opposition, and that they are open to future negotiation.

However, if you do anything underhanded or unethical, engender sentiments of resentment, or make the process (or the results) entirely unfavorable too your opponent, this may make it difficult for you to re-enter negotiations in the future.

Preparation

Using a buyer-seller negotiation as a model, the authors suggest for key points to consider when entering a competitive negotiation:

  1. What you consider to be an acceptable deal - this is your target point.
  2. Where you will start - usually requires asking more than you expect to get (or offering less than you are willing to pay). This is the opening offer.
  3. The absolute limit of what you will accept or pay - this is your walk away point
  4. What you will do if you cannot strike a deal - this is the Alternative

The first three points define the bargaining range - and it is different for both parties. So long as there is some overlap in the bargaining range, there is room for negotiation - however, the bargaining range can be difficult to ascertain: neither side wants to disclose its walk-away point to the other, and claims of a "best" offer or price are often exaggerated to provide a cushion for further bargaining.

Some methods for determine the other party's range:

Especially in negotiations over prices, it is possible for a person to do some research and determine an objectively fair price, to give them some idea of where the absolute limits lie.

The Power of Alternatives

There may be alternatives on both sides - what the party will do if an agreement cannot be reached. In terms of negotiating a sales price: a merchant can sell to someone else, and a buyer can purchase from someone else. The absence of alternatives puts a party in a position where it must capitulate; whereas the presence of alternatives gives the party the power to walk away.

This is not always objective: there may be some difference in the assessment of alternatives. While price is often the foremost concern, there are also issues of quality (are you paying less for lower quality merchandise), sufficiency (is the good available in the same quantity from other suppliers), and logistics (is it available in the time and location where you need it).

Where Competition is Effective

The appropriate circumstances for taking a competitive strategy are:

  1. The goals of both parties are short term - they intend to do the deal and move on
  2. Neither party has an interest in establishing an ongoing relationship with the other, and are focused entirely on the outcomes
  3. Both parties assume that their objectives are incompatible, and that one party only gains ground by making the other party lose ground.
  4. Your assumption is that the other party is going to take a competitive stance (though there may be instances when you wish to shift them out of that position)
  5. The negotiator is merely an agent, whose intention is to get the best deal possible, and your tactics will not impact the party they represent

Where Competition is NOT Effective

In some situations, taking a competitive stance can be ineffective

  1. Where resources and time expended in competing are not worth the benefits that will be gained by "winning" the negotiation
  2. Competition can be detrimental to establishing an ongoing relationship (if you identify a sale as a competitive negotiation rather than considering that you may sell to the same buyer multiple times)
  3. Taking a competitive stance when you are in a position of weakness can be counterproductive
  4. Getting into a competitive situation when you aren't very experienced, or are bringing inexperienced players to the table

The Misuse of Competitive Negotiation

Keep in mind that competition is not the only form of negotiation, and there are situations in which other tactics are more appropriate. Unfortunately, many inexperienced or untrained negotiators feel that competition is the only way to negotiate, and "hardball" tactics are attractive to certain personality types who find the process exciting (and let their desire to "fight" take precedence over achieving a desired outcome).

The authors provide a nifty analogy between competitive negotiation and racquetball - it's a very aggressive game, but the experienced players seem to know how to move and respect one another's space so they don't collide. It's the eager and aggressive neophyte who spends most of his time crashing into other people ... and in time, finds himself without a partner.


Contents