Even though there are many different types and categories of negotiation, there is no such thing as a “free style” negotiation. For each type of negotiation – real estate, corporate merger, treaty and trade agreements, employment or salary, commodity purchase, etc. – certain laws, regulations, and customs apply. Also, cultural differences are increasingly coming into play in today’s world-wide economy. Failing to conform to these rules and customs can instantly torpedo a negotiation, sometimes fatally. When preparing for a negotiation, make sure you are clear on the rules and regulations that could affect the process, and be careful to observe any cultural mores as well.
For instance:
A buyer for a major US pharmaceutical company is negotiating with a new supplier for the purchase of several hundred liters of a highly refined chemical to be used in an important new drug product. So far, the negotiation is going very well. The supplier is located in an Asian country, but they seem to be right on top of everything. The supplier has agreed to meet the full order at a very reasonable price according to an expedited shipping schedule. The buyer for the pharmaceutical company is ecstatic. The negotiation couldn’t be going any better!
However, if the buyer doesn’t understand the rules in play here, she may quickly be very disappointed. The biggest problem in this case is one of cultural differences. In this country, it is not acceptable to tell a stranger – especially a foreigner -- “I’m sorry, but I can’t do that for you” when discussing business. It is considered bad form and could also imply an embarrassing admission of weakness or inferiority on the part of the Asian company. For that reason, the sales rep for the Asian company will agree to anything and promise anything in order to appear accommodating. This isn’t considered to be lying; it is considered to be a form of honoring and respecting your customer.
However, the truth is their factory would not be able to produce such a large quantity of this chemical in such a short amount of time without closing down and completely refitting their production process. They can’t afford to do that, so they will promise something they can’t deliver, produce as much as they can and ship it, apologize for the shortage and get the rest out as soon as possible. The delay could delay the US company’s entry into the market by a couple of months and cost them about $30 million in penalties and lost revenue. Ouch! There is a way to avoid getting blindsided like this, but it involves knowing how to ask just the right questions at the right time in the right way, and it usually requires taking extra time to build a relationship that is not strictly focused on business, before you will get a straight answer to a business question.
To make matters worse, there is an issue with shipping. This particular Asian country places an extremely onerous export tariff on chemical products. The sales rep conveniently did not mention this, only stating that in order to be able to guarantee such a favorable price, the US customer would have to take possession of the shipment at the factory and make their own arrangements to ship it home. In her estimate, the buyer factored in a fairly standard shipping allowance to cover getting the product home, but she is totally unaware that the export tariff will add almost 20% to their cost in the deal.
The above example, though it may seem a little extreme, is very familiar with anyone who must negotiate for business opportunities with partners in other – especially non-Western – countries. However, similar situations – though less extreme – can occur in more typical negotiation settings everyday, even in the US. Never make the killer assumption that you understand all the rules, regulations and customs that may come into play during your negotiation unless you have carefully thought through every possible issue and asked enough questions to be sure you really know the rules.
Here is a basic list of some of the issues that might affect your negotiation when it comes to knowing the rules:
Of course, the list could be much longer, but you get the idea. People who thoroughly research and understand ALL the rules will be able to negotiate much more successfully than those who don’t. Don’t let a “minor” oversight in this area turn into a major disaster.
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December Negotiation Quick Tip of the Month: Tactics Shopping List
In a typical negotiation, one or both sides will raise complaints, objections, excuses and concerns as the conversation progresses. Each of these problems is likely being used as a tactic, i.e., a device to delay or manipulate the process in order to gain an advantage. To make matters worse, tactics tend to be raised throughout the course of the conversation in order to keep the other side off balance and wear down their resistance. The best way to counter this is to make a “tactics shopping list” at the first sign of trouble. Get out a sheet of paper and write down the other side’s first concern, then ask them to tell you all of their other concerns and problems as well. Keep probing by asking, “Okay, is this your only concern? If we address this, do we have a deal? No, well, then what other concerns do you have?” Keep probing until the other side finally agrees that all their concerns are on your list. Now, you can work to resolve them all at once and speed the negotiation to a successful conclusion.
