Business Role-play: Negotiation
Business Role-play: Negotiation
Introduction
This negotiation took place between two different teams. The first team, made up of three team members, was tasked with selling a product to the second team for sale in retail stores in the Kingdom of Saudi Arabia. During this negotiation, both teams had a clear goal: to make a good business deal and build a good relationship with members of the other team. This was mainly a preliminary negotiation, which means that both teams were talking primarily about a single product. This product is a protein powder, which team 1—the sales team—claims is highly in demand in Saudi Arabia today.
The primary negotiation concerned not only the sale of this particular product, but also the marketing of the product. The sales team offered a three-year contract to the buying team, which would presumably be an exclusive contract for the product. However, the buying team did not want to engage in such a long contract, as purchasing something like a protein powder is still a relatively risky business move in Saudi Arabia. Instead of the three-year contract, the two teams decide on a one-year contract which can be renewed after each successive year, which is beneficial to both parties. The sales team offered the opportunity to engage with other products as well if the product that they are selling to the buying team is successful over the course of the first year. The sales team also offered exclusive products to the purchasing team, which can be a very powerful negotiation tactic. This discussion will focus on the strategies adopted during the negotiation, the errors and biases that happened or could happen during the negotiation, and the sources of power for all the parties.
There was certainly give and take occurring during this particular negotiation. No one is ever happy when they finish a negotiation—one of the most common business adages is that when a negotiation goes well, neither party walks away from the table completely happy. Both sides were willing to give and take, and the sellers put their best offer on the table immediately in the hopes that they could get the buyers to agree to a three-year contract. When they did not agree, the sellers relented slightly on the contract length, but were sure to offer recurring contractual agreements each year instead.
The parties also very effectively broke the negotiations into parts. First, they agreed that the product was something that the buyers wanted; after that, they worked on the length of the contract and the type of contract that would be implemented. The buyers agreed that they wanted a one-year contract, but they also wanted details about the way the contract would work, which is how the negotiation began to happen in stages. The offer-concession strategy was very effective for these negotiations, because all the parties involved recognized that they wanted to find a way to go ahead with the purchase. The sellers got the buyers on board with the sale very early, so all the buyers had to do was become clear on the logistics of how the sale would go through at the end of the day. This is an extremely effective negotiation strategy for business of all types.
The negotiators did a lot of meeting in the middle with their negotiations. First the contract was a concern, then the sellers felt that 300 boxes per year was too few for their product, so they met the buyers in the middle and agreed to sell 400 boxes per year. This is an excellent example of the power of negotiations, and an excellent example of doing one’s best to meet the other side’s demands without giving up too many of one’s own demands.
Errors and Biases That Happened or Could Happen
Every seller is guilty of using some kind of bias to sell their product—this is a common tactic in sales. Framing and anchoring were two types of biases that were used early in the negotiations, particularly in the opening introduction to the product. The sellers frame the product as something that is highly desirable in Saudi Arabia today, and they also suggest that the product is not widely available—its relative lack of availability is what anchors the negotiation as a whole. Anchoring, or revolving a negotiation around a pre-conceived valuation of the product, is extremely powerful when the seller is able to present his or her valuation as the only valuation.
There are some potential types of biases that could have been present during the negotiation as well. Cognitive dissonance might have been present if the buyers thought there was no need for this product and were then presented with the evidence that there is indeed a need for the product; in addition, confirmation bias can be equally powerful in any negotiations. When someone has a belief about something, they often look for evidence to support that belief, rather than looking at evidence to tear down their beliefs; this confirmation bias can be present in any negotiation, and it is very powerful.
Finally, after the negotiation, both sides might have had hindsight bias. Perhaps if the product does well, the sellers think they should have pressed for a better contract; if the product does poorly, the buyers might think that they should not have taken the deal at all. Regardless, these biases are incredibly powerful, and hindsight bias in particular can be problematic for future business decisions.
Sources of Power for All Parties
The types of power that are present in negotiations vary based on the type of negotiations. However, power plays an inherent role in all negotiations, regardless of type. First, it is important to understand what power is in negotiations: in negotiations, power is the ability to act independently of the other people at the table. In the scenario in this case, both parties had power, although the power was not necessarily equal in all measures. The perception of power plays a large role in negotiations as well, so when someone perceives that someone else has power, that confers power to that individual, whether there was initially bargaining power there or not.
The buyer has the need for the product, but the need is not particularly strong. In this case, the seller has a little power, because there is clearly potential in the product. However, time and options are on the side of the buyer, who clearly has the most potential power in this situation. Looking at the negotiations as they stand, the buyer seems interested in the prospects proposed by the seller, but the contract is not something that they actively sought out.
The seller has power because they have a product that is unique in many ways. The unique nature of the product means that they might have other buyers they can approach, and they can offer a buyer an exclusive contract, which would lock competitors out of the market completely. This is a type of bargaining power that is commonly found in these kinds of product-based negotiations. Finally, both the seller and the buyer must contend with time, of which the buyer presumably has more. In this case, the buyer is likely more powerful than the seller because of the convergence of all these various factors.
Conclusion
In this negotiation, both parties seemed to be very motivated to work towards the end goal of a contract. Although the buyers expressed slight concerns about the nature of the contract, they never questioned whether the product was a good one, and they never questioned whether there would be negative business consequences associated with utilizing and selling this particular product. As such, the negotiation went remarkably smoothly, and both the buyer and the seller seemed to come out of the negotiation with a decent outcome. This is, of course, the goal of a negotiation: to get both sides to agree to the outcome. Overall, the negotiation was an almost ideal circumstance for both the buyer and the seller, both of whom were able to get exactly the results they wanted from the negotiations. This scenario demonstrated how to meet in the middle and adhere to the demands of the other side without giving up one’s own needs entirely.
