Definition: By the term ‘negotiation’ we mean an open strategic dialogue that is supposed to resolve the issue between the parties concerned, by reaching an agreement.
The two parties with different needs and goals having some common interest and others divergent intend to arrive at an agreement. So they discuss the matter, in order to find out a solution which is acceptable to and beneficial for everyone.
When does Negotiation take place?
When in any business situation, if there are multiple possible outcomes, wherein two or more parties are having a shared interest. Although the parties haven’t decided so far what will be the possible result. Further, there can be three possible outcomes:
- Win-win: Where both the parties win
- Win-lose: Where one party wins and the other one loses.
- Inefficient but equitable: Where all the items are shared equally.
With negotiation, the common interest of the parties motivates them to settle the specific differences.
Process of Negotiation
- Pre-negotiation stage: In this step planning plays an important role, which is supposed to set out the broad framework of undertaking negotiation. It involves:
- Prioritizing and ranking goals.
- Ascertain the priorities of another party.
- Identify real motivation
- Plan factual inquiries
- Quantification of Objectives
- Conceptualization: In this step, the formulation of the probable foundation of the agreement is done. It depends upon the competitive analysis of the targets which tends to be explored at the time of negotiation.
- Establishing the norms: After the conceptualization of the issues is done, the two parties need to set up the norms in an evaluative manner.
- Discussion: In this stage, the negotiators need to know about the tangible and intangible elements. Further, the discussion should follow a patient approach and so it should be undertaken in a decent manner and avoid hurting the sentiments of the other party. Any matter which is irrelevant to the discussion should be avoided. Here, body dynamics play an important role.
- Agreement: It is the formal closure of the negotiation process, in which the agreed terms and conditions are drafted. Further, it has to be carried out as per the legally accepted method. The agreement contains the agreed matters in legitimate, open and comprehensive language. It must specify the modus operandi, in case of any dispute with respect to any terms, in future.
In this process, each party attempts to convince and persuade the another, to agree and accept their points, but also make some adjustments. It tends to avoid the argument and settle the dispute with a compromise.
Types of Negotiation
The different types of negotiation are discussed as under:
- Distributive Negotiation: Otherwise called as competitive or zero-sum negotiation. In this type of negotiation, one side wins while the other loses. Further, the resources are limited which are to be divided, and so the more resources one party gets, the fewer resources are left for the other party.
Therefore, one person’s interest contradicts others. And so, the primary focus is to maximize one’s own interest, for which strategies such as manipulating, forcing and withholding information is used.
- Integrative Negotiation: Otherwise called as collaborative or creating value negotiation. In integrative negotiation both the side wins, as the number of resources is variable, which are to be divided between them. So, the effort is made to maximize the joint outcome.
In this type of negotiation, strategies like cooperation, sharing information, mutual problem solving are used.
- Management Negotiations: These are day to day negotiations, that take place within the organization. They are associated with the internal problems of the organization, concerning the work relationships amidst the group of employees.
- Commercial Negotiation: These are the negotiations with external parties, wherein the driving force is the financial gain. Such negotiations rely on give-and-take relationships, which may result in a contract and so the organization has to forego one resource with the aim of getting another.
- Legal Negotiations: As the name suggests, these negotiations are legally binding in nature. Disputes arising due to contradictory national laws form the base for the issue.
- Multiparty negotiation: Where there are more than two parties in a negotiation, such a situation is called as multiparty negotiation. The coalition can be formed among the parties which helps the parties to gain strength and push or block the other parties.
By and large, negotiation is a process in which the parties in a dispute seek to reach an agreement by identifying a beneficial outcome or solution.