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Do You Need to Develop a Negotiation Strategy for Your Company?

ByCalum Coburn,
business.com writer
|
Aug 22, 2019
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> Business Basics
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Here are the factors you need to consider to create your business's negotiation strategy.

  • A company negotiation strategy can define your approach to fundamental issues such as your target market and pricing. Your strategy can create a clear picture of your company's goals.
  • Developing a negotiation strategy based on your company's goals can create unity and empower your team to work together.
  • Your strategies and values can determine the primary negotiation styles you train your employees to use.

Negotiating with no strategy is like driving cross-country without a map. If you don't have clear goals, action plans or limitations, it can be difficult to measure your success. In an article for Forbes, Keld Jensen pointed out the dangers of negotiating with no strategy. According to Jensen, you can lose up to 42% of a deal's potential value.

Without a shared strategy, departments can develop varying objectives. For example, in a clothing company, the designers will likely want to use the best-quality materials, while the finance department wants to keep costs low. A clear strategy can enable departments to work better together. With the best negotiation training, you can learn how to develop your company's strategy.

Defining your company strategy

Consider defining your company strategy before your negotiation strategy. A company strategy can be defined as the approach you plan to take to achieve your long-term goals. Breaking down your strategy into smaller action points is the essence of a strategic plan.

Your company mission, vision and core values are the building blocks of your strategy. These aspects can be used to define goals. With clear aims, your departments can think of strategies to achieve your company's overall goals. Here are some factors to consider when framing your company strategy:

Setting your prices

How you set your prices is a key aspect of your company strategy. Two of the main pricing-strategy drivers are revenue and margins. Your strategy should focus on margin or revenue, but not both. 

If you focus on revenue, you may set lower prices to move a greater volume of products. If your strategy is geared toward better margins, then you may focus on higher-quality products and premium services.  

Walmart is a perfect example of a company that prioritizes revenue generation in its price strategy. As one of the world's largest retailers, Walmart negotiates for low prices from suppliers by buying in bulk. It can extend the discounted rates to its customers by keeping its margins low. This way, Walmart can beat its competitors on price and generate more sales.

Alternatively, companies like Apple and Ferrari develop premium products and focus on profiting from higher margins. While Apple may not sell as many mobile phones as Samsung in a year, the total profits it generates maintain its competitiveness.

Selecting your target market

Your target market is the specific group of people who are most likely to buy your products. Defining your target market can be a major component of your company strategy. Target market affects how and where you market your products. It also impacts the type of personnel you hire. Target markets can be selected based on criteria such as age, gender, profession and hobbies.

For example, a company like Disney specifically targets children. The bulk of Disney's products and marketing campaigns are designed to appeal to children and their parents. 

Other large companies can develop products that appeal to varying target groups. Cosmetic companies are known to develop different product lines for men and women. By developing gender-specific hair products, perfumes and lotions, cosmetic companies can serve two different target groups in the same market segment.

Developing your negotiation strategy

Most companies fail to define their negotiation strategy. The few companies that do define a negotiation strategy do so only for their sales and procurement departments. But if you define your companywide negotiation strategy, your departments can develop synergy, working together to save time and resources. Also, strategic planning teaches you ways to enhance customer relations.

The following factors can be useful when developing your negotiation strategies:

Company financial structure

Your company's financial structure can guide your negotiation strategy. Your stakeholders' needs affect a lot of your decisions. Financial training can teach you smart ways to manage your debt, equity and investors. Your planned revenue can guide you in defining your negotiation priorities.

SWOT analysis

SWOT stands for "strengths, weaknesses, opportunities and threats." It can be used as a strategic analysis of your company's abilities and limitations. Your opportunities and threats include external factors that you may not be able to control.

However, the SWOT analysis can show you how to build on your strengths and weaknesses. It can also guide your hiring and training decisions as you build your team.

Department objectives

Each department of your company typically has its own specific objectives. These objectives frame the department's key performance indicators (KPIs). Your company's incentive and reward system most certainly affects the department objectives.

You can get the best results by enabling departments to work together. This is possible when you align department objectives with company goals.

Flexibility

You should consider each department's structure in your company's strategy. Flexibility can give your departments room to improvise and adapt strategies that fulfill your main strategy.

Harvard Business School professor Michael Wheeler authored The Art of Negotiation in 2013. In the book, he explained that it is important to know how to improvise when you negotiate. He added that, to be effective, it's wise to be ready to adapt in a wide variety of contexts.

Negotiation students learn to think on their feet. In business, hesitation can be costly. The best training can teach you to study various problems and act with the most logical response. A departmental strategy informs your negotiators' decision-making, which is highly desirable under pressure.

Negotiation styles

There are five main negotiation styles. Skilled tutors can teach you how to flex each style according to your strategy. Here is an outline of these styles, applied to the sales department.

  1. Collaborate (win-win): The aim of using this style is to create value and a longer-term relationship for you and your customer.
  2. Compromise (I lose/win some, you lose/win some): This style is geared toward the two parties meeting somewhere in the middle. Neither you nor your customer loses or gains too much value in the deal.
  3. Compete (I win, you lose): With this style, you seek to gain value, leaving your customers to fend for themselves.
  4. Accommodate (I lose, you win): With this style, you are ready to lose value in the deal to preserve your relationship with your customer and win their approval.
  5. Avoid (I lose, you lose): In this style, you seek to end the talks or pause negotiations.

Different departments may thrive by choosing the right negotiation style at the right time. Your customer relations department may use accommodating styles when dealing with unhappy customers. Through practice, your teams can learn to leverage these five styles. However, collaboration may be the best style for your sales department.

Roundup

Developing negotiation strategies for your departments should have lasting benefits for your company. Your departments can develop better negotiation skills that support your strategies and build confidence.

Running a company without clear strategies is a challenge. The lack of direction can limit the creativity and effective decision-making potential of your departments. Negotiation training can map out the options in both capability and strategy deployment for your staff. With a clear understanding of your company's goals, your staff can be more focused and innovative.

Calum Coburn
Calum Coburn
See Calum Coburn's Profile
Calum Coburn, Senior Vice President for The Negotiation Experts, enjoys building negotiation capability in his clients’ negotiation teams. Calum’s negotiation experience has been honed in international deals worth hundreds of millions. He gets his inspiration by finding sustainable solutions that leave everyone involved with a sense of ownership. Graduates of The Negotiation Experts’ courses note Calum’s negotiating acumen and his dedication to translating negotiation best practice into their negotiation capability.
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