Updated date:

Business Negotiations

I am a student of chartered accountancy, and have good knowledge about business and it's management.


Negotiation is a process in which there are at least two parties and each party needs the involvement of others to reach the desired outcome.

Parties start negotiation with a different set of objectives, and each party considers that the other party would be willing to modify its initial position and reach a final conclusion.

Stages of Negotiation

There are five main stages of the negotiation process:

  • Preparation and Planning:

    This includes understanding the nature of conflict and the perception of parties towards the conflict. The possible results of the negotiation process are determined and analyzed, from the most favorable to minimum accepted. The weakness and strengths of other parties are analyzed.

  • Definition of Ground Rules:

    This includes agreements on the procedures of negotiation, including the names of participants, time, and venue of the negotiation process.

  • Clarification and Justification:

    Once both the parties have presented their initial viewpoint, they offer their explanations, clarifications, and justifications. This exchange of information brings into focus the importance of the issue to both the parties.

  • Bargaining and Problem Solving:

    Parties make concessions and yield from their initial positions to reach consensus and mutually accepted agreement.

  • Closure and Agreement:

    The consensus reached between the parties is stated in a formal agreement and includes procedures for its implementation and monitoring.

Approaches to Negotiation

There are two approaches typically adopted in the negotiation process,

Distributive Bargaining Approach:

In this approach, each party strives to obtain the maximum advantage for its self-interest, the motivation for each party is to obtain a win-lose position in which the gain of one party is at the expense of others.

The interest of each of the parties are opposite in this approach, the duration of the relationship between the parties is also usually of short term nature.

Integrative Bargaining Approach:

In this approach, both the parties attempt to expand the scope of the benefits to be able to maximize them to their mutual advantage, the motivation is that both the parties should emerge as winners in a win-win situation.

In this approach there is a convergence of interests of both the parties, the duration of the relationship between the parties is also of long term nature.

Skills of an Effective Negotiator

Different communication and interpersonal skills are required to be used together in the negotiation process in order to reach the desired results, the following are some of them:

  • Problem Analysis:

    Negotiators must have the skill to analyze the problem and to determine the interest of each stakeholder in the negotiation, they must have the ability to understand the problem.

  • Active Listening:

    Effective negotiators are able to listen actively to other parties during the debate, reading their body language, as well as, listening to verbal communications. It helps negotiators in determining the areas of compromise during the meeting.

  • Problem Solving:

    Skilled negotiators has the ability to visualize solutions to problems, rather than just focusing on ultimate goals without understanding how to achieve it.

  • Interpersonal Skills:

    Effective negotiators are able to make good working relations with those involved in the negotiation process. This requires patience and the ability to persuade others.

  • Decision-Making Skills:

    Good negotiators are typically leaders, with the ability to act decisively during the negotiation process and actually make a decision. This approach can lead to quicker and more effective agreement of compromise to end the stalemate, etc.

Negotiation Techniques

In addition to the skills mentioned above, different negotiation techniques are also adopted by the negotiators, these techniques may carry high risk as well as low risks. Some examples are as follows:

High-Risk Negotiation Techniques:

  • Take it or Leave it (Boulwareism):

    This is a very aggressive technique, which might produce anger and frustration among the other parties of negotiation, furthermore, an unwillingness to compromise may mean that no deal is reached.

  • Losing the Temper:

    This is a sign of weakness and can be interpreted as unprofessional and potentially manipulative.

  • Waiting Until the Final Moment:

    This technique involves using stalling tactics knowing the deadline is near, at the last moment a reasonable but favorable offer is made, leaving the other party little choice but to accept.

Low-Risk Negotiation Techniques:

  • Silence:

    This can be effective and shift the power to one being silent, but the negotiator must be careful not to provoke anger or frustrate the other party.

  • Address the Easy Points First:

    By using this technique more trust and momentum towards more challenging issues can be built.

  • Oh Poor Me:

    This approach could lead to sympathy although it may as easily bring out the aggressive nature of the other party.


Business negotiations play a very important role in achieving the deal which the company wants, it also plays a very important role in cost-cutting and making better relationships with other entities.

The goal of negotiation must be to form a win-win situation, through which every participant can take advantage.

Related Articles