This article is written by Chandana Pradeep, from the School of Law, University of Petroleum and Energy Studies, Dehradun. This article analyzes the pros/cons and the difference between collaborative and competitive negotiation.
Table of Contents
Negotiation is back-and-forth communication designed to reach an agreement when you and the other side have some interests that are shared and others that are opposed. Examples of daily life negotiations include when negotiating for a salary, bargaining at a shop, etc. There is a maxim- ‘Consilia Omnia verbis Prius experiri, quam armis sapientem decet’, which means that an intelligent man will prefer negotiation before using arms.
Negotiations have become part of daily life, so much that they cannot be avoided and if not negotiated, then the matters tend to evolve into big issues. There are four outcomes as to how negotiation can end- win-win, win-lose, lose-win and lose-lose. There are many pros and cons of negotiation which are as follows:
The parties have absolute freedom to choose everything about the negotiation process to ensure that the objective of the negotiation is achieved.
The process of negotiation is not forced upon but it is voluntary to take the process to achieve a certain objective that is there. There is no interference by a third party in this mode.
The negotiators follow a specific strategy to achieve their objectives from the negotiation.
Though this process aims at a mutual benefit to both parties, there will always be one party overpowering the other in this process.
If a fruitful decision has not taken place during negotiation, then one party might threaten to walk out of the discussion.
Relationships are not given importance
In some cases, where the discussion has not reached a place that is beneficial for one party, they might use other means such as threats and this causes the relationship between the two parties to falter.
Stages of negotiation
It is the first step of negotiation, wherein, the preparation has to take place and the basic requirements have to be decided such as the venue of the meeting and the parties who will be attending it. Preparation is an important step as it helps in solving conflict and helps the parties involved to understand their position.
It is the stage, wherein, the parties present their views according to their understanding. It would be quite helpful if notes are taken down while the opposite party is presenting their views.
It is an important step, as, without clarification, more misunderstandings and conflicts will take place. Hence, it is very important to clarify all the goals and expectations from the very beginning for effective negotiation.
A benefit to all parties
It should be a win-win situation for the parties that have entered into the negotiation as it is a positive mode and gives benefit to the parties which enter into it. It is always advised to be prepared with alternate remedies in the case a disagreement occurs or the parties are not ready to conclude.
The next step for an agreement to be reached is to make sure both sides are clear as to what they have agreed on. The parties must approach the situation at hand with an open mind so that all possible points of view can be taken into consideration and a suitable approach can be decided upon.
Failure to agree
If an agreement can not be reached upon, then the parties have an option of initiating the process of negotiation again from the beginning. This will mean that the parties will approach the problem at hand with different ideas to achieve a suitable outcome.
In competitive negotiation, the approach is to treat the process as a competition that is to be won or lost. Competitive negotiation may be also known as distributive, positional, or hard-bargaining negotiation. The negotiator always tries to negotiate so that he benefits more than the other party and creates an environment of ‘I win-you lose’.
This type of negotiation is the opposite of collaborative negotiation, as herein, there is no mutual benefit but the only concern is of the party themselves and how they can benefit individually. Competitive negotiation has no scope of flexibility as the parties try to overpower each other with remedy or idea that they have planned to execute in the negotiation process. Hence, another name given to this type of negotiation is ‘positional bargaining’.
Some negotiators do not see the benefit of collaborative negotiation, so the method that they approach is the one where they tend to make the other party believe that what they are offering is exactly what the other party needs. They can do so by intimidating or misleading the negotiator.
The ones who follow the strategy of competitive negotiation start with negotiating at a higher price and continue from there, hide information and accept agreements that were in their favour only. Other methods that they often use are threatening the other negotiator that they will walk away.
The parties try to understand the Best Alternative To a Negotiated Agreement (BATNA), and from that, they start to analyse the reservation value and Zone of Possible Agreement (ZPA) is decided upon, though all the surplus will be shared between the parties.
Negotiation of Lehman brothers
In this negotiation, the co-CEO used the strategy of competitive negotiation against his brothers and threatened them that if they did not accept this negotiation, then he would wage a civil war against the company. The brothers wanted to avoid this situation and surrendered in front of the co-CEO’s demands. They transferred the ownership of the company. This event led to American Express buying the company.
There is a concept called ‘information asymmetry’ which exists, where one party will not like to disclose certain information in the negotiation, but the other party will try their level best to extract that information as they can use it to their advantage but they use this as a hidden agenda and does not disclose this to the other party.
During the negotiation that took place during Brexit, the European Union adopted the approach of a competitive approach as it knew it had more power and was more dominant than the United Kingdom and made the countries sign agreements by following this mode of negotiation. It was just a strict approach and the only aim of it was for the European Union to avail benefit at any cost and there was no scope of compromise in this situation, they knew that they had to stick to this mode strictly to achieve their objective.
Collaborative negotiation is also called constructive, principled or interest-based negotiation. It is an approach that treats the ‘relationship’ as an important and valuable element of what’s at stake while seeking an equitable and fair agreement as opposed to always conceding to sustain the relationship.
Both the parties have an approach which will benefit both the parties and not favour just one side, this is achieved by having more value to the deal so that there will be greater profits to share between the parties. At the end of every collaborative negotiation, their outcome will be a win-win situation as no one party is trying to take a bigger benefit of the negotiation but all through the process, the goal will only be of mutual benefit.
The parties involved should work towards solving the problem at hand jointly and by using various methods such as brainstorming so that the outcome will benefit both. The relationship of parties is an important element in collaborative negotiation to decide the final value which the parties receive.
Interest is an important term in collaborative negotiations, Fisher and Uri described Interest as ‘interests define the problem’. The basic problem in a negotiation lies not in conflicting positions, but in the conflict between each side’s needs, desires, concerns and fears. These interests are the factors that move people to negotiate and decide on the factors that apply to them in the process.
This example implies a situation where interests are given more priority. Both the countries had an ongoing dispute regarding the ‘Egyptian Sinai Peninsula’ and they never concluded the negotiations. They finally reached a conclusion when they focused on the interest of what both these parties wanted to achieve out of the negotiation and accepted terms and conditions which would benefit both these parties equally.
Thinking about new ways on how to solve the problem at hand is a great method to go through for collaborative negotiation as more methods to achieve negotiation, the more benefits each party can get.
Competitive v. collaborative negotiation
Negotiation in a competitive sense is beneficial for those parties who do not need to maintain their relationships in the future with the opposite party and thereby look only at their benefit and create a win-lose situation, thereby creating an immediate gain for just one party.
Hence, this type of negotiation is only good in cases where it is a one time deal such as a settlement, where the party can use this approach to achieve their desired outcome.
An example of where it can be used is in a buyer-seller relationship, wherein, it is a one-time transaction and can opt for this negotiation technique to get the upper hand.
No fixed amount
There is no fixed amount that is being dealt with in this mode of negotiation.
Both the parties do not get the benefit. Only one party gets the upper hand and the other party loses, thereby creating a situation of win or lose.
Importance to value
The only importance given to this type of negotiation is the value at which the parties are negotiating and what one party can achieve through this process.
In this form of negotiation, there is no importance given to the relationship between the two parties as the use of emotions and relationships in this form of negotiation is not essential.
It is a more widely used type of negotiation as it has an equal benefit and creates a win-win situation. Some of the factors of collaborative negotiation are:
Instead of favouring only one party, it is made sure that by using this approach of negotiation both the parties avail benefits and there is a greater value that is received by the end of this negotiation process.
Process is fair
The process of collaborative negotiation is that of a fair one, as all the benefits are distributed equally, showing no prejudice to any party.
The problem at hand is dealt with by both parties jointly. Looking at both the interests of the parties and reaching a possible solution. This solution is beneficial for both the parties and in case no settlement is achieved at the end of the process, the parties can negotiate again with better views and understanding of the problem and can approach the problem with better methods.
This procedure creates clarity and transparency for both parties and there is a sense of understanding between these parties. This helps the outflow of information even before needing to ask for them as there is trust between the parties.
Creation of relationship
Both the parties have a relationship with each other, which is helpful for future negotiations too as they build trust with each other.
Both of these methods of negotiations have their pros and cons but how they should be used should depend on the scenario in which the negotiator is in and his approach on how he wants to tackle the problem at hand.
The main motive for any of the negotiation processes is to ensure gains, so this should be evaluated before starting the process. There is no answer as to which method is better but it will be even more beneficial for the negotiator if both methods are used simultaneously. The negotiation to achieve a better value at the end of the negotiation, hence, both having equal importance in negotiation and creating a balance.
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