CHAPTER 3
Controlling Negotiations WHO’S CALLING
THE
SHOTS?
I N V O L V E S the recognition and assessment of a counterpart’s bargaining position. Overestimating can be as disastrous as underestimating. Your counterparts will only reveal that which they believe is necessary and beneficial to their own plans. Trade strategies, and a good deal of tactics, will be dictated by which side is buying and which selling. This also applies to investment, since an investor is technically “buying” into a company (or market) that’s “selling” a piece of its equity. The adage “the customer is always right” seems to put the buyer in the position of strength, as does the golden rule of business (The person with the gold makes the rules!). Unfortunately, reality nullifies both axioms.
NEGOTIATING
Buying and Selling Power THE
POWER OF THE NEEDY
The relative “needs” of the buyer and the seller are really what determines who holds the upper hand. Added to this mix are the restrictions that governments establish to protect their domestic markets from “economic colonization.” As many large companies have found out when investing in the emerging markets, even when offering to invest billions, they’re still expected to transfer technology, train local management, and pay outrageous real estate costs. Here, the seller is driving a hard bargain above and beyond the actual investment strategy— controlling the supply (e.g., cheap labor, natural resources, consumers), and taking advantage of the buyer’s need to expand into the new market. Haggling has taken on market-sized proportions. This is in stark contrast to the policies of 19th-century business, wherein “commerce followed the flag” and nations such as Japan and China opened their markets under threat of military force. It should be noted, however, that even today certain commodities, such as petroleum, are subject to “forceful” negotiation. On a smaller scale, this type of power play takes place in every negotiation. The asking price is only a starting point; discussions and concessions are won or lost based on either side’s belief in what is “fair.” In order for negotiators to function, whether it be on a small or grand scale, they must be aware of their own strengths and those of their counterparts.
Perceived Economic Power First and foremost, negotiators must understand where the company they represent stands in terms of international commercial perception. The
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