As I reflect on the term “battle” when applied to negotiations, it perfectly encapsulates the relentless struggle businesses face amid inflationary pressures. Buyers and sellers are gearing up for what seems like inevitable conflicts of interest as they navigate through challenging economic conditions. With a global recession and rising costs in nearly every sector—from supply chains and raw material costs to manufacturing and wages—the stakes have never been higher.
In the face of such challenges, industries like consumer goods and retail stand out for their visibility and the sheer volume of discussion they generate. Prices of everyday items are not just news; they’re a topic of conversation at dinner tables worldwide.
But is this battle as formidable as it seems? Not necessarily. The real task is to adopt a long-term perspective on pricing and unlock the potential of negotiation teams through effective planning and preparation. It’s not just about protecting consumers during tough times; it’s also about ensuring that pricing strategies reflect rising costs and value-adding initiatives to enhance profitability for all parties involved.
Poor planning, a lack of trust, and excessive ego often hinder the creation of valuable solutions. So, what should leaders consider in their negotiation strategy? It’s crucial to determine whether your price negotiations are cooperative, aiming to create value, or competitive, focusing on distributing value based on self-interest.
The current market conditions demand a mindset that sees negotiators not as adversaries but as partners against a common challenge. Chris Atkins, a colleague from The Gap Partnership, reminds us that the Latin for negotiation, negotiari, means “to carry out business.” It’s about securing favourable outcomes through collaboration rather than conflict.
Implementing short-term fixes like hedging currency or materials offers only temporary relief. A sustainable strategy involves understanding the long-term development of products and markets, recognizing profit evolution from both perspectives, and building trust through strategic engagement.
Is pricing a battle or a war? Given the relentless pace of inflation, organizations are increasingly forced to adjust prices more frequently. This often turns pricing into an ongoing series of battles within a larger war against market pressures.
To effectively manage this, organizations should:
- Establish clear negotiation principles and boundaries.
- Utilize a cross-functional team that includes finance and governance support for planning and execution.
- Equip the commercial team with necessary tools, such as communication plans and Q&A documents.
Leadership is crucial in empowering negotiation teams. A confident team, well-prepared and supported, is more likely to succeed. Senior decision-makers should actively define negotiation objectives and align the team around critical decisions.
Ultimately, before deploying your teams into negotiation battles, remember the wisdom of Sun Tzu: “Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” Taking the time to plan thoroughly can mitigate risks and enhance the outcomes of negotiation strategies.
All images are generated by Eray Eliaçık/Bing
