Sun Tzu and the art of winning negotiations
Sun Tzu and the art of winning negotiations
To many of his colleagues, Sandro is an old Chinese. He has worked in various cities in China for the past 7 years and has more work experience here than most of his Chinese colleagues.
One of the key success factors attributed to Sandro’s career success in China is that he takes the time and patience to listen and understand his Chinese colleagues, suppliers and partners. Although some of the business practices in China may be very different, even contradictory, to those in his native Germany, Sandro has always been patient enough to understand why certain things are done in certain ways and then strive to make their Chinese counterparts to understand why certain things must be done internationally.
Therefore, when it came time to negotiate a major deal with a key supplier, Sandro decided to have his Chinese project manager take the lead in the negotiations. Since Sandro had no experience in negotiating such a large project in China yet, he thought it might be a good idea to learn from the local expert.
The Chinese project manager, Mr. Chen, shared with Sandro his negotiation strategy, which was to not reveal anything and push them to the lowest price. And that was what he did.
Halfway through the negotiations, Sandro found that things were deviating from his goals, such as:
• Although the company has a policy of minimizing purchase costs, there are frequent cases of suppliers raising prices unilaterally because they have just realized that the agreed prices are below their costs. If the buyer does not agree to the increased prices, the seller will reduce the supply. And since the agreed prices were below cost, the buyer could not find other alternative suppliers to supply at such prices.
• One of the key requirements for this deal is for the supplier to commit to various quality and delivery guarantees that are critical to the buyer’s production. However, these issues were not discussed as Mr. Chen feared that discussing such issues would increase their purchase prices. Mr. Chen thought it best to secure the best price, then state these requirements after the price was agreed upon. Sandro knows that if these requirements are stated after the price has been agreed upon, the supplier may not honor his quality and delivery guarantees because the price he receives does not cover the cost of additional work.
With these observations in mind, Sandro wondered if there was a better way to get a long-term commitment to negotiated agreements in China.
Formulating your negotiation strategy
“A victorious army plans victory before it fights, a defeated army fights before it plans victory,” said Sun Tzu in The Art of War. The same principle applies to formulating negotiation strategies. We can use Sun Tzu’s 5 elements:
• The Path: Your goal or desired outcome
• The climate: external factors beyond your control
• The foundation: External factors in your influence
• The General: The people who lead your negotiations
• The method: How the negotiations should be conducted
To begin with, you will need to determine what the goal or desired outcome of the negotiation is. The most important concern to have is whether you just want to win the negotiation or you would like to have a sustainable outcome of your preferences.
Interestingly, although it is often mentioned that Chinese businessmen expect that negotiated agreements can be renegotiated later if some unforeseen circumstances arise, most Chinese negotiators tend to view a signed contract or agreement as an indication of negotiation success . They are often too short-sighted to see that if the agreement is not sustainable in the long term, or that if it is deemed unfair, their opponents in the negotiations will want to renegotiate. As such, agreed upon outcomes are NOT sustainable
Therefore, in order to achieve a sustainable outcome of the negotiations, you will need to consider a few more factors, such as:
• What is the outcome of the negotiation that you want to achieve, other than price or instant gratification?;
• What is your best, second and worst case scenario?;
• Why should your opponent agree to your demands or requests?;
• What are you willing to give in exchange for what you receive?;
• When should you walk away and negotiate with someone else instead?
Then the next question is: is it safe to tell our adversaries what we want?
The best victory is the one won without a fight
In simple words, negotiation can be defined as: getting others to give you what you want by giving them what they want.
The problem is that most of us would like others to give SO MUCH MORE of what we want, while we give so little of what they want. While the rationale behind such thinking is to control costs or maximize profits, however, there are some flaws in this logic:
• This does not mean that if you give a lot more than what they want, it will cost you a lot. There are some things you can give at little or no cost to you, but may be of great benefit to your opponent;
• Many times the cost of NOT getting what we really want (besides the lower price and instant gratification) is greater than the savings of giving so little of what they want; and
• Sometimes you have to educate your opponents to understand what sustainable outcome is what they really want too!
As Sun Tzu said, “The best victory is that won without a fight.” If you want your opponents to give in to your demands or give you a lot of what you want, you may want to make your opponents feel that:
• When they give you what you want, they will get what they really want (besides price and instant gratification);
• You will make sure that whatever deal you make with them is something they will be happy with, even if it is done in your best interest;
• You make a conscious effort to move from adversaries in negotiations to a long-term partnership.
Sun Tzu also says, “Use conventional methods to organize, but use outside-the-box methods to achieve victory.” Endlessly talking about price will end in an impasse, but if both parties are willing to examine the reasons why they want what they want, they may be able to come up with a creative solution that meets each other’s needs.
There is a Chinese expression called “words spoken from the bottom of the heart” that is actually quite common between buyers and sellers who have been doing business together for a long time. It goes back to the Chinese ideal of looking out for the well-being of your business partners, even if they may be your adversaries in negotiations. The trick is to get your opponents to trust you quickly enough for this effect to occur.
Know yourself and your opponent
When we mention that we have to gain the trust of our opponents, it does not mean that we are just nice and sacrifice all our gains. Therefore, Sun Tzu said, “Know thyself and know thy adversary, a hundred battles fought, and be not endangered in any.”
What this means for the negotiator can be:
• You cannot win with ALL opponents. Knowing who you can trust and getting them to trust you is the key to achieving winning results;
• You don’t learn about your opponents just by talking to them. You can get more information about your opponents (including if there is an overwhelming need to give them what they want) from their colleagues, business partners or industry news in general; and
• During negotiations, knowing your opponent can be just as important as letting your opponent know you. If the adversary is someone you don’t know, start by revealing less sensitive details in smaller deals.
In short, although there is a huge amount of advice, techniques and other resources on how to win in negotiations, there is only one thing on your opponents mind and that is “Why should I let YOU win?”.
Here’s one last little story to illustrate why it’s important to make your opponents want to let you win, rather than pressure them. We often see some unreasonable and rude guests in hotels or restaurants who make unreasonable demands to the service staff in very rude ways, knowing that since they are paying the money, the service staff will just have to say yes to most of their rude demands. While some wait staff just suffer in silence, some experienced wait staff know how to get back by secretly spitting or adding other unmentioned “ingredients” to the rude customer’s food.
Moral of the story: even if you have tremendous bargaining power, you may still want to make your opponents want you to win. As in The Art of War, “To win, use intelligence to connect with your men and use discipline to implement your strategies”
by cj Ng
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