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Guidelines for International Business Negotiation
The process of Business negotiation goes from a situation of ‘Contention’ to one of ‘Conclusion’. Contention means that each party start from a different point concerning what he or she hopes to achieve through negotiations. Conclusion refers to final agreement between the two parties on what they will achieve to reach a common goal.
The Initial Stage :
1 - Business Through Agent : When the exporter meets with the potential agents in the target market he or she will have certain interests to pursue in the business dealing that will not necessarily coincide with these of the other party. He may want the agent to work for a minimum commission.
2 - Direct Business with the Importers : Very much like the business through the agents, even in case of direct business deals, the exporter and the importer are the two unknown entities in the initial stages of the business negotiation. Depending upon the product type, the importer generally prefer doing business on exclusive basis for a particular brand of product and contrary to that, the exporter desire to have as much of exposure as possible through more numbers of importers / distributors / dealers.
Negotiating Plan :
As part of the preparation of business negotiations, an exporter should make an assessment of the current status of the company, including its strong and weak points. This is done by SWOT (strength, weakness, opportunities, threats) analysis. Applying the SWOT techniques executives can optimize their companies strength, minimize their weakness, be open to opportunities and be ready to bargain in the face of threats and the company may make attempts to strike a balance and offset its weakness by stressing on its strength.
Negotiating strategies :
1- Pricing :
As pricing is often the most sensitive issue in business negotiations the subject should usually be postponed until all of the other aspects of the transactions have been discussed and agreed upon. To meet price objections, some exporters artificially inflate their price quotations. This enables them to give price concessions in the opening of the negotiations without taking any financial risks. The danger of this approach is that it immediately directs the discussions in to pricing issues at the expense of the other important components of the marketing mix. Generally such initial price concessions are followed by more demands from buyers that will further reduce the profitability of the export transaction. For instance, the buyer may press for concessions on :
  • Quality discounts.
  • Discount for repeat orders.
  • Improved packaging and labeling (for the same price).
  • Tighter delivery deadlines that may increase production and transport cost.
  • Free promotional materials in the language of the import market.
  • Market exclusivity.
  • A long term agency payment.
  • Higher commission rates.
  • Better credit and payment terms.
To avoid being confronted by such costly demands, an exporter should try to determine the buyer’s real interest in the product from the outset. This can be ascertained through appropriate questions but also must be based on research and other preparations before the negotiations.
2- Competitive vs. Cooperative :
Although executives can choose for several negotiating strategies, those most commonly used are competitive (win lose) and the collaborative (win-win) approaches. In a competitive strategy the negotiator is concerned mainly about a favorable outcome at the expense of the other party. He or she has a short term outlook and is not interested in preserving or building a lasting relationship. The competitive option is valid primarily for a one tine operation in which no repeat business is foreseen, no follow up is needed and the relationship between the two parties is not major issue.
In contrast, a collaborative approach consists of both parties working together is a problem solving manner to satisfy the mutual needs. The cooperative approach is most appropriate for international business deals, particularly those with a long term objective. In a cooperative process each sides seeks to satisfy the other’s interests by sharing information, concentrating on common problems and emphasizing similarities.
Phase of Negotiations :
Negotiations can be broken down in two three stages : the pre- negotiation phase, Negotiation phase and the post – negotiation phase.
Pre- negotiation phase :
During the preparatory stage it is critical for each party to lay down precisely the purpose of negotiations, the party’s relative strength and weaknesses, its minimum demand and maximum concessions, the strategy and tactics to be used, possible options for solutions and their costs for both parties, and its opening positions. The entire list of concessions to be made should be prioritized and translated in to money terms. It is only by knowing the real value of concession in both the short and long term that is full impact on the issues being negotiated can be assessed.
In addition, issues such as delivery schedules, packaging quality schedules should be studied carefully so that counter proposal can be made.
Negotiation Phase :
After the opening positions are known each party should start to make minor concessions to keep the negotiation process moving while addressing issues of joint interest.
1. Price Issue : After covering all of the non- price issue, the exporter can shift the discussions in the final phase of the talks to financial matches having a bearing on the price quotation. This is the time to come to an agreement on issues such as credit terms, payment schedules, currencies of payment, insurance, commission rates, warehousing costs, costs of replacing damaged goods and so on. Agreement reached on these points constitutes the price package.
Hints for perfect price list :
Your price list is probably the single most important sale tool you have If properly developed and presented it will do much to create a favorable impression, minimize costly errors and generate repeat business.
Remember the following points while making your price list :
  • Submit a typewritten list, printed on a regular bond paper and laid out simply and clearly.
  • Prominently indicate the name of your company, its full address, telephone, fax numbers, E- mail address including the country and city codes.
  • Fully describe the items being quoted and delivery schedule.
  • Group the items logically.
  • Specify whether shipped by sea or by air, f.o.b. or c.i.f. and to what port.
  • Quote exact amount and quantity and not rounded- off figures.
2. Timing : Timing in negotiation is crucial particularly the questions when to make concessions, when to ask for a recess and when to start concluding the agreement.
3. Dispute Settlement : Both exporter and importer should agree to suitable arbitration mechanism in case of any dispute arising after signing of contract agreement Laws of which country will be applicable and also the place of jurisdiction should be clearly stated in the contract agreement.
Post Negotiation phase :
Too often, negotiators have the impression that because an agreement is reached their involvement ends. In International business, where risks and uncertainties are much greater than what are found, close monitoring of the agreement is called for.

In many cultures reaching an agreement is not the end of the negotiations but rather the beginning of another round of negotiation and subsequent renegotiation's. In these countries the negotiated agreement provides only the framework for a business relationship, with details of the transaction to be discussed and modified as required. For this reason the negotiators concerned stress the relationship and the general nature of the agreement. Details can be worked out during the life of the agreement according to changing needs and requirements. This approach is rather different from that commonly adopted in countries where a contract is negotiated in detail, covering every aspect of transaction leaving little if any flexibility in its execution. Close monitoring and maintenance of a two – way dialogue, after such an agreement is made, is critical.
What do buyers look for when making a buying decisions ?
It is important to remember the three “ P “ s that influence the buying decision . They are product, price and performance. Normally buyers have in mind a combination of the following factors when making any buying decision :-
Product - Related
  • Qualities and guarantees.
  • Technical specifications.
  • Design and drawings.
  • Patent and proprietary considerations.
  • Environmental aspects.
  • Packing, Labeling and Markings.
Price – Related
  • Price.
  • Escalation clause, if any.
  • Terms of payment.
Performance - Related
  • Delivery schedules.
  • Continuity of supplies.
  • Transportation's arrangements.
  • Confidentiality.
 

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  • Agricultural and Processed Food Products Export Development Authority (APEDA)
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  • NCUI Building 3, Siri Institutional Area, August Kranti Marg, New Delhi - 110 016
    Phone : 91-11-41486013, 20863919, 20867008, 20867007