NEGOTIATING FROM A POSITION OF (PERCEIVED) WEAKNESS

Common Scenarios and Strategies to Combat Them

SCENARIO ONE: You have limited alternatives and are pressured to reach a deal.

Scenario: Jerry Murphy (not his real name) was in negotiations to sell his ranch and had two or three potential interested parties. It was a buyer's market and the offers he was receiving were significantly lower than what he was hoping for. He knew that if he refused, they had many other equally good alternatives that they could pursue. In addition, he was in a position of weakness because he had an urgent need to sell due to an immediate relocation across the country for a new job, and had no interest in managing his ranch from the distance. He felt that he was in a position of abject weakness in these negotiations and was about to accept the best offer which was still not very good. In a state of desperation, Jerry approached us and asked if there was anything he might do to improve his odds and salvage the situation.

SCENARIO TWO: They are the only game in town 

Scenario: A health care client needed to purchase a new drug which was being manufactured by only one pharmaceutical company. The company had no competition at that point in this drug category, and enjoyed a full market-share. Since they were the " only game in town" and essentially had a monopoly, they were able to exploit their advantage. They asked an exorbitant price and insisted on unreasonable conditions such as "at will" price increases during the term of the contract. Having an urgent need for this particular drug, our client's hands were tied.

Strategy:  In this case we felt that it was important to underscore the cost of short term gain at the expense of long term loss in negotiations with the vendor. We also made it known that we were feeling exploited and taken advantage of. We explained that it was only a question of a little time until a competitive drug was brought to market, and at that point we would be compelled to go with the competitor, given the exploitation we were currently experiencing.  We emphasized that these negotiations will set the tone for our future long term business relationship. 

To indicate our seriousness we also insisted on a very short term and non-exclusive contract with them, which would allow us to take advantage of any new entries to the market. At the same time, as an incentive, we also offered them a longer term exclusive contract if they could provide us with a fairer price point. We were able to persuade them that if they push us hard on the short term, just because they can, it would cost them more in the long term and they will lose market share rapidly. 

With the realization of long term costs and an incentive on the table to provide us with more reasonable pricing, we were able to reach an acceptable deal that both parties could live with.

SCENARIO THREE: They are more powerful and have greater resources than you

Scenario: A small Indonesian software company was involved in software development and they also entered into a distribution agreement with a large US software corporation to sell their products in Indonesia, a market into which the US company wished to expand. The arrangement was going well and the US company was gaining Indonesian market penetration, when the US company accused the Indonesian company of patent infringement and threatened a lawsuit. The smaller Indonesian company realized that the large US company had the resources and could afford to litigate, which would probably drive the smaller company to bankruptcy. How could the small company defend itself and survive?

Strategy: The Indonesian company needed to convince the large US company that they both have a shared interest in the survival of the small company because if it goes into bankruptcy, the US company loses its edge in the newly found Indonesian market. They would both be better served if they could work out an agreement around the disputed software, and continue their working relationship that will continue bringing value to both. 

By persuading the larger company and demonstrating how by "flexing their muscles", important mutual interests could be forfeited, indeed allowed the smaller company to negotiate a better deal.

The common denominator in all these three scenarios is that even though initially, it might seem as though we are negotiating from a position of severe weakness, by thinking more carefully about the  other side's weaknesses,  needs, concerns and risks, we can often combat and compensate for our own weaknesses and achieve fair, wise and amicable outcomes.