Episode #188: Covid-19 Triggers Tougher Negotiations Part 2

In Part One we looked at some of the key basics in negotiating:

1. Our Position
2. The Client’s Position
3. Our Analysis
4. What We Will Present
5. How Will We Bargain
6. What Should Be In The Agreement

These are all the things we can control on our side but obviously we have to be ready for how the other side will approach the negotiation. In business in Japan, the idea of a win/lose negotiating outcome would be a very short-term view of the relationship. Actually , there wouldn’t be a relationship, as the business would be purely transactional and would end fairly quickly.

Japanese companies are looking for long term partners they can trust. A negotiation is just the details of the business conducted within the broader confines of the relationship. If things change then Japanese companies expect the seller to make adjustments as well, regardless of what is written down in the contract. The relationship is the central piece not the contract. Having said that though, when we are talking about big deals and lots of money, the contRact confines become a lot more important and lawyers and courts get involved to sort it out.

In Part Two we will look at some Negotiating Tactics to get us to an agreement. These are not designed to trick or fool the other side. That makes no sense, if you are approaching the negotiation from a partner building perspective. These are just some tactics to help move the agreement process along.

1. The walk away option

Establish your BATNA - Best Alternative To A Negotiated Agreement.

We need to decide at what point we will leave the negotiating table, if the client is unreasonable. Not every business discussion is destined to establish a partnership. The selection of a long time partner, either in marriage or in business is never easy or certain. Sometimes the best decision is to decide not to become partners, but we need to identify the tipping point where we will determine this isn’t a deal to be had.

2. Silence

The pressure of silence can cause people to make concessions or offer up valuable information we can use in the negotiation. This is most often used by the Japanese side in the negotiation, as they have learnt that foreigners cannot bear a long silence and will want to speak up to fill the airwaves. Learning to sit there and shut up, is a skill we have to master in the negotiating process with Japanese companies, no matter how much it is killing us.

3. Authority to negotiate

We mention we need to refer the offer to a higher authority in the company.

This can buy time or let things cool down if they get heated. Japanese companies usually have a collective of divisions who will be affected by the negotiated agreement and often these groups, being absent from the negotiating table, need to be consulted. We might misinterpret the reference to others to make the decision to be a ploy, but actually it may well be the case on their side. This process may also have intensified, as companies have come under greater financial pressure, thanks to the business disruptions caused by the virus.

4. Ultimatum

This is a deal/no deal decision point, similar to the walk away. Having previously decided the breakoff point, we can suggest that the other side either accept this provision in the agreement or all bets are off. It is human nature to be greedy and push the other side to try and get the best deal for your side. Covid-19 may be pushing people harder to get a better deal than before, so it becomes a win for them and a semi-win for you. This is when you call them on it. Our landlord is the giant Mori Building company and when we looked at the space initially, the rent pricing was too high. They gave me their offer and I told them that if they couldn’t get it down to a certain number then forget it and I walked away. I was amazed to get a phone call a few weeks later accepting my counter offer.

5. Persuade

We add value to sweeten the deal to get them to agree. Sometimes there are things we have which won’t cost us a lot of money internally, which we can offer to the client which has high value for them. It might be additional research reports, surveys, consulting services, part payments, delayed payments etc.

6. Time pressure

We deliberately shorten the decision-making period to force an answer. Pareto’s principle says that “work expands to fill the time”, ipso facto, the work compresses if we diminish the time in the negotiating process. Japanese companies are highly risk averse, but they are also often paranoid about their competitors stealing a march on them. If they think that the opportunity may be lost and therefore benefit a rival, they may be more induced to get to a decision.

7. Delay or Inactivity

We slow things down. We don’t respond as quickly to their communication. This is similar to the “silence” tactic. It would be rare that we would use this with a Japanese company, because they are already world leading experts in going slowly themselves and never feel much pressure to do anything at speed, on the way to an agreement. It is more likely we are on the receiving end of this tactic and we should just be aware of it, although it would be hard to distinguish it as a tactic, compared to their normal way of doing business.

8. Add-ons

These are the additional concessions which are offered to close the deal. Research shows that 80% of the concessions are made in the final stages of the negotiation. We might have something which has value to the client but which is not a big cost to us, in order to make easier for them to say ‘yes’. Think about the current realty with Covid-19 and ponder what can you do that would be of value to the client? Things seemed to have changed ten years since this February, so there may be a whole grab bag of things that have now become more important than before. Try and search these out.

The compound kanji for crisis “kiki” （危機）comprises the characters for “danger” and “opportunity”. Negotiations today will have a greater capacity to deliver opportunity, because the Japanese company world has been turned upside down, over these last few months. Our job is to find the opportunity in the crisis.