Single-use or relationship-based negotiations? Some key differences for the tech industry

Daniel Freeman looks at the choices we make to make deals over the short and long term

Trade

Daniel Freeman, Scotwork

In association with Scotwork International (Ireland)

In the current climate, the tech sector is being hit hard by layoffs and cuts. Where the margin for profit has become tighter, there’s an increasing pressure to generate more value from the agreements that organisations currently have, as well as maximising the opportunities that come from any new deals or partnerships that are on the horizon.

Those that are in the tech sector may be feeling this pressure in their current negotiations, so it’s worth considering the best approach. If we consider the types of negotiations we find ourselves in, some might be single-use for one-time purchases/contracting or licensing agreements which can result in a more competitive approach as forming a relationship is not a priority. On the other hand, negotiations with a long-term partnership may favour a more collaborative approach, such as joint ventures or strategic alliances. Ultimately, the choice between the approaches will depend on the specific circumstances of the negotiation and the goals of the parties involved. Depending on how close to the red line some tech organisations may be, the increasing pressure may give way to more competitive practices, but is that the right approach?

I’ve highlighted a few key areas to consider when approaching both single use and relationship-based negotiations.

Strategy

Single-use negotiations usually focus on the specific transaction or deal at hand, while relationship-based negotiations take a more strategic approach to the negotiation process, with the goal of establishing or strengthening a long-term relationship between the parties involved. You might be willing to make more concessions to appease the other party and help them get what they want in the process, rather than solely focusing on your own goals. Sometimes we have to recognise that we need to change our strategy in order to achieve our objectives. In the early 2000s, the European Commission launched an antitrust investigation in Microsoft’s Window’s Media Player. Initially, Microsoft took a defensive stance and vigorously contested the EC’s allegations. However, as the negotiations progressed and the legal battle continued, Microsoft recognised the need to change its negotiation strategy. Instead of strictly contesting the allegations, Microsoft made significant concessions and proposed various remedies to alleviate the antitrust concerns. This led to an agreement being reached in 2007 resolving the legal dispute and maintaining operations in the European market, Microsoft’s main objective.

Time

Single-use negotiations tend to have a shorter time span and are often focused on achieving a quick resolution to a specific issue or transaction. Relationship-based negotiations, on the other hand, are focused on building trust and developing a partnership that can last for many years. These negotiations also have the potential to last for a longer time frame, spanning weeks, months or even years. The question is, how long do you want to spend negotiating? Even if you’re in a one-off negotiation and you are in a position to pitch aggressively low, consider how much time it could take to move to a more realistic position. Also, if you begin with an unrealistic offer and then make a big jump towards a more agreeable outcome, what does that signal to the other party?

Focus on price vs. value

In single-use negotiations, the focus is often on one variable and getting the best deal possible for the transaction. Relationship-based negotiations, however, place a greater emphasis on the overall value of the deal and the benefits that each party can provide to the other over the long term. There is more of an emphasis on the ‘win-win’ mentality. If the other party are asking for a high price and you are able to pay it, what could you ask for in return to secure the long-term value of the deal on your side?

Competitive vs. collaborative behaviour

Single-use negotiations tend to be more transactional and less focused on building a personal connection between the parties involved. This tends to lead to a more competitive style of negotiating behaviour. Relationship-based negotiations, however, require more open and frequent communication, with a focus on building a rapport and understanding each other’s needs and priorities. The need to share information is crucial in these negotiations, less competitive behaviour is usually favoured in order for there to be a level of comfort in sharing information from both sides and reaching an agreement. Apple and Intel had a series of collaborative negotiations sharing their technical knowledge, marketing strategies and supply chain goals, leading Apple to switch to using Intel processors in 2005. Sharing information is key to encourage collaboration, but make sure to ask yourself: is the information I’m sharing advancing the negotiation or could it potentially harm my position if I choose to reveal it?

Level of risk

Single-use negotiations tend to involve lower levels of risk, as the parties involved are typically only concerned with the specific transaction at hand. There may even be an alternative option already waiting in the wings to play off against the other party. Relationship-based negotiations involve a higher level of risk, as both parties are investing time and resources into building a long-term relationship and may have a lot to lose if the deal fails. Seeking an alternative option may not be as simple, as a lot of investment in multiple variables will be involved. When a disagreement is reached in a negotiation, consider whether it is in your interest to say ‘no’ and force the situation into deadlock, or if choosing to negotiate will end up being the lower cost option in the long run.

In either case of single-use of long-term relationship negotiations, it’s important to be prepared. Be aware of what your priorities are, if your strategy is the right one, if it’s more advantageous to behave in a competitive or collaborative way, and consider how long you are prepared to negotiate in order to get the outcome you desire.

Daniel Freeman is senior consultant, Scotwork International (Ireland)