Negotiations happen all around us. They occur every day in business, in the workplace, in politics and in any general situation where more than one outcome is possible and different parties have interests in those outcomes. Hence the need for negotiations to become a core competence among emerging world business leaders and policymakers.
In business, negotiations can revolve around securing deals with suppliers, customers, business partners and colleagues. It can also take place internally when decisions around business goals, workloads, job priorities and management goals need to be made.
According to UNCTAD (2019) total trade from Africa to the rest of the world averaged US$760 billion in current prices in the period 2015–2017, compared with, US$4,109 billion from Europe, $5,140 billion from America and $6,801 billion from Asia. Intra-African exports were 16.6percent of total exports in 2017, compared with 68.1percent in Europe, 59.4percent in Asia, and 55percent in America.
Underlying all these transactions are purposive negotiations. The big questions for African citizenries to consider include amongst others the following:
- Are African nations really benefiting from the billions of dollars that are exchanging hands?
- Are the policymakers and business leaders bargaining with the continents’ resources for short-term price political and self-gains OR purposively negotiating for long-term value benefits, national and regional wide development?
Pillutla and Nicholson define negotiations as “the process through which two or more parties who are in conflict over outcomes attempt to reach an agreement.” They explain that negotiation is a constructive alternative to haggling or bargaining and is focused on coming to a positive agreement instead of “winning a battle.”
This means that negotiating should not be about winning or losing, but rather about coming to a mutually beneficial agreement.
Fisher, Ury, and Patton, in their book, Getting to Yes, define negotiations as a “back-and-forth communication designed to reach an agreement when you and the other side have some interests that are shared and others that are opposed.”
Similarly, Bazerman and Moore explain that “When two or more parties need to reach a joint decision but have different preferences, they negotiate.”
Jonathan O’ Brien argues that negotiation is “an activity with a start, middle and end; a means by which we can move from one place to another and a way for the parities to deal with their differences or reach a resolution to a problem.”
Put simply, purposive negotiations are about having clear reasons, tactics and skills to engage for a win-win outcome.
When it comes to the procurement aspects of Supply Chain Management, purposive negotiations are often divided into two types, namely integrative and distributive negotiations.
Integrative negotiations occur when buyers and suppliers negotiate to reach an acceptable ‘win/win’ solution. In comparison, distributive negotiations focus on allocating fixed resources whereby one party is seen as the ‘winner’ and the other the ‘loser’. Most often, this is seen as the act of dividing up a pie of value – where someone ends up with perceived greater value than the other.
In the business environment, negotiations often occur around costs, quality and delivery. Other variables that impact successful negotiations include payment terms, frequency of orders, warranties and return policies. Being flexible in one or some of these areas may allow organisations to improve the outcomes of their negotiation processes.
According to the Chartered Institute for Procurement and Supply (CIPS) reasons for supplier, negotiations can be linked to changes or challenges around costs, value, performance, conflict, problems, quality and agreement. They explain that supplier negotiations usually aim to: “reduce the cost of acquisition by achieving a lower price;” “achieve added value such as reduced lead or cycle times;” “improve performance through KPIs’ and SLAs;” “resolve conflict through reaching understanding;” “solve a problem by open discussion;” “achieve optimum quality through reducing defects;” and/or “reach a mutual agreement in a collaborative style where all parties are satisfied.”
Despite the variety of variables impacting the reasons for and types of negotiations, in most African nations, business negotiations, unfortunately, tend to focus specifically on price. This can arguably be attributed to the continent’s current position in global trade, industrialisation and other economic developmental benefits.
According to the United Nations 2021 Economic Development in Africa Report, the “share of Africa in world trade has declined steadily over the past 50 years.” The report notes that “the continent has a high level of dependence on imports and commodity-based natural resource exports.
“In 2019, Africa accounted for 2.8 percent of world trade and intraregional trade accounted for only 14.4 percent of total continental trade. Countries in Africa have not yet identified effective means of fostering sustained growth and increasing living standards,” the report highlights.
In addition to this, the report advances that Africa “continues to host the majority of the world’s poor, amid high and increasing levels of inequality (Schoch and Lakner, 2020). The gap between rich and poor has continued to grow in most countries in Africa and it is the second-most unequal continent (Seery et al., 2019).”
This continued poverty and inequality on the continent tend to place price gains at the forefront of many supply chain bargaining and not negotiating, leading to short-term ‘wins’ which do not always have long-term developmental goals in mind.
Moving away from short-term price gains toward longer-term purposive negotiation benefits often requires a structured approach to negotiation practices.
Structuring the Negotiation Process
Before purposive negotiations begin, preparations are essential. For example, where the meeting will take place; the goal to be achieved; who will be in attendance; what the facts around the alternating outcomes are, etc., need to be established.
Once the meeting begins, initial discussions around each party’s interests and goals should be had. Each party should be given a chance to put their side forward and make their intention clear. It is important that each party takes this opportunity to actively listen to the points made and ensure that they ask any questions needed for clarity.
Once each party had highlighted its interests and goals, it is vital to review conflicting viewpoints and agree upon common ground. Getting clarifications around conflicting ideas is essential at this point as it can help to prevent misunderstandings that may impact the overall outcomes of the negotiations.
Once you have clarifications it is time to negotiate for a win-win outcome. This means that negotiations should focus on coming to an agreement whereby both parties feel that they have gained something positive from the engagement process. A win-win negotiation results in the best outcome for both parties. While this should always be the aim of the negotiation, alternative strategies and compromises may need to be considered if an agreement cannot be made on the original discussions.
Once an agreement has been made, both parties can determine the best course of action to achieve the agreed-upon outcomes.
To conclude, through carefully structured and process-driven purposive negotiations, business leaders, and policymakers entering negotiations will be more equipped to engage for win-win outcomes that can have long-term benefits for organisational, national, and regional wide industrialisation, beneficial trade, wider socio-economic development and the UNSDGs.
Professor Douglas, the author of this article, is an international chartered director and Africa’s first-ever appointed Professor Extraordinaire for Industrialisation and Supply Chain Governance. He is the CEO of PanAvest International and the founding non-executive chairman of MY-future YOUR-Future and OUR-Future (“MYO”) and the highly popular daily Nyansa Kasa series. He is currently the non-executive chairman of the Minerals Income and Investment Fund(MIIF). Professor Boateng was previously the non-executive chairman of the Public Procurement Authority(PPA).