Negotiation Process & its Management – Meaning, Definition, Nature, Process and Types

Negotiation Process & its Management


Negotiation is a method by which people settle differences. It is a process by which compromise or agreement is reached while avoiding argument and dispute.In any disagreement, individuals understandably aim to achieve the best possible outcome for their position (or perhaps an organisation they represent). However, the principles of fairness, seeking mutual benefit and maintaining a relationship are the keys to a successful outcome.


“A strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view.”

“Negotiation is defined as a discussion among individuals, each one trying to present his best idea to come to a conclusion benefiting all.”

“A process for resolving conflict between two parties whereby both modify their demands to achieve a mutually acceptable compromise.”

Nature of Negotiation

1. It requires two parties

There are a minimum of two parties present in any negotiation and the parties can be two or more individuals, groups, or organizations.

2. There is a conflict of interest between two or more parties

What one wants is not necessarily what the other one wants and the parties must, therefore, search for a way to resolve the conflict.

3. The objective is to reach an agreement

They may not reach an agreement but all efforts need to be made to reach an agreement.

4. It is a continuous process

Negotiation is a continuous process in an industrial or in a business organization.It occurs between the employers and the employees on wages,terms and conditions of the employment,between sales representatives and buyers on price and contracts and between the departments over resources allocation.

5. Usually there is no winner/loser

Negotiation need not have a winner or loser.In every negotiation,there are opportunities to be created especially while using social skills and effective communication to bring both the parties together toward win-win outcomes in which mutual interest of the parties is involved.

6. Requires flexibility

The parties which are involved in negotiation need to be flexible.The areas of the agreement are to be identified clearly. Otherwise it leads to a negative attitude where there is non cooperation and refusal to reach a conclusion.

7. A process not an event

It is a process involving briefing and creating a climate of  discussion and understanding each other,where the ultimate objective is to reach an agreement.

8.Needs effective communication

Negotiation lays thrust on effective communication.Seven Cs for its effectiveness are completeness, consciousness, courtesy, credibility, correctness, consideration and courtesy.

Negotiation Process

The process of negotiation is instrumental in achieving the desired results in the company’s run of transactions. It is therefore necessary for a business deal to adhere to strict stages in the negotiation.


The basic stages of negotiation may be enlisted as:

a) Preparation

The preparation for negotiation may involve:

  • Identifying what the needs are.
  • Planning thoroughly.
  • Identifying alternatives and prioritizing issues
  • Establishing a settlement range
  • Focussing on long term goals and consequences.

b) Discussion

The next stage involves further discussion of the issues with the members so as to choose the best strategies before the actual negotiation. This again involves the following:

  • Being aware that “no” can be the opening position and the first offer is often above expectations.
  • Being aware of the reluctant buyer or seller .
  • Revising strategies
  • Considering many options.

c) Proposal

The proposal that is to be presented depends upon the existing needs of the presenter and revolves around a set of issues and alternatives that mat be a threat or opportunity.The proposal is designed keeping in view that it appeases the parties at the other end of negotiation table.As such,the ultimate goal being a win-win negotiation.

The few key points under this are:

  • Increasing power by getting the other side to commit first.
  • Adding credibility by getting agreements in writing.
  • Being wary of splitting the difference.
  • In handling an impasse,offering to set it aside momentarily.
  • In handling a stalemate,alter one of the negotiating points.
  • In handling a deadlock,bring in a third party.
  • When asked for a concession,asking for a tradeoff,
  • Being wary if the other party uses a “higher authority” as a rationale for not meeting negotiating points.

d) Agreement

The agreement finally comprises of the accepted negotiated proposal that is in accordance with the norms of  both the negotiating parties.

This agreement follows certain steps as under:

  • Counter the other party’s asking concessions at the end by addressing all details and communicating the fairness of the deal in closure.
  • Do not expect the other party to follow through on verbal promises.
  • Congratulate the other side.

Types of Negotiation

There are two types of negotiation on the basis of relationship

  1. Distributive negotiation
  2. Integrative

1. Distributive

The distributive process of negotiation is one in which one of the parties tries to grab maximum benefit,while imposing maximum losses on the other.this has come to be known as win/lose situation or ‘Zero sum’  which means that one party,s gain will counter balance the other party’s loss.In this strategy,it can only be a win/lose outcome.There is no possibility of a win/win outcome,as only the loss of one party can result in the benefit of another party.This strategy should be avoided as far as possible and should be used only in case there is no need to maintain further relations among the negotiating parties.

A distributive negotiation usually involves people who have never had a previous interactive relationship nor a re they likely to do so again in the near future.This is only a one time deal as losing party would not like to deal with the winning party again.

2. Integrative Strategy

The word integrative means to join several parts into a whole.Conceptually,this implies some cooperation,or a joining of forces to achieve something together.Usually involves a higher degree of trust and a forming of a relationship.The Integrative process of negotiation is one in which parties on both sides feel that they are gaining what they expected.Such situation has widely come to be known as a ‘win-win situation’.

Negotiation Process & its Management – Meaning, Definition, Nature, Process and Types

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