Negotiation is a broad and general term

Negotiation is a broad and general term that may be defined in several ways. Not most of us are aware that negotiation happens in almost every aspect of our lives. In fact, San Diego State University sponsored a seminar about negotiation and conducted a survey among the participants about the frequency or rate of recurrence of negotiation in general in their lives. Sixty four percent of the respondents answered ‘always’ (Stark, 2008). That must mean that in most aspects of our lives, we do negotiations.

To fully understand, negotiation, it is significant to go over several definitions that may narrow down the long list of definitive terms used to define the word. Gerard I. Neirenberg wrote the book “The Art of Negotiating” and the president of Negotiations Institute, Inc. in New York. According to him, negotiation as the exchange of ideas in an attempt to alter the status of a relationship and deliberate to make an agreement. (Stark, 2008)

The iron ore price negotiations are an example of a negotiation. An article released on the 2nd of March this year tackles this issue. It is soon to be settled with the heightened demand for pellets from the Companhia Vale do Rico Doce (Vale), therefore negotiations for the prices of the these items is well underway. The CEO of Vale, Mr. Roger Agnelli, stated that talks are being conducted with their consumers to guarantee fairness in their transactions. Apparently, Agnelli said that Vale wants to assure their clients that they will not be overcharged, and at the same time guarantee that their clients will not be paying a lesser amount either. (Steel Guru, 2008a)

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Another article released on the 3rd of March this year reveals a negotiation going on between Vale and Arcelor Mittal. The article is also about the price of iron ores. Vale is active in the mining and metal industry in Brazil. Arcelor Mittal, on the other hand, is involved in the steel business. Apparently, Arcelor Mittal is the major client of Vale. Both companies are negotiating to close a deal involving the price of iron ores that will be purchased from Vale. The negotiation is similar to Vale’s negotiations with other companies all over the world. (Steel Guru, 2008b)

In this scenario, Vale is involved in major negotiations with several companies mostly involved in the steel business. Since the demands for pellets and iron ores have reached its summit, there is a need to negotiate the prices of these commodities. This is to ensure that the buying capacity of clients will be able to compensate the production of pellets and iron ores by Vale. The negotiations would then be a vehicle for companies and Vale to agree on a price that would be advantageous for all.

The main point of the negotiation process is exemplified in a statement by Agnelli, the CEO of Vale, wherein he states that they want to make sure they will not be charging too much for their products and at the same time, their clients will not be paying reduced amounts for the actual cost of pellets and iron ores (Steel Guru, 2008a) Perhaps this is a very good example of a well-mannered negotiation because both parties are making sure to agree at a certain point that would be mutually fair. Conceivably, this is the primary concept of negotiation.

At this point, it would be significant to discuss the elements of negotiation. According to Roger Fisher, negotiation has seven elements namely alternatives, interests, options, legitimacy, commitment, communication, and relationship. Having alternatives means that the factions that are holding negotiations should have back-up plans that they can follow individually just in case they fail to arrive at a consensus. Interests are the desires or the requisites of each faction.

These are the conditions that are reasons for a negotiation between factions. The options available in negotiation are the ways or modes in which two factions can compromise. There should be several options available in a negotiation, and it is best that each of these options ensure that the results would lead to a fair and balanced position for both factions. Legitimacy is the evenhandedness of negotiations based on standards or rubrics that are advantageous to both factions.

The commitment of both factions to adhere to their agreement should be talked about or materialized in a written agreement that would state how they are going to go about realizing what they have agreed on. Communication is a significant tool in negotiating because without it, both factions will not be able to understand and arrive at a consensus. During and after negotiations, the relationship between the factions should have improved to affect a harmonious and workable rapport. (Fisher, 2006)

There are also negotiation strategies that ensure a fair and a balanced agreement favorable to both negotiating parties. To cite three of them, negotiation strategies include assigning people who would lead or represent a party in the negotiation process, evaluating the weaknesses and strengths of both negotiating parties, and developing a negotiation plan where priorities are ranked as to importance. Assigning people to represent a party in negotiation proceedings is strategic in nature because the acquisition of the objectives of the party is dependent on their performance as a negotiating team.

It is important to make sure that the negotiating team is a small group and that specific tasks in the negotiating process is assigned to them. It is also strategic to evaluate the strong and weak points of each party involved in the negotiation, such as the background, the existing knowledge, bargaining skills, and importance of the agreement, etc. of and to the other party. It is important for a negotiating party to create a plan wherein their priorities or interests are ranked in order of importance. The non-negotiable interests, issues that are open to compromise, etc. should be identified and laid out to the other negotiating party. (Federal Acquisition Insitute, 2003)

All three strategies are appropriate for negotiators to use before and during the negotiation process. The inappropriateness lies in the negative response of negotiating parties to these strategies mainly because these strategies are laid out in order to affect success in negotiations. These strategies are the foundation of successful negotiations.

In marketing and other business issues, most negotiation subjects are pricing and cost estimates. Pricing analysis is an act of evaluating the appropriateness of a given cost (U.S. Department of Housing and Urban Development, 2008). Pricing or estimating costs should involve marketing analysis and evaluation of other factors involved in pricing, such as the demands, pricing objectives, etc. Negotiating parties should conduct marketing analysis in order to identify the demands of the consumers.

After this, the production of commodities, its distribution, and promotional strategies should be evaluated in order to arrive at the actual cost of producing the demands of the clients. All the expenses involved in the production of commodities for consumers and the standard for altering prices according to the rate of demand should be taken into account. These strategies will then be used to arrive at a price that should appropriate and fair for both negotiating parties. (Net MBA, 2007)

Negotiations are significant in the realization of a goal or objective that cannot be attainable through individual efforts alone. Negotiation is there to provide for a means to attain the interests of an organization through the help of another organization. Negotiation strategies are available for each party to adhere to in order to accumulate success that is favorable for both parties. In marketing and business administration, pricing and cost estimation is very common in negotiation proceedings. Therefore, pricing strategies are also made available for business groups to follow in order to close deals with other negotiating process in a fair and balanced way that is desirable to all of them. Negotiating parties should be able to propel the negotiation on the way to their success.

Resources

Federal Acquisition Institute. (2003). Unit 42: Negotiation Strategies. Retrieved March 9, 2008,   from Federal Acquisition Institute. Website:

http://www.fai.gov/pdfs/Unit42.pdf

Fisher, R. (2006). The 7 Elements of Negotiation. Retrieved March 9, 2008, from

Net MBA. (2007). Pricing Strategy. Retrieved March 9, 2008 from Internet Center for

Management and Business Administration, Inc. Website:

http://www.netmba.com/marketing/pricing/

Stark, P. B. (2008). What is Negotiation. Retrieved March 9, 2008 from SmartBiz.

Website: http://www.smartbiz.com/article/articleview/618/1/5/

Steel Guru. (2008b). Iron ore price negotiations – Vale and Arcelor Mittal. Retrieved

U.S. Department of Housing and Urban Development. (2008) Quick Guide to Cost and

Price Analysis for HUD Grantees and Funding Recipients. Retrieved March 9, 2008 from Homes and Communities: U.S. Department of Housing and Urban

Development. Website: https://portal.hud.gov/hudportal/HUD?src=/program_offices/cpo/grantees/cstprice

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