4 Types Of Negotiation In Business (Definition And Tips)

By Indeed Editorial Team

Published 10 October 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Negotiation is the process of getting the most value for the least amount of cost through bargaining. Whether you are negotiating your salary or trying to get a better sales deal from a client or vendor, learning how to negotiate can be extremely beneficial in a professional setting. Knowing the different types and approaches to the negotiation process can help you become a great negotiator. In this article, we discuss four different types of negotiation, describe their usage in a business environment, explain distinct negotiation approaches and share some tips to help you negotiate effectively:

Related: Negotiation Skills: Definitions, Benefits and Examples

4 Types Of Negotiation Models

Here are four types of negotiation models and their unique characteristics:

1. Principled negotiation

This type of negotiation uses an integrative approach and the goal is to use the shared values between the two parties to reach a compromise. These principles create value, build trust and reach mutually acceptable solutions. Some values to follow in a principled negotiation include fairness and transparency. It is also important to remember that the final outcome is mutually beneficial and serves the interests of both parties.

Related: What Is A Code of Ethics And What Are Its Principles?

2. Team negotiation

Team negotiation is a process in which two or more parties, usually involving several individuals, attempt to negotiate a mutually beneficial agreement. Team negotiation is common in situations such as finalising and signing business deals. To reach a successful conclusion in a negotiation, the two teams balance multiple interests and consider many different factors. To achieve a negotiated agreement that is fair and balanced, it is essential for each party to feel that the deal they are getting is rewarding.

3. Multi-party negotiation

In multi-party negotiations, two or more parties negotiate with the other party to reach an understanding. Multi-party negotiation often involves leaders and management within the same organisation. This negotiation can be difficult to manage as each leader may have different priorities and goals. Further, there are chances of alliances forming during this process that may affect the final result and leave certain parties unsatisfied with the end result. In such a situation, it can be helpful to get a neutral party to broker an agreement to avoid miscommunication.

4. Adversarial negotiation

Adversarial negotiation follows the idea that both parties are against each other instead of working together. This type of negotiation is more aggressive in comparison to cooperative negotiation. All parties usually adopt a 'hard bargain' tactic in adversarial negotiation wherein any proposed compromise gets rejected. Additionally, both parties try to get a written commitment in such negotiations.

What Are The Different Forms Of Negotiation In Business?

Negotiation in a business setting can take many forms:

  • Salary negotiation: In this negotiation type, a candidate bargains for a better pay package and benefits from their employer.

  • Seller negotiation: In this type, company employees try to get the most cost-effective deal on the services and products from a third-party vendor.

  • Client negotiation: This type of negotiation helps salespersons and teams increase the value of products or services they offer to their clients or customers.

  • Conflict resolution: Business leaders and team managers usually perform this negotiation to resolve issues between two or more employees engaged in a disagreement.

Related: Salary Negotiation Tips and Examples

Different Approaches To Negotiation

Here are two significant approaches to negotiating effectively, along with tips to implement them in business settings:

Distributive negotiation

In this approach to negotiation, the opposing parties bargain to get a higher share of a fixed sum. Distributive negotiation lets one party succeed at the cost of another party losing. That is why it is also called win-lose negotiation, competitive negotiation or zero-sum negotiation.

Here are a few tips for implementing distributive negotiation:

  • Make an initial offer. Doing this can make the bargaining process more favourable for you. This is because making the initial offer acts as a powerful move according to the anchoring principle.

  • Remain persistent. Being patient and firm can reiterate your position. This is why persistence in a negotiation often leads to a successful outcome.

  • Avoid divulging unnecessary information. To appear assertive during negotiations, it can be helpful not to reveal excess information. This can include information like your lowest acceptable outcome, sensitive details and counter-points that may make you appear as the weaker party.

Integrative negotiation

In this negotiation approach, both parties try to help each other by collaborating on shared interests to receive maximum benefits. Such negotiations aim to reach a mutually acceptable solution that solves the problem for both parties. This is also called 'win-win negotiation' or 'cooperative negotiation'.

Here are a few tips you can apply during an integrative negotiation:

  • Clarify your interests. As the goal of this negotiation is to have an outcome that favours both parties, transparently communicating your interests can be useful. This can help in building a promising relationship.

  • Be flexible. Whenever possible, demonstrate flexibility and willingness to compromise. This can help build confidence in the other party and encourage them to do the same.

  • Build trust. Follow a principled approach that helps both parties navigate the process of negotiation transparently. Show trust and good faith in your opponent's ability and willingness to reach a conclusion.

Related: When To Negotiate Your Salary (With Tips And Examples)

Tips For Negotiating Effectively

Here are some tips you can use to negotiate effectively:

Use data and numbers

In situations where you are negotiating a price for a service or a product, it can be tempting to use a range of numbers instead of an exact value. If you do this, you can risk your ability to get the best possible price. For example, giving an exact quote such as '₹36,500' to a client is better than saying 'between ₹35,000 and ₹40,000'. By providing exact numbers, the person you are negotiating with might be in a better position to understand the value proposition.

Include open-ended questions

Asking effective questions at the right time can be an excellent way to understand the other party's motives and position. To do this, try formulating your questions in ways that encourage more than a simple yes or no answer. Instead, ask open-ended questions that can elicit a more in-depth response.

Another way to use questions effectively is to ask the other party for information without giving them any information about your own position or situation. This can help you understand the other party's motives and position effectively. Using this information can help you find areas where you can reach an agreement by finding a win-win solution.

Related: What Are Open-Ended Questions? A Complete Guide

Research well

Before entering any negotiation discussion, it is important to perform thorough research first. For example, when negotiating the terms of payment with a client, it can be helpful to know what other businesses in the industry are charging for similar services. Comparing these price plans and offerings can help you make informed and attractive value propositions for your client. Conducting research can also help increase confidence during the negotiation and contribute to achieving desirable results.

Related: Essential Research Skills (With Benefits And How To Improve)

Be a good listener

By becoming an active listener, you can effectively control the negotiation discussion and understand the other party's expectations. So, stay focused, listen attentively and observe nonverbal communication cues when the other party is discussing their expectations or making an offer. By being an active listener, you can also convey that this discussion is essential for you and inspire trust and confidence in other negotiators.

Related: Building Communication Skills: 10 Types of Listening

Focus on achieving a win-win situation

Understanding the other party's interests is one of the most important aspects of any negotiation. This may allow both parties to reach an agreement and create a mutually satisfactory solution. By asking the other party what they hope to achieve by the end of the negotiation, you can help reach a mutually beneficial agreement. Being honest and transparent can help you achieve your goals and establish a strong professional relationship. Be clear when expressing your expectations and try to assess the situation objectively to make compromises that can help in reaching an agreement.

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