We sometimes require counterparts to meet certain conditions before we agree to enter negotiations. Setting conditions for participation in dealmaking can be a powerful negotiating move—but one that carries real risks.
In international negotiations, those challenges are often magnified. Political pressures, cross-border legal issues, market uncertainty, and cultural differences can all add complexity beyond what negotiators face in domestic deals.
A well-known example comes from Microsoft’s acquisition of Finnish mobile phone company Nokia’s mobile-device business for roughly $9.5 billion. The deal closed in 2014, but within two years Microsoft wrote off most of the purchase and laid off thousands of employees as it exited the smartphone hardware market.
Many factors contributed to the deal’s failure. But one negotiating move Nokia made before entering serious talks offers a useful lesson about the risks and rewards of setting negotiation conditions.
Quick Answer: Should You Set Conditions Before Negotiating?
Setting negotiating conditions can help you protect key interests, but it works best when:
- You have a strong BATNA (best alternative to a negotiated agreement),
- The conditions truly protect critical interests,
- The other side still sees enough benefit to continue negotiating.
Conditions that feel one-sided or unnecessary can derail talks before they begin.
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International Negotiation Case Study: Nokia Builds Its BATNA
Microsoft and Nokia had partnered since 2011, when Nokia adopted Microsoft’s Windows Phone operating system for its smartphones. But both companies struggled to compete with Apple and Android-based devices, and Windows Phone failed to gain meaningful global market share.
In early 2013, Microsoft CEO Steven Ballmer contacted Nokia chairman Risto Siilasmaa to explore the possibility of Microsoft purchasing parts of Nokia’s struggling handset business. Early conversations suggested inefficiencies in the partnership and possible paths forward, ranging from revised partnerships to a full acquisition.
At the same time, Nokia was exploring alternatives. One possibility was allowing its Microsoft partnership to expire and shifting to Google’s Android system in an attempt to revive its handset business.
By cultivating this alternative, Nokia strengthened its BATNA—its best option if negotiations failed—giving it leverage to walk away from a weak offer.
After Microsoft presented an initial acquisition proposal, Nokia indicated the companies remained far apart on price and key issues, including ownership of Here, Nokia’s mapping service.
Nokia leaders believed keeping Here was essential, as the service could be licensed broadly across the automotive and technology industries. Microsoft, meanwhile, saw mapping technology as crucial for phones, tablets, PCs, and online services.
Early meetings in New York, London, and Finland produced little progress.
A Deal Takes Shape
Momentum shifted when Nokia informed Microsoft it would continue formal negotiations only under certain conditions.
Two key conditions stood out:
- Microsoft would help arrange financing that eased Nokia’s transition.
- Nokia’s mapping business, Here, would remain off the table.
Microsoft accepted these conditions, allowing negotiations to continue.
Eventually, negotiators found a compromise: Nokia would retain ownership of Here while licensing the technology—and even source-code access—to Microsoft. Microsoft could build improvements for its products, while Nokia preserved the right to license the service elsewhere.
Ballmer and Siilasmaa shook hands on the framework, and details were finalized over the following months.
The Risks of Setting Negotiating Conditions
A negotiating condition is essentially an “if” statement:
“If you meet this requirement, we will negotiate.”
Such conditions can protect key interests or rebalance negotiations, notes Harvard professor Guhan Subramanian. But they also risk stalling talks.
A contrasting example occurred in a labor dispute involving the Minnesota Orchestra. Musicians insisted they would negotiate only after management lifted a lockout. Management resisted, believing negotiations would lose urgency if musicians were already back at work and receiving pay.
The lesson: your counterpart will compare accepting your conditions with pursuing alternatives outside the negotiation.
Conditions work best when your BATNA is strong and the other side still sees value in negotiating.
Even in the Microsoft–Nokia case, Microsoft ultimately gained meaningful access to Here technology despite Nokia’s initial stance. Microsoft’s willingness to keep negotiating may have helped close the deal—though in hindsight, the acquisition itself proved unsuccessful.
Several practical lessons emerge from these negotiation examples:
1. Demand Only True Deal Breakers
Conditions should protect interests that genuinely matter. Overusing conditions risks pushing the other side away.
2. Structure Conditions to Benefit Both Sides
Whenever possible, frame conditions so they also offer value to your counterpart. Agreements reached through cooperation tend to be more durable.
Even when you hold leverage, helping the other side meet its goals often produces stronger long-term results.
Negotiating conditions can be powerful tools in international negotiations—but they must be used carefully. Conditions that protect essential interests while preserving value for both sides are most likely to lead to successful agreements.
Have you had experience setting or responding to negotiating conditions in international negotiations? How did it turn out?
Claim your FREE copy: International Negotiations
Claim your copy of International Negotiations: Cross-Cultural Communication Skills for International Business Executives from the Program on Negotiation at Harvard Law School.
There are no more phones with ‘Nokia Lumia’. They are all ‘Microsoft Lumia’. Microsoft completely scraped the company and rebranded the devices. Nokia got a bad future
There has been a completely mixed response to whether the deal was good or was a decision taken in a hurry. Nokia surely can use this incoming cash flow on some great products, but the issue now is that Nokia was recognized by its Mobile Devices and there will be almost zero difference between a new product category (coz no more mobile phones)coming under the NOKIA brand name or a completely new Brand name because they will both have zero popularity in that field.
It would probably be good for Nokia to come up with a new brand name and leave the Nokia legacy behind in its Nokia Research Department and nowhere else. As you could feel, this deal saddens me 🙁
It’s 2015 now buddy and Nokia’s all of microsoft now. You should be a lot sad now 😛