Effective Negotiation Strategies for Dealing with Competitors

Competition is good in the business world, but collaboration can be even better. Follow our three ethical and effective negotiation strategies for teaming up with your competitors to create value.

By — on / Negotiation Skills

Effective negotiation strategies

In the business world, organizations take competition for granted, to the extent that they often overlook opportunities to meet their goals by working with one another. But the benefits of negotiation in business can extend to our dealings with competitors. Recent high-profile negotiations highlight three effective negotiation strategies competitors can use to cooperate and compete.

1. Team Up on Product Design

Back in 2013, U.S. automakers Ford and General Motors announced they were teaming up to develop two new automatic transmissions (a nine-speed and a 10-speed) to help them comply with tightening fuel-economy regulations. The complex, high-tech parts are critical to vehicle performance, but they’re not part of a carmaker’s brand identity, writes John Rosevear on The Motley Fool website. Working together to design the transmissions allowed the companies to share the high costs of developing the hardware without blurring their identities in the eyes of consumers. After designing the hardware, the companies split off to independently develop control software for the transmissions. This enabled them to tailor the parts to their vehicles—while keeping privileged information to themselves.

This integrative bargaining example in business illustrates how organizations can find innovative ways to collaborate that still allow them to compete and protect trade secrets. Such partnerships may be particularly suited to developing behind-the-scenes (or under-the-hood) products that customers don’t usually see.

2. Identify and Negotiate with “Complementors”

Artificial intelligence (AI) personal assistants such as Alexa, Siri, Google Assistant, Cortana, and other devices are aimed at making our lives more organized and relaxed by managing mundane tasks. Yet such devices haven’t been a huge hit with consumers, in part because many AIs are incompatible with one another. In May 2016, Amazon chief Jeff Bezos approached Microsoft CEO Satya Nadella with a plan to tackle this obstacle by making their devices compatible, the New York Times reports. Because the AIs on the market have different strengths, Bezos argued, competitors should be trying to motivate consumers to purchase multiple assistants to seamlessly perform different tasks rather than encouraging them to choose just one. Teams from the two companies are working to put the project into action, and the CEOs hope to get other competitors on board as well.

Broadening out from this integrative negotiation example, in their book Co-opetition (Doubleday, 1996), Adam M. Brandenburger and Barry J. Nalebuff coin the term “complementor” to refer to market players—including competitors—who can make your product or service more valuable. By negotiating to complement one another, organizations can make use of effective negotiation strategies even as they continue to compete.

3. Collaborate to Do the Right Thing

As the AIDS epidemic ravaged Africa in the late 1990s, Western pharmaceutical companies faced global outrage for charging high prices for their AIDS drugs—about $12,000 per patient per year. In 2001, Mumbai, India–based pharmaceutical firm Cipla rocked the industry by offering to sell its cocktail of AIDS drugs to the nonprofit Doctors Without Borders for just $350 per year. Most other major pharmaceutical firms soon followed suit, and the initiative is credited with saving millions of lives.

As life expectancy has increased across Africa, the continent is facing a growing threat: cancer. Due in part to a shortage of cancer drugs, oncologists, and technologies, cancer mortality rates are much higher in Africa than in the developed world. In October 2017, Cipla and New York–based pharmaceutical giant Pfizer announced a joint agreement to significantly discount the prices of 16 common chemotherapy drugs in six African nations.

When organizations seek to make a positive impact on their community or the world at large, they typically don’t think about teaming up with competitors. But when they combine know-how and reach, competitors often have unique opportunities to efficiently create value for those who need it most—while also potentially generating goodwill for their industry.

A Note on Collusion

As these effective negotiation strategies show, at their best, collaborations between competitors create value by promoting marketplace competition, to the benefit of consumers and society at large. At their worst, they squelch competition and harm consumers, as in the case of competitors secretly colluding to fix prices in a market. When considering a collaboration with a competitor, keep your lawyers engaged throughout the process to ensure the agreement wouldn’t violate antitrust laws. In addition, do a thorough cost-benefit analysis that considers whether your agreement would create or destroy value for consumers and society.

 What other effective negotiation strategies have you identified to create value with competitors?

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