Types of Negotiation for Business Professionals

An understanding of the most common types of negotiation used in the business world will help you prepare to get the best deal possible—while building a strong reputation as an honest and effective negotiating counterpart.

By on / Negotiation Skills

types of negotiation

What is negotiation? In her book The Mind and Heart of the Negotiator, Northwestern University professor Leigh Thompson defines negotiation as “an interpersonal decision-making process necessary whenever we cannot achieve our objectives single-handedly.” This definition stresses the interdependence that’s fundamental to any negotiation.

Narrowing in on this definition, when preparing to negotiate, business professionals often wonder what types of negotiation are available to them. In this article, we offer business negotiation solutions by introducing you to the main types of negotiation practiced in business settings as well as the situations in which they tend to be used.

  • Distributive negotiation. A distributive negotiation is a negotiation in which parties are haggling over a single issue, most typically the price of a given commodity or service. Parties engaged in a distributive negotiation bargain over a fixed amount of value—that is, they aim to slice up the pie. When you are negotiating with a merchant in a foreign bazaar over the price of a rug, or negotiating over the price of a used car at a dealership, you may be engaged in a distributive negotiation.

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  • Integrative negotiation. An integrative negotiation is one in which more than one issue is at stake—ideally, many issues. When multiple issues are available for discussion—such as salary, benefits, and start date, in the case of a job negotiation—negotiators have the potential to make tradeoffs across issues and create value. That is, if you care little about a particular issue that your counterpart values more, you might propose making a concession on that issue in exchange for a concession from your counterpart on an issue that you value more. Negotiators often make the mistake of assuming that a negotiation is distributive when in fact additional issues can be added to the discussion to make it an integrative negotiation.

 

  • Team negotiation. A team negotiation is one in which at least one of the parties is made up of more than one person. More typically, in a team negotiation, there are at least two teams involved, sometimes more. Examples of team negotiations include contract negotiations between company management and a union, or two organizations negotiating a possible merger. Negotiators typically team up when they believe their different talents, skills, and knowledge will make them stronger. Indeed, research shows that when there’s at least one team at the bargaining table, negotiators are likely to create more overall value. When setting up your negotiation team, it is wise to negotiate what role each person will play, plan your negotiating strategy in advance, and take frequent breaks during the negotiation to discuss how things are going and work out any disagreements that emerge in private.

 

  • Multiparty negotiations. A multiparty negotiation is one in which three or more parties are negotiating among each other, whether as individuals or as part of negotiating teams. When three friends are deciding where to go for dinner, they can be said to be engaged in a multiparty negotiation. And when the nations of the world meet to try to reach an agreement on climate change, they also are engaging in a multiparty negotiation. Clearly, multiparty negotiations often also encompass team negotiations, if various teams are at the bargaining table. Business professionals are often daunted by the complexity of multiparty negotiation, but in fact, that complexity can bring immense benefits. The more issues, parties, and concerns there are on the table, the more opportunities there are to create value by making tradeoffs across issues. But because multiparty negotiations sometimes splinter into divisive factions, they need to be managed carefully.

 

  • One-shot vs. repeated negotiations. Some negotiations are “one shot”—that is, parties meet for a single negotiation with no intention of negotiating together in the future. Such a negotiation may occur in more than one meeting, as in the case of negotiators who discuss the price of a used car online, meet in person for a test drive, and then conclude the negotiations a week later, but the expectation is that they will go their separate ways when the negotiation is over. One-shot negotiations often carry a risk of unethical behavior and hard bargaining if parties believe they have no need to build a trusting relationship. By comparison, negotiators who hope to engage in repeated negotiations tend to work harder to create a sense of mutual trust, and their negotiations may be more cooperative and collaborative as a result.

 

What other types of negotiation have you engaged in?

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