Meaning and Importance of Negotiation

The word Negotiation is derived from two Latin terms, “negare otium”, which if literally translated means, “to deny leisure”. In French and Spanish, deny leisure means “business”.

The Business Dictionary[1] defines negotiation as the process of bargaining, between two or more parties, each having its own needs, aims and viewpoints, seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict. In other words, negotiation can also be simplistically viewed as mutual communication intended to reach a common end agreeable to all parties involved in such communication. The cause of such communication and stakes involved therein may be big or small and may run into huge amounts or severe monetary implications but in the ultimate analysis, the process of negotiation invariably includes a back and forth communication to enable the parties to arrive at a mutually agreeable conclusion.

The negotiation process combines the attributes of art, skill and aptitude. It embodies a different perspective of looking at any transaction or dispute, howsoever big or small.

For example, A intends to buy a big house for his family. Upon finding a suitable property, the seller, B, quotes a price of INR 80 million. Quite obviously, A wishes to buy the house at and lowest possible price. Therefore, he engages in market research and discovers that the property quotation is quite over-priced. Armed with this information, A negotiates a lower price with Y at INR 60 million.

Since the stakes are quite high, A and B thereafter hire their respective lawyers for the legal documentation regarding the transfer of property for the agreed consideration. At this stage, various other expenses such as stamp duty, legal fees, etc. arise. Various loopholes such as outstanding municipal dues, etc. also came to the surface after the due diligence.

Consequently, the lawyers negotiate the allocation of additional expenses as well as ensure that A is appropriately indemnified by B wherever necessary.

As a result of this entire exercise, A is able to purchase the house at a much better and fair price which was acceptable to B. In this illustration, the price settlement conversations between A and B and the subsequent attorney negotiations are a very simple example of negotiation at the ordinary buyer-seller level and how lawyers add value to the process by accounting for present and prospective legal issues through negotiation.

Importance of Negotiation

The art of negotiation constitutes an essential element of the skill set required for successful conduct of any business. The question of the significance of negotiation is fundamentally associated with cracking of the best deals in any business, howsoever big or small.

Whether we know or feel it or not, we keep negotiating throughout our lives with so many people. Be it buying – selling, negotiating salary with our employer, better conditions of work, reduction of interest rate on our loans, etc. are just few examples. 

Strong negotiation skills can transform a loss into a beneficial compromise. There will always be conflicts in life, and the ability to solve them, particularly in the business world lies in inculcating good negotiation skills which include an array of other ancillary skills such as confidence, market research and ability to understand the position of the other party.

A right mix of such skills makes an individual or professional a good negotiator.[2] In business, negotiation skills are important in both informal day-to-day interactions and formal transactions such as strategizing and negotiating conditions of investment, sale, lease, service delivery, and other legal contracts. 

It is an art to conclude a deal wherein both parties feel they have achieved the desired result and have a win-win situation for all. The significance of negotiation skills cannot be exaggerated. It must always be remembered that negotiation should be approached not as a competition, but as a deal / compromise in which party leaves the table with satisfaction of getting what it wanted.

Bhumesh Verma with Students researcher team of Aditi Duggal, Sanjay Narayan Das, Akhil Shandilya, Dibya Prakash Behera, Samridhi Duggal and Niharika Sanadhya

[1] Business Dictionary, Negotiation, (January 1, 2019, 4:58 PM), http://www.businessdictionary.com/definition/negotiation.html

[2] Jeff Cochran, The importance of Negotiation, (January 1, 2019, 6:30 PM) https://www.shapironegotiations.com/the-importance -of-negotiation/

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