Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Negotiation

What it is:

Negotiation is a process in which two or more parties resolve a dispute or come to a mutual agreement.

How it works (Example):

Negotiations occur all the time in the business world, and they are often strategic in nature. In many cases, they require a good legal education and a good financial education so that the parties can understand each other, make sound decisions, and understand the potential consequences of those decisions.

Negotiation often takes place in these business situations:

  1. Company A and Company B want to merge but must agree on price, financing, and management changes.
  2. John Doe wants a job with Company XYZ but must negotiate his salary and benefits.
  3. Company A wants to purchase supplies from Company B on certain payment terms.
  4. Company A wants Company B to become a customer.
  5. John Doe is suing Jane Smith, and Jane Smith offers to settle out of court for a certain amount of money.
  6. Union ABC wants higher wages and pension contributions from Company XYZ.
  7. Jane Smith wants to buy a house from John Doe.

Why it Matters:

The list is endless. The important thing to remember is that negotiation is not necessarily adversarial; it often is a strategic process. The objective is to come up with an agreement that benefits all parties. Sometimes parties must give up some things, but this is indeed part of the negotiation, and giving something up frequently allows for gains in other areas of the negotiation.

The best negotiators prepare themselves by studying the situation extensively before entering the negotiating room. They also consider deadlines, timing, cultural expectations, personalities, and the distribution of information in their negotiating strategies.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...