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What Is a Competitive Negotiation?

By K. Reynolds
Updated May 16, 2024
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Competitive negotiation is a method for negotiating the pricing and terms surrounding a particular transaction. This method of negotiation is based around the concept that negotiations are a zero-sum game; meaning that one party must win the negotiation while the other party loses. This concept is in direct contrast to cooperative negotiation methods, which conclude that there can be multiple winners in a negotiation, resulting in a win-win scenario for all of the involved parties.

A person or company that utilizes competitive negotiation tactics is under the assumption that there is only one fixed outcome that both parties are striving to obtain. The result of a competitive negotiation often results in one party feeling as though he or she received everything possible out of the negotiations, while the other party feels as though he or she has lost out on the negotiation. The losing party typically concedes more to the demands of the winning party.

The concept of a competitive negotiation was first implemented as a tendering method for businesses and governmental agencies. Individuals within these organizations would send a request for proposals (RFP) to qualified vendors. The RFP would state all of the parameters and conditions upon which the project would be awarded. The vendors that submitted proposals within a pre-determined competitive range were then chosen based upon the proposal that offered the best pricing or service.

In a competitive negotiation, the only factors that are a concern are the pricing, terms, and overall value created through the negotiations. The relationships between the negotiating parties tend to be irrelevant in this type of negotiation. Some believe that showing concern for the other party may weaken a party's position and create an opportunity for exploitation.

The strategies implemented within a competitive negotiation either focus on a hard exchange or double-dealing. The process of a hard exchange is one where both parties know exactly what terms are being negotiated, and where there is little or no use of high-pressure tactics. In contrast, in the form of competitive negotiation known as double-dealing, each party uses high-pressure tactics and deception in order to accomplish its goals.

Competitive negotiation tactics can help organizations meet their business goals. Although savvy negotiators might leave a negotiation with a feeling of success and triumph, the competitive nature of the process may cause them to alienate themselves from the other party. Ultimately, business success relies in part on good relationships, and organizations that regularly negotiate based on zero-sum principles may find that this practice has long-term negative effects.

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