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Different Types of Negotiation, Explained

The Scotwork Team
Negotiation Encyclopaedia [Converted]

Negotiation is a fundamental skill in the business world as it facilitates effective agreements across various scenarios—and so do the types of negotiation itself.

In this article, we are going to explore two negotiation approaches that are central to the practice of negotiation. Then, we look at different types of negotiation as well as some key considerations for using one over the others.

Negotiation approaches

Before we dive into various types of negotiation, it is important to understand that most, if not all, negotiations are often categorised into two main approaches: distributive negotiation and integrative negotiation. Let's take a closer look.

Distributive negotiation

Distributive negotiation is also known as competitive, or win-lose negotiation. It involves a situation where the resources in question are fixed and limited, leading to a scenario where one party's gain is another party's loss. The goal in distributive negotiations is to get the largest possible piece of the pie, so it is about maximising one's own benefit.

Common scenarios include haggling over prices where the buyer wants to pay less, and the seller wants to charge more. Consider using the distributive approach when:

  • •  The interests of both/all parties clearly conflict

  • •  The other party insists on taking a win-lose approach

  • •  You do not need to foster or nurture long-term relationships

  • •  You are powerful enough to prevail

  • •  Short-term goals are more important

For example, a tech company is negotiating a contract with a software development firm for a specific project. The tech company aims to minimise its costs, while the software firm seeks to maximise its project fee. After several rounds of negotiations, a contract is agreed upon at a lower fee than initially quoted by the software firm, but with stipulations for additional payments based on the project meeting certain milestones, thus providing a compromise that allows the tech company to manage its budget while offering the software firm potential for higher earnings.

Integrative negotiation

Integrative negotiation is known as collaborative, or win-win negotiation. Unlike distributive negotiation, integrative negotiation involves a scenario where all parties seek to find solutions that bring mutual gains. It assumes that the pie can be expanded through cooperation and by understanding the underlying interests and values of the other parties.

In integrative negotiations, parties work together to find creative solutions to their problems that can increase the value for all involved. Consider using the integrative approach when:

  • •  You and the other party have common/shared interests

  • •  The other party is willing to consider a win-win approach

  • •  You are in a weaker position, or power is approximately equal

  • •  Building a continuing, trusting relationship is important

  • •  Long-term goals are more important

As an example, two companies are negotiating a partnership to develop a new product. Each has unique resources and capabilities that can contribute to the success of the project. Through integrative negotiation, they explore ways to combine their resources and expertise in a manner that enhances the project's value, resulting in a more profitable outcome for both than if they pursued the project independently.

9 Common types of negotiation

Each negotiation type has its context, strategies, and tactics, which influence how parties prepare, engage, and conclude their negotiations. Understanding these nuances is crucial for effective negotiation.

1. Competitive negotiation

Competitive negotiation thrives on the principle of win-lose outcomes, where one party aims to secure the most advantageous deal possible, often at the expense of the other party. For instance, in a procurement process, multiple suppliers might bid for a contract, with each aiming to outdo the others on price or service terms to win the business.

2. Compromising negotiation

In compromising negotiation, parties seek a middle ground, making concessions to achieve a mutually acceptable solution. This approach is often seen in wage or salary negotiations, where employers and employees agree on a number that balances the company's budget constraints with workers' demands.

3. Power-based negotiation

Power-based negotiation leverages one party's position of strength over another to dictate terms. A large retailer negotiating supply prices with a small manufacturer might use its purchasing power to secure lower prices, knowing the manufacturer depends heavily on the retailer's business.

4. Principled negotiation

Principled negotiation focuses on mutual interests rather than positions, aiming for win-win outcomes. It involves identifying shared goals and working in collaboration to achieve them. An example is a business partnership where two companies collaborate on a joint venture, pooling resources and expertise for mutually beneficial outcomes.

5. Team negotiation

Team negotiation involves multiple representatives or negotiators from one or both parties. It is common in complex business deals, such as mergers and acquisitions, where various departments (legal, financial, operational, etc.) need to agree on different aspects of the deal.

6. Multiparty negotiation

Multiparty negotiation includes more than two parties and is seen in situations like coalition government formations, where multiple political parties must negotiate to form a government, agreeing on policy priorities and cabinet positions.

7. Adversarial negotiation

In adversarial negotiation, parties view each other as opponents, and the process may be confrontational. Legal disputes often take this form, with each side aiming to secure a judgment in their favour.

8. One-shot negotiation

One-shot negotiation happens when parties negotiate a single deal with no expectation of future interactions. For example, buying a car from a dealer you are unlikely to visit again may involve one-shot negotiation as it focuses on getting the best immediate terms.

9. Repeated negotiation

Repeated negotiation occurs between parties with ongoing relationships. It emphasises long-term outcomes and trust. Long-term supplier agreements are a typical scenario where both sides aim for terms that will sustain their relationship over time.

Which type of negotiation to use?

While no two negotiations are ever the same, there are some "basics" you can consider to choose the most effective approach to achieve your goals, and, ideally, the other's. Ask yourself:

What is the ultimate goal?

Whether you are seeking a quick win, a long-term partnership, or a fair solution, the choice of negotiation type directly ties to what you hope to achieve.

Competitive strategies might be preferred for maximised personal gains, while principled or compromising negotiations aim for mutual benefits and sustaining relationships.

How complex is the issue?

This includes the specifics of what is being negotiated with the desired speed of resolution. Simply put, how complex it is and how fast the parties involved want it resolved.

Straightforward, transactional negotiations might lean towards one-shot or competitive strategies for speed and efficiency. In contrast, complex issues or those with significant long-term implications call for more collaborative approaches like principled or team negotiations to ensure all interests are thoroughly considered.

What are the relationship dynamics?

This is about your relationship with the other party – and vice versa – and the power dynamics at play. At the end of the day, the last thing you want to do is to burn bridges if compromises can be made to benefit all parties.

Ongoing relationships might benefit from more collaborative forms like team or repeated negotiations, where trust and mutual benefit are paramount. Conversely, in situations where power is unevenly distributed, power-based or adversarial negotiations might emerge, necessitating a strategic balance between asserting one's interests and maintaining the relationship.

How many people and who are involved?

The more parties involved, the more complex the negotiation becomes, often requiring a shift towards multiparty or team negotiations.

These scenarios demand strategies that can accommodate the broader range of interests and perspectives, pushing towards more compromising or principled approaches to achieve consensus.

Any cultural and ethical considerations?

The negotiation strategy may also be influenced by the cultural background of the parties and ethical standards.

Cultural expectations can dictate whether a more competitive or collaborative approach is appropriate, while ethical considerations can drive the preference for principled negotiations to ensure fairness and integrity in the process.

Master your negotiation tactics with Scotwork

We believe one of the best ways to perfect negotiation skills is to put the work in. That's why our negotiation training courses are hands-on, ensuring that your learning journey is not only insightful but also enjoyable, with a strong emphasis on practical application through real-world case plays. What's more, Scotwork's expert, seasoned coaches offer personalised feedback and strategies tailored to your unique needs. Get in touch today to see how Scotwork can help advance your negotiation skills.

The Scotwork Team
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