Can you negotiate with Wal-Mart? With a big celebrity? With the President of the United States? In his excellent book, Breakthrough Business Negotiation: A Toolbox for Managers, former Harvard Business School Professor Michael Watkins suggests a way to negotiate when the other side is very powerful and you feel very weak. One particularly valuable insight: you can sometimes do surprisingly well by doing several things outside the negotiating room to improve your relative strength…^^ To improve the odds of negotiating well with a BIG counterpart, you need to make wise moves away from the bargaining table. How? In essence, Watkins argues, by gradually building up your strength with a series of agreements with others. You do this work until you can (1) offer the BIG guy more attractive options than you could before, and (2) made it possible to do well without him. To put it another way, you develop your ability to offer the BIG guy something attractive- and your ability to walk away- by first negotiating well with other players.
Example- Negotiating with Wal-Mart. For example, imagine you want to build a shopping mall in Farmington, Massachusetts. In the first weeks of the project you win a loan from the bank. You also win an option to lease the land for twenty years from the current landowner, an option that expires in 12 months. You apply for a building permit from the town government (which advertises that it’s very friendly to business), and you interested several smaller store owners in the idea of renting space there. Unfortunately, simple bureaucratic snags caused the government to delay issuing the permit for nine months. Still, with three months to go before your lease runs out, you are hopeful. You want Wal-Mart to be your key tenant, in part because the other stores want a big retail chain there to attract customers to the mall. So you start negotiating with Bob Smith, a Wal-Mart VP. You seem to make progress. You learn that Wal-Mart likes the location and wants to keep its competitor, Target, out of the region. (Neither Wal-Mart nor Target likes to open a store near the other.) But with just one month to go, Smith makes several “non-negotiable demands” for freedom to sublet, freedom to quit the mall anytime, and lower rent. Together, these demands would ruin your ability to attract other tenants and would kill your ability to win a profit. The ‘quit mall’ clause would be particularly bad. What to do? Watkins suggests these moves: Four Moves Away From the Wal-Mart Table
1. Government. Negotiate for real estate tax breaks and public services from the government, showing them that the mall will increase employment and sales taxes- IF you build it.
2. Land Owner. With these breaks from the government, negotiate with the land owner for a nine month extension and a lower rent by showing him that the government’s assistance will improve his land value. The extension will reduce the pressure on you to agree with Wal-Mart very quickly; the lower rent will make everyone happy.
3. Store Owners. With the government benefits and the lower rent in place, go to the other store owners and get them to agree to the sublet clause Wal-Mart wants (and that you can live with.) Also get them to agree that Target would be an acceptable substitute.
4. Target. With all these agreements in place, open talks with Target to serve as the anchor tenant instead. Show them that they can block Wal-Mart and grab an attractive new mall in the region. A Stronger Negotiation with Wal-Mart Finally, go to Wal-Mart’s Bob Smith and offer (a) the sublet clause he asked for but not the ‘quit mall’ clause; (b) a lower rent; and (c) government tax breaks and improvements. Tell him that (d) you have several more months on your option so you’re not in a rush now, and (5) Target is very interested. Now if Smith refuses to cooperate, you can walk away easily. But he now has very good reasons to agree: you’ve made the offer more attractive to him in several ways, and raised the cost of disagreeing. You can find Watkins book, Breakthrough Business Negotiation: A Toolbox for Managers, at Amazon.com at http://www.amazon.com/gp/product/0787960128/102-1840352-4155308?v=glance&n=283155.