Negotiation - The Pitfall to Avoid

Many year ago, I was asked by my superior to attend a business meeting in Shanghai together with him, and my scope is to represent our Malaysian operation to deal with a sales contract to be awarded upon successful business negotiation.

The company in Shanghai is our established long term customer of more then 10 years and we have a cordial working relationship all the while.

The first question I asked to my superior, "What is the real issue with this negotiation and what can we do?" The reply was, "We do not really know what they wanted, except we were ask to attend the meeting in relation to the price quotation submitted earlier".

Upon arrival into the meeting room in Shanghai, we were surrounded by a negotiating team of 6 person.

Beside the chairman of the team, he has personnel from sales, quality and finance sitting inside the meeting room, and here, we were, 2 person team, i.e. myself and my superior.

The endgame of this meeting was without doubt, a trashing.

The demand was:-

a) Lower our prices to those they targeted, otherwise the business will go elsewhere
b) You have to make the decision within few hours as they need to wrap up the process within the week itself

What is right and wrong here?

The negative are as following:-

a) We did not take seriously of this meeting, thinking that our opponent for this process is our long term customer and they will have some emotional connection with our company
b) We did not prepare anything at all, thinking that they are formalizing the  latest deal and need our attendance to check on certain issue which may be overcome easily by us
c) We did not ask them seriously for the real agenda of the meeting and trust the content of the invitation which read something like, " to negotiate and finalize the term of supply for the new contract."
d) We did not have any Plan B in our briefcase to overcome any issue
e) We always thought that the pie is fixed for us and nothing will change
f) We betting on our track record of good quality, delivery and historical pricing which should be good for the customer


What we should have:-

a) Asking for the full agenda for the meeting and what is the real concern which we need to prepare for
b) Prepare for Plan B even if this will not be use based on few possibilities outcome from the meeting
c) Must not have assume that the customer will stay with us for the long term without any serious demand
d) Review closely the proposal submitted to ensure no surprises

On our customer side, what they have done with this negotiation was perfect and based on our amateurish preparation, we are "dead meat".

What have they done correctly?

a) Plan well by including all the key members of the company to be in the team, i.e. proper evaluation of the business proposal and feedback from every member of the team must have been considered before calling for the meeting
b) Reveal little about the meeting agenda and since we did not ask for more detail, work to their advantage
c) Negotiation are on their home ground and, thus advantage of familiar surrounding
d) They have arrange Plan B if our side is unable to provide what they needed
e) They have formed their zone of possible agreement  (ZOPA) and we have not done that

In the end of the day, we lost the negotiation process but kept the business by;

a) Providing to them most of their demand
b) Reduce our margin for the business considerably
c) Lick our bitten ego

The are blinded by the "enemy" and got a trashing and we allow this to happen due to our own ignorance and overconfidence.