What is trade negotiation and what issues can be negotiated?
Trade, whether domestically or internationally, is always a process full of steps and complexities. All these steps together ensure the success of a trade. If any of these steps fail, the desired result can no longer be achieved.
Negotiation and the culture of negotiation are very important sector, especially in international trade. All the investors and traders need to negotiate with others to enter any business. Being able to negotiate and the proper use of this ability can be a very strong step for you as an investor and trader. In the following parts we will examine in detail the different aspects of negotiation and its related cultures and also how to be a good negotiator.
What is the importance of negotiation?
Some people consider negotiation undesirable because it causes disagreement; but being more aware of the negotiation process will help you to manage it with confidence while increasing the likelihood that the outcome will be to the benefit of both parties. This article help you understand the process of negotiation and avoid making the deal which may cause regret and give you the chance to make the most of your resources. We also describe the negotiation process and identify the issues you need to address in your conversations. We review the steps of negotiation one by one and at the end we will deal with what is needed to finalize the deal.
What is negotiation?
Negotiation is the process of your endeavors to encourage somebody to do something that you want. This requires a two-way communication in order to reach an agreement acceptable to both parties. In imports and exports, this agreement may be about the price you want to pay the supplier or you want others to pay you for the product you sell.
Negotiation should be accompanied by persuasion, while ensuring that the other party feels good about the outcome. Win-win negotiation in very important. Both parties should fell that the result in positive. The problem with win-lose negotiations is that the loser later tries to equal the winner. The loser may not reach you today or tomorrow; but eventually he/she will be equal to you.
What can you negotiate about?
Although the negotiation may be complex, there are a few main issues that you can negotiate about. These issues are being explained in details below.
You can negotiate whether you have a restriction on selling your products somewhere and to someone. Suppose I am an Iranian manufacturer of disposable medical supplies. I produce a series of products that are sold without a prescription (Band-Aid, alcohol swab, etc.) plus similar products that are suitable for hospitals. I can choose a distributor in China and determine that this distributor can be the distributor of my products for selling to hospitals. Then, I can determine one other company as my distributor in China for selling products to big malls, pharmacy, and etc.
Exclusive or non-exclusive
If you are an importer, you can negotiate about having exclusive and non-exclusive Distributorship right. If you are an exporter, determine that which rights you will assign to each person to whom you sell your products.
Negotiate about minimum required performance. For example, suppose that I am an Iranian distributor who have been selected by an Iraqi copperware manufacturer. Do we have to reach a certain amount of sales during the contract period? What will happen if I do not reach this level of sales?
One of the other issues that is negotiated in the most of businesses is the product. Negotiate about desired products in the agreement and their features. Furthermore, have discussion about the quality, services and trainings.
Price and payment terms
Undoubtedly any product or service you are considering will come at a cost. Since the main issue of every business and trade is and will be the price, one of the important topics of negotiation is the price. Be clear about your terms and conditions when negotiating prices.
Shipping conditions and risk of damage
When a commodity is selected to be imported or exported, two parties should negotiate about terms and conditions of shipping, as well as all possible and related risks subsequently. Terms and conditions of shipping specify the information about the amount of liability of both parties for shipping of products and their costs. They also determine where ownership is transferred from the exporter to the importer.
Restriction of activities in field of competitor products
In this part of negotiation you state exactly what kind of products are considered your competitors’ products. You also agree on whether the distributor can have activities in the field of competitors' products during the contract period or even some time after the contract expires.
Governing law and language
Different countries have different laws on contracts. Determine which country's law will govern the contract and which international law will govern the two parties. Also, pay attention to that what language is the formal language of the contract. Although the contract may be in two languages, in the event of a dispute over language, one language should prevail legally.
Dispute Resolution Terms
The most disputes between the two parties emerge from disagreements over their duties to each other. During the negotiations, the expectations of each of the two sides should be discussed in detail to reduce the possibility of surprises. Make sure that you are negotiating about the way of resolving disputes; for example, you want to use an alternative dispute resolution process before you can arbitrate or file a lawsuit.
Term and termination of contract
Negotiate about the term of the contract and the terms under which the contract can be terminated or extended. Agreements that are the result of negotiations may be written, oral or implicit based on the actions of the parties involved. Always make the agreements written. A written agreement explains the terms and conditions of the two parties involved and will provide a strong legal safeguard in the event of a misunderstanding.
The last word
Negotiation is a process in which an attempt is made to persuade or encourage a natural or legal person to do what is intended. Many people find negotiation undesirable but in fact it is not true. If negotiations have been done properly, they can have huge potential benefits for the trader or investor. Appropriate negotiation increases the chances of profitability on both parties and greatly reduces possible mistakes and problems that may occur in the future. Sharing your comments and questions about negotiation and its related issues with us would make us happy.
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