A balance of power is the key to effective negotiations

Quinton Douman

Quinton Douman

It was at the Gordon Institute of Business Science (GIBS) that I learned about Porter’s 5 Forces as a business analysis tool (see image below). It works really well when reviewing the strategic position of any business. The two things it highlights very clearly are points of leverage and the points of vulnerability.

As you will see in the image, two of the five forces are firstly, the bargaining power of suppliers, and secondly, the bargaining power of buyers.


Porter’s Five Forces analysis

It’s important to be able to effectively asses the balance of power in any business negotiation before starting. When a customer or potential client has all the bargaining power – which happens when they have too many options from which to choose – negotiations are bullish and one-sided, and business suffers.

So how do you get the power back?

1. Become a one-off original

Being in a hyper-competitive environment should drive you to think of methods of delivering an offering in a way that sets your business apart. Refining internal processes, becoming more efficient, and identifying opportunities to deliver value that consumers haven’t experienced before will help a business become an original.

The question to ask yourself is: Even if my products are exactly the same as those of my competitor, is there a way that I can deliver an unmatched overall experience? Customise your products or services in way that sets you apart.

2. Become an essential part of your target market’s progress

Whether it is your supplier or customer, the key is to know their interests intimately. When you know what drives their business, when you speak their language, and when you show that you are both willing and able to assist them in growing their businesses, you become an essential part of their future plans. I have seen this in action many times, and it is a beautiful sight. I have seen insurance salespeople taking a sincere interest in the lives of their customers and suppliers, creating a fully functional ecosystem where everyone’s interests matter equally.

3. Know your worth

If you are negotiating from a position of weakness, you have already lost. Nobody buys from a desperate salesperson. Entrepreneurs get into trouble when they start measuring their worth by what they see in their bank accounts. Self-worth is the result of completed assignments. The more you finish the things you start, the more your self-worth will grow, and this will show in negotiations. So before every meeting and every sales call, take cognisance of all the tasks you have completed, even the small ones.

In short, take back your power by creating special focus on these three things: Come up with ideas on how to become a one-off original; take a sincere interest in the growth of the businesses in your ecosystem; and above all, know your worth.

Quinton Douman is the Managing Director of 212 Business Consulting, as well as a public speaker. He is one of only two South Africans to have graduated from the Bill Gove School of Professional Speaking.