# Understanding Negotiation: Key Stages & Effective Strategies

![Negotiation](https://www.investopedia.com/thmb/mVbMNAJANH4s4SBdkw6IsdmNsoU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/negotiation.asp-228fca5196da4b8a99ddbb57acca7d9b.jpg)

*— Investopedia / Ellen Lindner*

> **Definition**
>
> Negotiation is a strategic discussion between two or more parties who try to reach an acceptable agreement for all involved.

## What Is Negotiation?

Negotiation is a strategic discussion intended to resolve an issue in a way that both parties find acceptable. It can occur between buyers and sellers, employers and prospective employees, two or more governments, and other parties.

A successful negotiation requires both parties to prepare extensively and to come to an understanding about one another's position. They should also make an effort to compromise and make concessions. One frequently negotiates for large purchases or employment offers.

### Key Takeaways

*   Effective negotiation requires preparation, where individuals clarify their goals and gather information about the other party's objectives and constraints. This can lead to identifying potential concessions and compromises.  
    
*   The negotiation process involves exchanging information and bargaining, where both parties present their positions and seek mutually beneficial compromises.  
    
*   Understanding the opponent's needs and perspective is essential for reaching an agreement. This means considering their goals while maintaining one's objectives.  
    
*   Skilled negotiators manage their emotions and know when to walk away if discussions stall or become unproductive, indicating the importance of setting boundaries and minimum acceptable outcomes.  
    
*   Examples of negotiation include price bargaining in car purchases and salary discussions in job offers. Real-world applications show the importance of negotiation in personal and professional settings.

## Essential Phases of Successful Negotiation

*   **Preparation:** Before negotiations, individuals should know their goals, concessions they can make, and what they hope to achieve. Preparation can include researching the other party to determine their point of view. When negotiating the price of a new car, buyers often come prepared with pricing data or competing deals. Job seekers bring information to support their accomplishments when negotiating a salary for a new position.
*   **Exchanging Information:** Both sides present their initial positions and what they are willing to offer in return. Individuals should clearly articulate their wishes and listen to the other side to find a middle ground or points that are negotiable.  
    
*   **Bargaining:** After both sides have been detailed, this is when individuals will bargain. An important key to this step is to hear the other party out and refrain from being dismissive or argumentative. Successful negotiations require give and take on both sides, and an adversarial relationship is likely less effective than a collegial one.
*   **Closing the Deal:** Negotiations end when both parties are satisfied. The next step might be a verbal agreement or a written contract outlining each party's role, enforceable if broken.

> **Fast Fact**
>
> According to a 2022 study by Fidelity, 58% of young professionals accepted a job offer without negotiating. For those who did negotiate, 87% received at least part of what they asked for.

## Understanding the Dynamics of Negotiation

The [negotiation process](https://www.investopedia.com/negotiation-secrets-11741146) continues until both parties agree to a resolution or negotiations break off without one. Experienced negotiators learn about the other party's strengths and weaknesses and prepare responses before negotiating.

The length of negotiations depends on the circumstances. Negotiation can take as little as a few minutes when bargaining the price of an item at a garage sale, or much longer, like in company mergers and acquisitions. Some negotiations require a skilled negotiator such as a professional advocate, real estate agent, or attorney.

## Effective Strategies for Negotiating Success

*   **Justify the Position.** Individuals should come to negotiations ready to back up their position, including research and a commitment to reaching a deal.
*   **Consider the Other Side.** Remember that the other side has things it wants out of the deal, too. Individuals should determine what they can offer to help them reach their goals without giving away more than they want to or can afford.
*   **Keep Emotions in Check.** It's easy to get caught up in the moment and be swayed by personal feelings, especially anger and frustration. However, emotions cause negotiators to lose sight of the goal.
*   **Know When to Walk Away.** Know what to accept as a minimum and when to walk away. If both sides are hopelessly dug in, pausing negotiations gives everyone involved a chance to regroup and possibly return to the table with a fresh perspective.

## Real-World Negotiation Examples

A car buyer may be interested in a new SUV but doesn't want to pay the full [manufacturer's suggested retail price](https://www.investopedia.com/terms/m/manufacturers-suggested-retail-price-msrp.asp) (MSRP). They may offer what they consider a fair price. The dealer can accept the offer or counter with another price. A good negotiator may be able to reduce the cost and the dealer may still earn a profit.

An individual's new job offer may come with a low salary. An employer's first compensation offer is often not its best possible offer, so it may have some room to negotiate. Even if a higher salary isn't feasible, the employer may be willing to offer something additional, such as more vacation time or better benefits. This is where the individual may succeed with good negotiation skills.

## What Makes a Good Negotiator?

Some of the key skills of a good negotiator are the ability to listen, to think under pressure, articulate their point of view, and compromise, within reason.  

## What Is the Zone of Possible Agreement (ZOPA)?

ZOPA stands for the [zone of possible agreement](https://www.investopedia.com/terms/z/zoneofpossibleagreement.asp). ZOPA is a way of visualizing where the parties' positions in a negotiation overlap. It is within that zone that compromises can be reached.

## What Is BATNA?

BATNA means the [best alternative to a negotiated agreement](https://www.investopedia.com/terms/b/best-alternative-to-a-negotiated-agreement-batna.asp). It refers to the next course of action a negotiator may take if a negotiation fails to arrive at a satisfactory conclusion. Veteran negotiators often go into a negotiation knowing what their BATNA is.

## The Bottom Line

Negotiating is essential in daily life, business, and international affairs. A successful negotiation requires thorough preparation and understanding of the other party's goals. It is also important to exchange information clearly to find common ground.

But successful negotiation also means being willing to walk away. Studies show that job applicants who negotiate for offers are likely to receive at least some of what they ask for.

> **Article Sources**
>
> 1.  Fidelity Investments. "[2022 Career Assessment Study](https://preview.thenewsmarket.com/Previews/FINP/DocumentAssets/635628.pdf)," Page 3.