Negotiating power is the influence that affects the outcome of negotiations, which can shift from side to side. Both sides have something the other wants, and behavior, approaches, and external factors can affect negotiating power. Researching ahead of time can increase the chances of closing a deal in one’s favor.
Negotiating power is perceived or actual power that influences the outcome of negotiations. It is extremely rare for power in negotiations to be unilateral or for the balance of power to remain consistent during negotiations. As people negotiate, power can shift from side to side in response to changing circumstances. Understanding how negotiation power works and how it can be manipulated is a key part of successful negotiation; numerous books and workshops cover this topic comprehensively for people who trade professionally.
In negotiations, both sides have something the other wants. For example, when people sit down to work out the details of a real estate deal, one side wants the property and the other side wants the money. Thus, each party immediately has negotiating power, manipulating its control over what the other party wants. Similarly, when someone is negotiating on salary, that person has the skills a company wants and the company has a position that person wants to fill.
Several factors can affect negotiating power. One is behavior during negotiations; people who are confident and assertive, for example, generally have more perceived power even if they lack actual power. Similarly, different approaches to negotiations can cause ebbs and flows in negotiating power, depending on how those approaches are perceived by the negotiating goal. Someone who works very aggressively, for example, might end up in a corner with no power when the other side starts calling bluffs.
External factors also play a role in negotiating power. Individuals outside of negotiations may have an interest in how negotiations proceed and may be able to influence the outcome of negotiations. In the real estate example above, for example, someone else might make a better offer in hopes of getting one of the parties to back out of the deal. This best offer could in turn be used as leverage to increase negotiating power.
Whenever someone gets into talks about something, it pays to research ahead of time to learn as much as possible about the other side and gain some insight into the balance of power. Having this information before you start trading can be extremely valuable. This technique is used by everyone from diplomats to casket sellers; knowing as much as possible who you are working with increases the chances of closing a deal in your favor.
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