E-launch business activities often have to be carried out in an order that may seem totally illogical.
—Bill Gates
In today’s new economy, the Internet is changing the way business is carried out and is fast becoming an important channel of communication. It offers a wide range of business opportunities and challenges for enterprises, particularly those firms seeking new markets. Exporters, importers, suppliers, buyers, and agents are increasingly using the Internet to carry out their business transactions thanks to lower communication costs, reliability, and expediency.1 As a result of its capabilities, many international executives have started to rely on the Internet for negotiations.
Although the benefits from the Internet are numerous, inappropriate use can result in costly mistakes. In fact, most negotiations carried out over the Internet fail due to a lack of clear communication resulting in misunderstanding between the parties. As negotiation is about communication, negotiators must take the time to craft clear e-messages. By avoiding a few common pitfalls, negotiators doing business on the Internet can greatly improve their performance and optimize their outcomes.
Merits of Negotiations Over the Internet
Because communicating on the Internet is relatively inexpensive, user-friendly, and timely, it is easy to maintain ongoing contact with the other party. The Internet also provides an effective means for a firm to promote its products or services anywhere in the world. By maintaining a website, firms gain instant exposure and visibility worldwide, generating interest from potential customers.2 Receiving inquiries on the Internet leads to dynamic interaction with quick exchanges of information. Communicating on the Web permits both parties to rapidly reach the concluding phase of negotiations. However, extra care is needed to determine the buyers’ requirements, making offers competitive to improve one’s chances of establishing a productive dialogue with the buyer. Similarly, the buyer needs to obtain vital information from the seller before considering concessions and counteroffers. Besides it being a neutral communication medium, the Internet overcomes traditional barriers and allows greater interaction with potential partners on a global scale.3
Eliminates Time Zones and Distances
Corresponding on the Internet reduces cultural, organizational, and gender barriers. Obtaining face-to-face appointments with key managers and getting involved in the bid process may be difficult for executives representing lesser-known firms. Thanks to the Internet, however, these same executives can communicate with the intended parties without any barriers.
In the e-economy, any business partner regardless of location, availability, time zone, and position can be easily contacted. This is a tremendous advantage considering how busy today’s executives are. Even if executives are unable to contact their counterparts, their messages are getting through. Eventually the targeted person will look at his or her computer screen and respond. Being able to reach business partners on the Internet reduces the need to travel abroad, which is time consuming and costly. Today, buyers and importers seeking suppliers are less concerned with specific geographical locations as long as they believe a firm can be reached through the Internet. This option opens up new business opportunities for firms seeking an active role in global trade. More importantly, it projects an image of modern organizations relying on state-of-the-art technologies.
Reduces the Role of Status
Doing business on the Internet provides opportunities for junior or lower-ranked executives to interact with senior managers. In some countries and business organizations with a well-structured hierarchy, higher-ups may be reluctant to negotiate with junior personnel. In such cases, there will be undue delays, risk of changes in personnel, and/or breakdowns in communication. This problem is greatly reduced when the interaction takes place on the Internet. Generally, people are more inclined to respond to inquiries via e-mail regardless of age or status of the other person. The Internet can be considered as an equalizer in situations where status, position, and age are considered essential in negotiating business deals.4 This point is particularly significant in markets where culture and tradition play a major role in negotiations. In negotiation situations in which one party is more relationship oriented, the Internet should be used selectively with greater attention paid to crafting clear messages and addressing the other party properly. For example, in more traditional cultures, sending a junior executive to negotiate a contract in which a senior executive represents the other side is a disaster in the making.
Erases Gender Biases
The Internet is an excellent medium that can be used to overcome gender biases in business negotiations where women executives are not expected to hold key managerial positions. In specific geographic regions of the world as well as in certain organizations, women decision makers may face difficulties obtaining appointments with key managers or being invited to participate in negotiations. Doing business on the Internet neutralizes, to a large extent, this gender bias while allowing women executives to negotiate with their counterparts on an equal basis.5 As the Internet reduces the need to travel, women managers are able to more effectively combine family obligations with their professional responsibilities.
Increases Personal Power
E-negotiations provide new sources of negotiating power to those executives who have difficulty interacting effectively in face-to-face discussions. E-negotiations also reduce the risk of discussions failing due to personality conflicts. By negotiating on the Internet, less-confident executives can gain greater personal power, thereby interacting with the other party on an equal, if not superior, basis.
Another benefit of e-negotiations is the home-court advantage enjoyed by both parties. Negotiating from one’s own office offers a number of advantages. Besides being able to save on travel expenses and avoiding recuperating from jet lag, an executive has access to his or her files and staff, and to any other expertise needed to carry out the discussions satisfactorily. Selecting the place for negotiations is no longer a sensitive issue when doing business on the Internet.
Allows Simultaneous Multinegotiations
An important feature of e-negotiation is the ability to carry out several tasks simultaneously, including negotiating with other parties to maximize outcomes. For example, after sending out a message, an executive does not need to remain idle while waiting for an answer. Instead, he or she can undertake other priority tasks. Nothing stops the executive from checking out the competition to see whether his or her most recent offer is competitive. To improve the chances of success, the executive can negotiate simultaneously with other interested parties.
Expands One’s Audience through New Technologies
With the introduction of new technologies, it is now possible to communicate on the Internet with video and interactive voice communication. Along with the exploding use of sophisticated mobile phones, digital communication generates greater virtual business opportunities. Using chat rooms and discussions groups, executives can negotiate with one or more parties. However, to ensure its effective use, a moderator is needed to manage the flow of communications. Due to technical and practical reasons, it is preferable to rely on the text channel only. Discussion groups are most useful for finding out what customers think of a product or service, for exchanging information, for finding new supply sources, and for testing the market.
Pitfalls of Internet Negotiations
Executives who rely on the Internet to keep in touch with existing customers and to seek access to new markets should be aware of a number of mistakes inexperienced e-negotiators tend to make. E-negotiations increase risk. Although the Internet provides worldwide opportunities, it also results in greater risks due to competitive forces dominating e-commerce. The ease with which companies can access global markets and do business using the Internet not only expands trading opportunities, but also gives more power to buyers. In other words, buyers and sellers must be extremely careful when corresponding via e-mail with business partners. All that is needed for an importer to switch to the competition for a better offer is receiving an unfavorable or unfriendly reply from an exporter.
Conflict Escalation
A danger of Internet negotiations is that the negotiators may become antagonistic, as it is easier to become less agreeable when not dealing with another party face-to-face. Frequently, due to the absence of interface with the other party, e-negotiations can turn to “take it or leave it” offers—hardly the type of business strategies and tactics suitable for negotiating long-term agreements.6
Greater Emphasis on Price
E-negotiations allow an executive to carry out multinegotiations without the knowledge of the concerned parties. E-buyers also negotiate with several sellers to maximize their results. As a result, e-negotiations often reflect a lack of cooperation coupled with more competitive moves centered on a single issue, namely, price.7 Carrying out simultaneous negotiations with several parties may yield better outcomes, but mainly results in one-time deals. Multiparty negotiations are sometimes used to test the market and to determine whether one’s offers are within an acceptable range. Generally, these initial contacts do not develop into full-scale negotiations.
Strategies for Negotiations on the Internet
Negotiating from one’s office and exchanging information is an easy and comfortable way to carry out discussions. Reading e-messages on a computer screen and sending replies by e-mail is fast becoming an acceptable practice for business-to-consumer and business-to-business transactions. Unless negotiators take notice of the danger of negotiating on the Internet, they may develop “screen myopia” or “tunnel vision.” In other words, negotiators enter an interpersonal game where messages are sent and received from one or more partners to obtain the best deal. After several rounds of exchanges, negotiators tend to become obsessed with winning at all costs and begin to take greater risks while relying on more aggressive tactics. By getting involved in this game, negotiators often fail to consider the context in which the transaction is taking place, do not consult others for advice, and forget the long-term consequences or benefits of their actions.8 This explains the high failure rate of negotiations on the Internet.
Situations Suitable for E-Negotiations
Negotiating on the Internet should be limited to exchanging information, clarifying key issues, and finalizing specific clauses in an agreement. The Internet is also an excellent medium for preparing arrangements for a forthcoming face-to-face negotiation, such as making travel bookings, finalizing the agenda, selecting the location of the meeting, and agreeing to the number of people participating in the discussions. The Internet is also expedient when negotiating a repeat order or a small transaction that does not justify an investment of time, personnel, and financial resources.
To business executives, the Internet provides up-to-date information about the competition and buyers’ technical requirements and offers a plethora of timely marketing intelligence. Companies must know who their competitors are and what buyers are looking for before their employees can reply to e-mail inquiries.
Because communication on the Internet is easy and fast, there is a tendency to respond immediately without taking time to prepare well. Negotiating on the Internet is no different than face-to-face negotiations; both require planning, preparing, displaying patience, understanding people, knowing the needs of the other party, and using persuasive skills and problem solving abilities (the four Ps of negotiations, i.e., preparation, patience, persuasion, and problem solving).
As e-enterprise involves receiving inquiries from parties operating in a borderless world, great care should be given to local business practices, legal aspects, and financial considerations. Payment and security concerns are sensitive issues requiring serious assessments, particularly when requests originate from unfamiliar markets or unknown parties.
Proper Planning for E-Negotiations
An executive should take time to think through the full implications of the negotiations on the Internet before communicating with the other party. Once a message is sent, particularly when it is printed, it can be viewed as a legal or binding document by the recipient. Furthermore, what is written tends to be taken more seriously by the other party and may come back to haunt the executive, especially when the message is of a negative or unpleasant nature. Frequently, people use the Internet to send messages without planning and without assessing the long-term implications of their actions. An inadequately prepared message is likely to be misunderstood, resulting in unproductive communication. A consequence could be that both parties may take positional stands, and instead of seeking common ground, they may concentrate on exploiting their differences.
Too often, a party’s main concern is to reply as soon as possible. In fact, numerous e-commerce manuals recommend replying within 48 hours. For some business transactions, 48 hours may be too long, for others, 48 hours may not be long enough. Because many executives consider quickness in decision making a sign of superior management skills, they have a tendency to act rapidly. Acting quickly is easier on the Internet as a person is facing a screen instead of people. What is important is for a company representative to give each incoming and outgoing message full consideration, including assessing the risk over the long term and how the message will affect his or her position with their competition. To avoid being overwhelmed with incoming e-messages, the employee should thoroughly screen all incoming messages and set priorities allowing him or her to reply to genuine inquiries only. If the employee needs more time before replying, he or she can send an interim message.
Negotiators must use common sense and sound business practices to maintain open communication lines with potential clients while taking time to be well prepared for upcoming negotiations.
Combining E-negotiations with Face-to-Face Discussions
To reap the full benefits of e-commerce, negotiators may wish to combine off-line, face-to-face meetings with online communication. Despite all the advantages of doing business on the Internet, when it comes to negotiations, face-to-face interaction is still preferred by most executives, particularly if the value of the deal justifies it. In more relationship-oriented cultures, online communication should be restricted to exchanging information, while the main issues are discussed off-line. One danger to be aware of is the impersonal nature of e-negotiations. Trust and confidence are difficult to establish and maintain solely on the Internet.9 This is particularly true in situations where one party is only interested in pricing. Because of competitive pressures, buyers and sellers limit their exchanges to offers and counteroffers centered on the single issue of price. This scenario is at the heart of too many negotiations, whether they are held face to face or over the Internet. For example, sending ultimatums (“this is my last offer”) or other forms of competitive moves tends to dominate e-negotiations. Although pricing is a key issue in any business negotiation, in the end, it is the firm’s reputation as well as its capacity to produce the required quality and quantity, and deliver timely that influence the decision. For this reason, each party should take the time to explore in detail what is required and take the time to develop sound proposals that can withstand competitive pressures and lead to repeat orders over the long run.
Cooperative Versus Competitive Approach in E-negotiations
Basically, competitive behavior dominates e-negotiations. Given the fact that e-negotiations are impersonal, executives are inclined to pay less attention to personal relationships and cooperative strategies. This behavior is reflected by the wide use of irritants, negative expressions, and aggressive tones in e-communications. Moreover, as e-negotiators do not benefit from observing the other party’s body movements, a great deal of information communicated through nonverbal cues is lost.
In e-negotiations, new technologies have an impact on the way negotiations are carried out, particularly on how fast they take place. Because e-negotiation is basically an exchange of information between two or more parties until each party’s needs are satisfied, e-messages become the mainstay of communications. But sending ultimatums or responding with tit for tat is hardly the best approach for building a lasting business relationship. In any face-to-face negotiation, there is a mixture of competitive and cooperative strategies, with more collaboration prevailing in the concluding phase.
To ensure success, e-negotiators should avoid being too competitive in the early rounds, as such discussions can lead to a breakdown of communications. E-negotiators must encourage the sharing of information in the early rounds, allowing both parties to reach the closing phase through the exploration of joint solutions.
Pros and Cons of E-Negotiations
The Internet has proven to be an excellent vehicle for business-to-business dealings. It is estimated that 80 percent of the growth in e-commerce will come from business-to-business transactions, mainly from global supply chains. Companies wishing to benefit from supply chains need to be connected with these global firms in order to be in contention for their procurements. The direct linkage between buyers and suppliers is likely to result in a restructuring of commercial distribution channels, with less reliance on intermediaries. As buyers’ requirements will be accessible to anyone connected to the Internet, greater competition among suppliers can be expected, resulting in lower prices and reduced profit margins. E-negotiators will need to be well prepared to face the competition and must emphasize their technical capacities, delivery capacities, reputation, and long-term commitment. Finally, despite the benefits of negotiating on the Internet, negotiators should continue to travel to their markets to maintain personal contact with customers and to assess the local business environment. Figure 15.1 provides a selected list of tips for negotiators communicating via e-mail.
Figure 15.1 Useful tips for e-negotiators**
** The above tips for e-negotiators are developed from Claude Cellich’s book review in the Journal of Euromarketing, Volume 23, Number 3, July-September 2014 for the book E-Negotiations; Networking & Cross-cultural Business Transactions by Harkiolakis, Nicolas with Halkias, Daphene and Abadir, Sam (2012). Gower Publishing, Surrey
Summary
Until e-commerce is fully integrated into the global economy and management is committed to this new form of doing business by restructuring their processes, negotiators should continue face-to-face interaction supported by e-exchanges. However, the Internet has changed the competitive landscape. It has given more power to buyers and has provided greater business opportunities to suppliers, importers, and exporters, regardless of time zones and distances. Thus, negotiations on the Internet are more competitive, impersonal, and adversarial, often resulting in negotiation failures. With e-commerce stimulating competition, firms engaged in business-to-business trade face greater price pressures, higher client turnover, and unpredictable markets conditions.
E-negotiation is no panacea to business-to-business deals, but if used effectively, it can lead to better agreements. Failing to do so, e-negotiators may find themselves without business deals, as other parties switch to the competition with a simple click of the mouse. By and large, e-negotiations are best for negotiating repeat business, taking and confirming orders, initiating trade leads, testing the market, clarifying specific points, obtaining additional information, providing after-sales service, giving details about shipping and deliveries, communicating with existing customers, checking the competition, and preparing for face-to-face negotiations. But e-negotiation success requires sending well-crafted e-messages, considering long-term implications, consulting others before replying, carefully reviewing messages before sending them, being selective when replying, refraining from using negative/irritating expressions, adopting more cooperative strategies, avoiding discussing pricing issues from the outset, and avoiding developing “screen myopia.”