Negotiation: Is It Just About Price?
As if the world wasn't crazy enough just now, the row that’s just blown up over Covid vaccine allocations have made matters just a little crazier.
I believe it's all down to the negotiating priorities of the various parties.
The Issue If you haven't heard, the EU has just asked (demanded) AstraZeneca "ring-fence" 75-million doses of the Covid vaccine manufactured in its UK plants to make up for a shortfall after AZ said it would cut the number of doses delivered to the EU due to supply problems.
When it comes to negotiating commercial deals between 2 or more parties, there are very rarely matters of life and death. However, the Covid19 vaccination roll-out could be one of those such rare deals that could, quite literally, mean life or death for those that remain at risk due to non-vaccination.
It's no surprise, therefore, that a considerable amount of angst has been generated from various parties affected by AstraZeneca’s decision to restrict supply to the EU. In response, the EU even threatened to impose border restrictions between the Irish Republic and Northern Ireland to limit vaccine exports from the EU.
Negotiating Priorities This got me to thinking about the various negotiating positions and decision-making processes that have taken place between Governments and Pharmaceutical firms. That is, the end-user clients and the supplier on the journey to securing precious vaccine supplies.
It’s clear to everyone that the UK Government urgently needed to recover its reputation in the eyes of voters in the way that it has dealt with the Covid-19 pandemic, so its primary objective was to achieve the fastest delivery timescales possible to vaccinate its population. In doing so, it could not afford to embark on a lengthy procurement process and so pricing would have to be its main point of flexibility.
For info, the UK Government signed the AstraZeneca deal 3-months before the EU
The EU on the other hand - and by its very constitution - needed to have all 27 member states agree to a deal before it could commit to AstraZeneca.
This could have been for a number of reasons but, given the political and economic ramifications of the still raw Brexit process, its priority was to preserve the integrity of the EU body itself. This would take considerably more stakeholder management (diplomatic effort) – in other words, time - and therefore time became its default point of flexibility.
It’s important to understand what you want out of the deal but also to discover what your negotiating partner (or counterparty) wants out of the deal – their negotiating priorities.
After all, if you can help them get what they want out of the deal (they may not be very clear in what they want to achieve commercially), then you can put together your negotiating strategy by helping them get what they want which, in turn, helps you get what you want out of the deal.
Defining a Successful Negotiation I believe the definition of a successful negotiation is where everyone is satisfied with the outcome. That doesn’t mean everyone is thrilled though it could mean everyone is relieved! It means that the parties could all win but by unequal amounts. Some people will be thrilled, some happy, some relieved but some may become resentful if they feel treated less favourably for some reason.
Any party that is in the resentful angry bracket is someone whose negotiating needs have not been met and they may even put the deal at risk by “misbehaving” or becoming uncooperative at some point.
Given the most recent vaccination statistics, the potential political ramifications and the clear and present need to preserve itself, it’s no wonder the EU feels angry.
· What are your negotiating priorities in trying to do a particular deal?
· What are you prepared to be flexible on?
· What are your client’s priorities in doing a deal? If it’s an extremely large deal or share price affecting, consider any political priorities (PESTLE)
· Nothing is agreed until everything is agreed - make sure you know the decision-making process your client will be going through before committing to a deal. That includes price, delivery slots and could preserve the integrity of your business forecasting
· As a minimum, each party should feel satisfied about the deal in order for it to stay “done”