First impressions make a difference. Getting off to a good start
in business negotiations is likely to influence the final
agreement. Your first offer should reflect your best-case scenario,
supported by first-class justification. To steer negotiations
toward your goals, find out the other side's needs; think through
your opening positions; and master the technique of repeated
The way you open business negotiations influences the entire
process, from the initial offer to the final agreement. For
first-time negotiations, especially between different cultures,
these opening moments are even more critical.
Business executives should ask themselves three questions when
preparing their opening offer:
• Who should make the first offer?
• Should it be high (if you are exporting) or low (if you are
• What should you do if your opening offer is rejected?
While some negotiators recommend letting the other side open the
discussions, others suggest that making the first offer gives you a
tactical advantage. These suggestions are simplistic and generally
apply to one-time business deals. Doing business in the global
arena is a long-term prospect, where personal relationships are
essential. Skilled negotiators create a favourable atmosphere that
has a positive impact on the tone, style and progress of
negotiations, as well as the final agreement.
Once made, first impressions are difficult to change,
particularly if they are negative. We tend to have quicker,
stronger and longer-lasting reactions to bad impressions than to
positive ones. So, take extra care in formulating opening
For fruitful negotiations, the opening offer should:
• stress mutual benefits;
• be clear and positive;
• imply flexibility;
• create interest;
• demonstrate confidence; and
• promote goodwill.
Understand what the other side needs
The opening phase is the time to find out what the other side is
really looking for. Identify their underlying needs and your common
interests, and emphasize the mutual benefits to be derived from
reaching agreement. At least in the initial stage of the
discussions, be prepared to set aside differences of interests and
potential obstacles that could derail the negotiations. Your first
offer should be viewed as fair and reasonable. The other party may
require justification to support your proposal; you should be in a
position to provide it. Overall, the initial offer should be on the
higher side to give you room to manoeuvre while protecting your
margins. Research has proven that negotiators starting with high
aspirations generally obtain higher outcomes than those with lower
or more modest goals. As a rule, buyers do better starting with low
offers, while sellers improve their results with high openings.
In view of these findings, exporters may be tempted to start
high and importers to begin low to maximize their outcomes.
However, as every deal is different, both parties should consider
each new negotiation as unique, calling for extreme care in the
preparation of opening strategies. Experienced negotiators in
international business bear a number of factors in mind when
planning their opening stance: cultural norms prevailing in the
target market; competition in their line of business; and whether
they are seeking repeat orders over the long term. Equally
important is how badly they need the deal and whether they have
other business alternatives.
Should I make the first offer?
Yes, if you wish to take the initiative and set
the tone of the discussions. You gain a tactical advantage by
submitting your position first, because you establish a reference
or anchor point.
Your anchor point will probably influence the other side's
responses. The other party now knows your position, and will either
reject it or request a counter-offer. The other side may also
revise its acceptance limits in light of your opening offer.
At this point, don't make unnecessary concessions; seek
clarifications instead. This approach assumes that your initial
offer is based on recent market information, is credible and is
presented with conviction.
In most international business deals, sellers are expected to
make the first offer since buyers consider themselves in a position
of power. In some markets, buyers dictate the discussions and
control the negotiations from the beginning to the final
No, if you are not familiar with the market in
which you are trying to do business. Making an offer without
adequate information or a clear understanding of what the other
side wants places you in a risky position. For example, having your
first offer accepted means that you have underestimated the
Another reason for not making the first offer, even if you know
the market price, is to test the seriousness of the other side,
particularly if it is new a business deal. In this case, prepare in
advance. Find out about quality standards, delivery terms, size of
order, payment conditions and other relevant information. This will
enable you to present a credible offer or counter-offer.
Should I open high?
Yes, if you can justify the level of your
offer. At this early phase of the discussions, any objections to
your high offer should be dealt with through questions, not by
making concessions. Your best approach to objections is to find out
which part of your proposal is acceptable and which elements are
considered objectionable. Only by acquiring this additional
knowledge will you be in a position to justify your initial offer
or eventually make a counterproposal. Proposals and counter-offers
should be handled step by step, using the technique of repeated
questioning (see box). This allows you to gather and exchange
information without making early concessions. Equally important,
the technique allows discussions to continue, despite rejection of
a high initial offer.
Starting high is common in markets where business executives
rate their superior negotiating skills by how many concessions they
obtain. For example, a high initial offer is expected in many
countries in Latin America and the Middle East. In highly
competitive markets, frequently found in south-east Asia, North
America and western Europe, opening offers are slightly above the
bottom line. In most of Asia, Africa and European economies in
transition, a moderate to high offer is taken for granted. A
moderate opening offer is an acceptable strategy to initiate
discussions in most foreign markets.
The main mistake to avoid is to present an offer considered so
high by the other side that it results in a deadlock. Another
common pitfall is to start with a high offer and not be prepared to
justify it. To overcome lack of justification or preparation,
negotiators wrongly begin immediately to make concessions, without
asking for reciprocity.
Should I make a low offer?
Yes, in special situations. Skilled negotiators
may make a low initial offer, near the bottom line - not so much to
get the business, but to be invited to the negotiations. In some
industries and markets, your product is sold at a going price and
at predetermined conditions, leaving you with little choice in
setting your opening offer. When facing strong competition, your
offer should be more or less in line with theirs.
An advantage of having an opening offer close to the
competition's is that it allows you to remain in contention for the
business. To increase your chances of having your offer retained,
your proposal must address the specific needs of the other side and
demonstrate how your offer can best meet their requirements to
their full satisfaction. While doing this, it is important not to
criticize your competitors openly.
When they hope to enter into new markets or to get a foot in the
door with a new customer, business executives often open with a
proposal that is close to, or at times below, their bottom line. In
such cases, it is vital to explain that the offer is valid for a
limited time only. For example, an exporter may be faced with extra
production capacity during the last quarter of the year. In this
situation, the exporter could propose a limited business deal at a
one-time price preferential, in order to utilize the extra capacity
and thus recover the fixed and part of the variable costs.
At times, you may wish to make a low offer in order to secure
business with well-known global enterprises. This strategy is
common among small and medium-sized firms seeking business deals
with world-class companies. Advantages of being associated with
large international firms often override the need for immediate
profits. This business strategy places the negotiator in a weak
position from the beginning, however, and often results in
unprofitable agreements. To avoid being caught in this situation,
shift the discussions away from the initial offer to the needs of
the other side.
Your main concern at this stage is to take charge of the
discussions through questions, in order to make sure you have a
clear understanding of the real needs of the other side. Once you
know exactly what the other party's requirements are, you can
propose additional features such as better quality, faster
delivery, individual versus bulk packaging, short and flexible
production runs and other intangibles in order to improve your
margins. By managing successfully this type of low-offer strategy,
you could obtain a profitable agreement despite having started near
your bottom line. Remember, professional buyers are known to seek
the highest-quality products or services from the most reputable
firms at the lowest possible price. In the end, these same buyers
often end up paying a premium to avoid the risk of getting
inconsistent quality or receiving late deliveries.
There are times when entrepreneurs from small or mid-sized firms
propose very low offers in the hope of receiving large orders at
higher prices in the future. Too often, promises for future
business opportunities remain just that - promises. Negotiating
deals at low prices in the hope of recovering lost profits from
future orders is a dangerous strategy. Wise negotiators avoid this
strategy because of the high risks involved. Don't forget that if
the main reason you obtained the deal was your low offer, the
moment you raise the price (with or without ample justification),
the buyer is most likely to shift the business away from you to
What should I do if my first offer is rejected?
React positively. A rejection should be regarded as the
beginning of the negotiations, not the time to make concessions or
take a defensive attitude.
Experienced negotiators expect objections. They turn objections
into opportunities, without getting into concessions. They consider
such reactions as an ideal opportunity to start an information
exchange through questioning.
Before justifying your initial proposal, ask the other side what
part of your offer they are willing to accept. This information
allows you to initiate discussions in a positive manner and to
reintroduce your proposal, stressing the features considered best
by the other side. By not ceding to pressure, you gain a
substantial psychological advantage in the early round of
discussions. This exchange of information between both parties is
necessary to identify common grounds and explore new interests to
reach a better agreement.
A summary of the most common objections encountered in the
opening phase of the face-to-face discussions and appropriate
responses is given in the box on page 16. These objections are
generally meant to put you on the defensive. By taking charge of
discussions through repeated questioning until you have a clear
understanding of what the other side really wants, you can
successfully overcome these early objections and be in a favourable
position to steer the negotiations toward your goals.
Getting your first offer ready
For every negotiation you plan to enter, your initial offer
should stand on its own merit within the prevailing context
surrounding the discussions. Entering the negotiations under false
pretences or unfounded premises can prove costly or result in
deadlocks. Make your first offer competitive in the eyes of the
other party and be ready to defend it with valid arguments.
The worst scenario is to make concessions immediately following
objections to your initial offer. Unskilled or unprepared
negotiators frequently face this dilemma in their business
dealings. Asking questions, active listening and patience go a long
way to conquering this tendency. Anticipate the typical objections
you are likely o face; prepare appropriate replies in advance; and
formulate information-seeking questions before you meet the other
Your knowledge of the market, a clear assessment of your
competitors, and an understanding of the other side's real needs
should help you overcome this crucial initial phase.
As the opening offer will shape the outcome of the negotiations,
your ability to make a good impression from the outset is critical.
Remember, you may not be given a second chance to make a good first
Although it is better to place your initial offer slightly
higher to reach a better outcome, you may have to lower it if you
are doing business in highly competitive markets. In more
traditional and less competitive markets, your offers should be on
the higher side with plenty of built-in concessions. In these
markets, negotiators judge their results by the number of
concessions obtained due to their persuasive bargaining skills
rather than the full value of the concessions.
In whichever market you plan to negotiate, your initial offer
should be presented with confidence and conviction yet implying
flexibility. The issue is not to have your offer accepted or
rejected or to be the first to make an offer, but to be in a
position to start strong and maintain control of the discussions.
It is only through a series of high-yield questions that you will
learn what the other side really requires, enabling you to
reformulate your offer to meet their specific needs.
This phase of the negotiations should be regarded as an
opportunity to create an atmosphere of trust, leading to an
exchange of strategic information. It is not the time to start
making concessions. Executives from certain corporate or local
cultures consider this initial phase a waste of time and enter
immediately into trading away concessions. Successful negotiators
know better. They invest their time by finding out the real needs
of the other side and by determining how best they can satisfy
those needs in an acceptable package. In other words, your first
offer should reflect your best-case scenario, supported by
What if they say... Handling common rejections to first
Your offer is too expensive.
• Ask what is meant by too expensive.
• Find out what is considered acceptable and on what
• Respond by providing justification.
• Avoid lowering your price until you learn more about what
the other party is looking for.
• Find out if the objection is due to your price offer or if
it reflects other factors.
• Ask yourself: if I'm too expensive, why is the other side
negotiating with me?
We don't have that kind of budget.
• Find out how large the budget is, and for what time frame.
• Explore whether your offer can fit within the overall budget
by checking whether the other side can combine several budget
• Propose deferred payment schedules.
• Confirm the order and postpone deliveries until a new budget
allocation is confirmed.
• Split the order into smaller units or mini-orders to meet
current budget limitations.
That's not what we are looking for.
• Ask what they are looking for, and insist on specifics.
• Find out which aspects of your offer they like best.
• Keep asking questions until you have a clear understanding of
the other side's real needs, then...
• Repackage your offer in light of the new information
Your offer is not competitive.
• Ask what is meant by the phrase 'not being competitive'.
• Find out if your competitors' offers are comparable to
• Look for weaknesses in the other offers and stress your
• Reformulate your offer by avoiding direct comparison with
competition. Stress the unique features of your
Claude Cellich, Vice-President of the International University
in Geneva, formerly served as ITC's Chief of Human Resource