Successful Negotiating with Monopolists
Negotiating with monopolists is one of the most difficult tasks for a buyer. Find out more about negotiating successfully with monopolists here.
Tips and tricks in negotiating with monopolists
Whether real or just home-made monopolists, the perceived dependence and powerlessness among buyers is equally strong in both forms. If you ask them about it, you get a resigned shrug. Negotiating with monopolists is undoubtedly one of the most demanding and difficult tasks of a buyer.
Monopolists have a prominent position within their own supplier base. They do not just happen, but are often home-made. Monopolies arise because companies are too one-sidedly focused on specific technologies, commit themselves to a supplier very early on, or because purchasing failed to thoroughly look for alternative suppliers. Finding and developing alternative suppliers is the only effective means against home-made monopolists in the long term.
The most frequently asked question in my seminars is “How do you crack a monopoly?” As a matter of fact, there is no magic bullet for this. There are only methods and procedures that make success likely. And if there is one recipe for it, it is: preparation, preparation, and more preparation!
Is there really no alternative or other option?
First, shed light on your suppliers’ monopoly status. In your opinion, what makes them a monopoly? Are they really the only provider on the (world) market, or is it general conditions such as high tool costs, internal customer requirements, or a lack of market knowledge that define them a monopoly?
Carefully examine the position of your supplier. Concentrate primarily on possible weaknesses of your supplier. Many monopolists tend to overestimate themselves. Over the years they have become arrogant and overconfident of their market position. This can become their greatest weakness. Take the time to prepare thoroughly.
Find new approaches – there are no limits to creativity. Here is an example from aviation, where the long development times often lead to monopolistic supplier structures. A buyer from an aircraft manufacturer had to negotiate an electrical module with an electronics supplier, which they would supply for the next 20 years. The module had to be checked and approved very extensively by a federal testing agency. The supplier knew that no one else had passed this test.
Their position and demeanor reflected that fact accordingly. What could the buyer do? He knew that his engineering colleague was on good terms with the supplier. He prepared inquiries from alternative suppliers and discussed them with the engineer. Knowing full well that he would probably not find a real alternative, he believed he knew that his approach to the market would not remain hidden from the existing supplier. And in fact, this information flowed from his engineering department to the supplier as intended. That meant the supplier now was much more cautious in the next negotiations. The buyer went even further and announced to the federal inspection agency that another supplier would be submitted. Big surprise! The supplier also heard about that move.
Preparing negotiations with monopolists
It is part of any good negotiation preparation to recognize the strengths and weaknesses of the other and to prepare appropriate strategies. It is of great importance not to put yourself into the role of the loser from the ontset, because you would show this to the other side through many subconscious signals, even if you tried to cover it up.
Gather all the details you can. Take a look at their homepage, and scour the industry press and media services. As with a puzzle, this allows you to get as precise an idea as possible of what to expect in the negotiation. Most of the time, we focus exclusively on the product, the starting position, and our own goals. But also assemble additional information about your negotiating partner. Find out what their goals are, including personal ones. Are there any similarities? Let’s learn from the top salespeople who systematically analyze and profile their customers. Use your network within the industry to gain this information. This applies in particular to personal data such as hobbies, interests, family. Often enough people reveal more about themselves on the Internet or in social media than they intended.
Recognize the behavior patterns and motives of the other person
When negotiating, many people make the mistake of projecting their own behavior patterns and motives on their counterpart. Good negotiators analyze the behavior patterns of their counterpart using personality preference models, such as STAR or DISC. From observed behavioral patterns, conclusions are drawn about the personality of the negotiating partner, and about possible strategic and tactical behavior in negotiations. This enables an initial assessment of the negotiating partner and an anticipation of actions.
Set yourself clear goals
No negotiation without a clear formulation of minimum (walk away point) and maximum targets (best possible outcome). The biggest mistakes made in negotiations are to either set unrealistic targets that are often too high, or not precise. If you only set a single target and miss it, you feel like a loser, and this will weaken you mentally for any further negotiation. Those who achieve their minimum goal can already feel like a winner. Put yourself in the shoes of your negotiating partner and think about the minimum and maximum targets your counterpart could pursue. In addition, in the event that the minimum target cannot be achieved, you should consider a worst-case scenario, i.e. prepare a plan B.
Develop a strategy and tactics
You now know where you are (starting position) and where you want to go (Goals). Now is the time to consider how you would like to achieve your goals. Strategy is the guideline for the behavior in the negotiation, while tactics implement the strategy through individual measures. There are four basic categories of strategies: pressure, partnership, avoidance, and acceptance. The selection depends on the starting position and goals. A good negotiator thinks about a mixed strategy, used in a targeted manner – depending on the design of the negotiation.
In most negotiations with monopolists, a mix of pressure in the matter combined with very cooperative behavior has proven its worth.
Or as Al Capone once said: “Nothing is more convincing than a smile and a gun.”