A surprising use for the SWOT-analysis

August 28, 2017

An efficient preparation tool for negotiations

You’re preparing for what you think is a minor negotiation and you’re short on time and have other pressing priorities. The last thing you want to do is overinvest in a simple negotiation of little consequence. How should you prepare? We recommend using a SWOT analysis.

Most of us reserve this tool for making strategic decisions at the corporate level, such as discovering new opportunities and managing and eliminating threats. What you might not have realized is how useful it is as a quick preparation tool for negotiations. While we don’t recommend limiting your preparation to 1 tool, for a low risk, simple negotiation it’s a great way to identify your leverage points and develop a negotiation plan that will distinguish your company from the competition.

Diagram of SWOT analysis
Use the SWOT analysis to distinguish your company from the competition in negotiations.

Internal situation and external factors

Too often our clients are forced by their counterparty to differentiate themselves on price; this is especially true for their sales organizations. However, when our clients have a clear understanding of their unique selling proposition (strengths) and develop a plan to mitigate their weaknesses, they no longer allow the negotiation to spiral into a discussion focused solely on price.

After you have analyzed your internal situation (strength and weaknesses), it’s time to think about the external forces influencing your negotiation. How will these external market forces impact your future? What is key is to know what you or your counterparty will do if an agreement is not reached. Having an actionable best alternative to reaching an agreement is your source of power. Make sure that you understand your alternative as well as theirs. You should also understand how feasible the alternative really is. Knowing this will greatly affect how you asses the balance of power.

Know the alternatives

Many times in my career while negotiating against a difficult customer, I’ve been threatened with being replaced if price reductions targets weren’t met. The claimed source of power from my counterparty was that there was a hungry competitor waiting for the opportunity to take our business. Early in my career, this was enough to send me running to management for lower pricing. However, once I assessed the true switching costs and compared it against our pricing, I soon began to realize that they weren’t going anywhere! Why? Because their alternative wasn’t actionable.

For your next negotiation, include a SWOT analysis in your preparation check list. It’s a quick tool that will help you identify your leverage points and assess your relative power in the negotiation. It can also be used as a go-to preparation tool for your simple low risk negotiations that don’t require in-depth preparation.

Want to learn more?

You can read more helpful tips from Erich Rifenburgh here.

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