Negotiation of price is an important element of negotiation of the various terms and conditions of the export order. Generally, exporters from the developing countries do face problems during initial negotiations with the importers. These problems generally relate to pricing questions and particularly the fact that their prices may be considered too high. Though price is one among many issues to be discussed during business negotiations, yet it tends to influence the entire negotiation process.
New exporters may be inclined to compromise on price at the beginning of the discussions, thereby bypassing other negotiating strengths that they may have, such as the product’s benefits, the firm’s business experience and its commitment to exporting quality products. The exporters should not do this as it has serious implications for the business negotiations. It needs to be emphasized that an importer may reject the price quoted by the seriousness of the offer, find out how for the exporter is willing to lower the price, seek a specific lower price because the product brand is unknown in the market, or demonstrate a lack of interest in the transaction as the product does not meet market requirements.
If the price quoted by the exporter is not acceptable to the importer, the exporter should not respond by offering to reduce the price; instead he should respond by concentrating on the non price issues such as quality, packaging, packing, delivery terms, payment terms etc. If the exporter does not follow this strategy then he may have to face many more demands from the importer such as:
1. Quantity discounts
2. Discounts for repeat orders
3. Improved packing and labeling
4. Tighter delivery schedules that may increase production and transport costs
5. Free promotional literature in the language of importer’s country
6. Supply free of cost of the damaged parts
7. Free training of staff in the maintenance and use of the product
8. Exclusive market rights for distribution of the product
9. Better credit and payment terms
An exporter can avoid such costly concessions if he determines the real interest of the importer at the beginning of the negotiations itself. This requires proper planning for the negotiations.