Lessons in Leverage: What International Merchants Taught Me About Business Negotiations

When it comes to leverage on the international stage, there are two lessons you need to learn.

Business negotiation
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For over thirty-five years, I've been traveling the globe, striking up negotiations and sealing deals, from Russia to Zimbabwe and Indonesia to Bosnia. Nothing in my education or prior business experience equaled what I learned first-hand from my travels.

Today's global business environment brings people together from across diverse cultures. If business people and leaders want to succeed, they must navigate an often quite bewildering maze of cultural expectations, customs and business practices. It takes savvy and down-in-the-trenches experience to learn the essential insights for conducting business with anyone, anywhere in the world.

My experience has taught me some enduring but simple lessons of global trade. One of the most crucial is the importance of leverage. Leverage is your power to influence the outcome of a negotiation. You can use leverage to bring someone to the negotiating table, haggle for a better deal and more. When it comes to leverage on the international stage, there are two lessons you need to learn: You have to understand what leverage you possess, or can possess, and you need to know the perception of that leverage across the table.

1. Know Your Leverage and How It's Obtained

I learned the first lesson in leverage when I was traveling for business in Egypt. One of the inevitable consequences of international travel is a lot of downtime; international meetings and flights simply can't get scheduled back to back. I filled my downtime with trips to the local souks and marketplaces. It was in one of these marketplaces that I met Emir.

Emir was selling Egyptian rugs, one of which in particular caught my attention. But in the souks and bazaars of the Middle East, buying smart means haggling. The first price, even the second, is never the final price. If you want to buy smart, you have to negotiate. And in order to negotiate, you need to understand your leverage.

Over the course of one afternoon, I approached Emir and made him an offer for the rug. He countered with a higher price. I refused and left his shop. I came back two more times, and each time the negotiation reached the same conclusion as the first. My only leverage at the time was my willingness to walk away.

A few days later I learned about a local superstition that says if a deal is made with the very first customer of the day, a merchant will have good luck. I realized this superstition might provide me more leverage in my quest to buy the rug. The next time I met Emir, it was early morning, just as he opened his shop. Once again he refused my offer, but as I turned to leave he relented and sold me the rug at the price I offered. Why did he relent? Emir told me he would have good luck the rest of the day.

Leverage can take various forms. It can be as simple as a willingness to walk away from a bad deal. But as I learned from the encounter in Egypt, it can also be as complex as a local custom or a set of culturally held beliefs. If you want to negotiate successfully around the world, you need to be aware that leverage is often cultural. Standard haggling, without the added leverage of cultural insight, would have cost me my rug.

2. Perception of Leverage Matters

I learned the second lesson about leverage in Indonesia. I was haggling with an Indonesian merchant in Jakarta over the price of a painting in his shop. He wanted more than three times what I was willing to pay, and negotiations quickly came to a standstill. Using my only leverage at the time, I walked away.

About three months later, I returned to Jakarta and found the painting still for sale. But this time, when I made the merchant the same offer as before, he told me many people were interested and it would sell at a high price very soon. Again I left. I had no leverage to negotiate the price with so many interested parties engaged in a bidding war.

But lo and behold, I was in Jakarta another couple of months later, and I found the painting still on display in the shop. When I confronted the merchant about the painting, he and I both knew the leverage had changed. His dishonest negotiation tactic had been exposed; obviously there never were other interested buyers. I put less than my original cash offer on the table, and the owner silently handed me the painting.

The lesson here is that establishing leverage is as much about perception as it is about reality. The merchant's less-than-honest negotiation tactic was an attempt to manipulate my perception of leverage in the negotiation. Once his tactic was exposed, the perception of leverage changed completely. While his English was poor and my Indonesian nonexistent, we both understood it.

Leverage often fluctuates in the course of a negotiation. If you get too cocky, like the Indonesian merchant, you might end up losing the battle of perceptions and come out worse for wear in your negotiations.

As we all know, leverage matters. In the global business environment, you need to realize it often centers on cultural logic or beliefs and that perceptions of leverage can change the playing field in a negotiation. These two lessons have assisted me in negotiations involving millions of dollars. Keep them in mind and you'll enjoy negotiating success.

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