Negotiating Power, Profits, and Development

February 8, 2019

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Negotiating Power, Profits, and Development

Supporting international or US economic development often means supporting the underdog—small businesses, farmers, remote communities, women, and other vulnerable populations. Improving their negotiating power is often key for them to improve their situation—whether it is an opportunity to do business, grow their business, negotiate the terms of a contract, or improve the business environment or working conditions. There is power in numbers—one of the advantages of cooperatives and unions. Groups of small companies and farmers are better able to negotiate volume discounts when purchasing and higher prices when selling. Associations have more power when they speak with one voice to the government when representing the private sector.

There are other ways to improve negotiating power that aren’t always recognized by small companies and small communities. In the same way that people with needed skill sets are able to negotiate higher salaries with companies that value those skill sets, small companies can do the same if they understand the needs of potential clients and what value their company offers. For example, small companies that can make frequent deliveries would be attractive to buyers that want to save on inventory costs. If they are offer unique products, are able to customize their product or service offerings, or can be more flexible than larger competitors, these are also advantages and they can be used to compete against larger companies and negotiate higher prices. Understanding one’s competitive advantage and negotiating fair prices is important to keep any company viable, but is especially critical for small companies who often need to compete against a number of other small companies to survive.

Smaller communities and even cities often have advantages of which they are unaware as industries come and go. Being able to identify and capitalize on these advantages should be a cornerstone of marketing these regions to potential investors and potential residents. If, for example, the economic development organizations are involved in efforts to transform an industry and attract investment to do so, potential investors will want to know the expected return on investment. Presenting how an investment in infrastructure, services, or a missing link in the value chain will make it more competitive and be profitable is a good way to attract that investment.  Partner4Growth has proven tools to help communities better capitalize on their advantages, attract investment, reinvigorate their industries or attract new ones.