Successful negotiators establish control before discussions even commence. Sun Tzu, the esteemed strategist behind The Art of War, articulated this principle centuries ago: “The supreme art of war is to subdue the enemy without fighting.” The most effective negotiations are those where success is determined in advance, without direct confrontation.
Industry leaders such as Apple, Amazon, and Tesla exemplify this approach. These companies do not merely negotiate; they dictate terms by positioning themselves strategically. The following case studies illustrate how they achieve this, and how similar principles can be applied in other business contexts.
Apple: Establishing Market Leverage Through Exclusivity
Prior to the launch of the iPhone in 2007, mobile carriers exerted significant control over phone manufacturers, influencing pricing, branding, and product features. Apple fundamentally disrupted this dynamic by positioning itself as indispensable.
Steve Jobs presented AT&T with a unique proposal: exclusive rights to the iPhone, contingent on Apple’s terms. These conditions included complete control over branding, software, and user experience—concessions that no other manufacturer had been granted. AT&T, recognizing the unprecedented demand for the iPhone, accepted.
Apple subsequently extended this strategy to its supply chain. As demand for its products increased, Apple secured pricing and operational advantages by setting terms for manufacturers. The company did not enter a battle for control; it structured negotiations in its favor well in advance.
Amazon: Controlling the Marketplace to Strengthen Negotiation Power
Amazon has consistently operated from a position of strength. In its early years, it supported publishers in selling books online, fostering reliance on its platform. Once it became the dominant bookseller, Amazon leveraged its market power to dictate terms. When publishers resisted its pricing policies, Amazon simply removed their books from its store, forcing them to comply.
A similar approach was taken with Amazon Web Services (AWS). While competitors hesitated to enter the cloud computing market, Amazon aggressively expanded, securing a substantial market share before others reacted. By the time Microsoft and Google attempted to compete, AWS had already established industry standards and operational control.
Tesla: Redefining Industry Standards to Eliminate Negotiation Barriers
Tesla rejected the traditional automotive dealership model in favor of direct-to-consumer sales. This decision allowed Tesla to maintain full control over pricing, branding, and customer interactions, bypassing intermediaries.
However, Tesla’s most strategic move was securing its supply chain ahead of market demand. Recognizing the critical role of battery production in electric vehicle manufacturing, the company invested heavily in Gigafactories and established long-term agreements for lithium supply. As competitors scrambled to secure resources, Tesla had already positioned itself as the industry leader.
Key Strategies for Strengthening Negotiation Positions
Businesses of all sizes can implement these strategic principles to enhance their negotiation outcomes:
- Control key resources. The entity that possesses a critical product, service, or capability holds the advantage.
- Generate demand prior to negotiations. When the offering is essential to the other party, they are more likely to accept favorable terms. Apple did not persuade AT&T to sell the iPhone—AT&T required it to remain competitive.
- Establish first-mover advantage. Amazon and Tesla secured market dominance before competitors identified key opportunities.
- Maintain the ability to disengage. Effective negotiators retain the option to withdraw if terms are unfavorable. Amazon demonstrated this principle by removing publishers’ books from its marketplace until agreements aligned with its objectives.
Successful negotiation is not about responding to offers but about shaping the landscape in which discussions take place. By positioning themselves advantageously before negotiations begin, businesses can achieve optimal outcomes with minimal resistance.
For organizations seeking to strengthen their market position and enhance negotiation strategies, 7 Stage Advisors provides expert guidance in positioning, scaling, and profitability optimization. Contact us to explore how to establish control and drive competitive advantage before negotiations even commence.