BPT3133 Procurement in Industrial Management
NEGOTIATION BPT3133 Procurement in Industrial Management STRATEGIES Chapter Outline What is Negotiation? Negotiation Framework
Negotiation Planning Power in Negotiation Win-Win Negotiation International Negotiation The Impact of the Internet on Negotiations Learning Objective Understand when and why a buyer enters into a sourcing negotiation Recognize the importance of planning within the negotiation process Appreciate the different sources of power that are present during negotiations Introduction Negotiation is a skill that is essential to all purchasing and supply managers Negotiation is a vital part of every sourcing process Negotiation is an ideal way to convey the buyers specific sourcing requirements and specifications to its supply base What is Negotiation? is an interactive communication process that may take place whenever we want something from someone else or another person wants something from us OR is the process of communicating back and forth for the purpose of reaching joint agreement about differing needs or ideas is a decision-making process by which two or more people agree how to allocate scarce resources negotiation Negotiation Framework
Identify or anticipate a purchase requirement Determine if negotiation is required Plan for the negotiation Conduct the negotiation Execute the agreement 5 PHASE Negotiation PROCESS Negotiation Planning Develop specific objectives
Analyze each partys strengths and weaknesses Gather relevant information Recognize your counterparts needs Identify facts and issues Establish a position on each issue Develop the negotiation strategy and accompanying tactics Brief other personnel Practice the negotiation Negotiation Planning Power in Negotiation Power is the ability to influence another person or organization Sources of negotiation power: Informational Reward Coercive Legitimate Expert Referent Win-Win Negotiation Win-lose negotiation
Two or more parties are competing over a fixed value with the winner taking the larger share Also known as a zero-sum or fixed-sum game (if one party gains, it is only at the expense of the other party) Win-win negotiation Seeks to expand the value or resources available to all participants through collaborative negotiation Also know as integrative bargaining Win-Win Negotiation Characteristics of Win-Lose and Win-Win Negotiation International Negotiation
Negotiations with suppliers located literally anywhere on the globe take on added complexity and challenge when the parties have different languages, customs, laws and cultures Important considerations in negotiating a global sourcing agreement is culture shock Requires additional planning and preparation to be successful The Impact of the Internet
Tend to equalize the interactions between the parties because normal visual cues and sources of power are not as evident Engage in more risky behaviours and are more aggressive in their demands Active listening and effective feedback are more difficult to conduct Engage in behaviours that indicate that they are communicating in real time even when they are not Often feel less accountable for the outcomes because of perceived disconnect with their counterparts in a different locale Tend to take on a more adversarial, us-versus-them mentality The negotiator at the other end of the electronic connection is relatively anonymous Behavioral / Interactive Factors :
Negotiation skills Successful negotiators criteria: They should be rated as effective by both sides They should have a track record of significant success They should have a low incidence of implementation failures. Behavioral / Interactive Factors : Image Integrity Status Self-actualization Corporate issues & Human issues Negotiation skills The resolution of conflicting interests through negotiation is motivated by: Individual personality needs of negotiators Personality compatibility among negotiators representing opposing parties Negotiators perceptions and expectations of the opponent Persuasive mechanisms employed to modify the bargaining positions and values of the opponent to achieve a more favorable convergence of interests Methods of Dealing with Ploys Manipulative Techniques and Ploys
Negotiation skills Negotiation Ploys Methods of Dealing with Ploys Nice guy / hard guy Either match style or adopt contrast style Add on Carefully check what you are getting for your money before agreement Deadlines Avoid revealing what time you have to finish. Agree to meet another time Russian front Do not accept poor deals. What is your best alternative to a negotiated agreement? Empty larder Ask for an explanation of any constraints in a deal. Offer what you can within those constraints Approval from a higher authority Establish opposite numbers full authority before negotiation Manipulative Techniques and Ploys Negotiation skills The Interpretation of Postures Posture
Possible Meaning Leaning forward when making a point Interested; wants to emphasis a point Avoiding eye contact May be embarrassed; not telling the truth Arms folded; body turned away from you Defensive; no compromise. Not interested Body turned towards you leaning forward Interested; warning towards your comments Looking away at watch or at a window Wants to leave or avoid any further discussion Hands supporting head and leaning back in chair Confidence Stroking nose regularly with a finger avoiding eye contact May be lying Good eye contact; fingers stroking face Interested in what you are saying summary Negotiation process involved 5 phases
Negotiation may not always be the appropriate way to reach an agreement persuasion, complete acceptance, coercion or problem solving may prove sound alternatives Negotiation style depends on the objective to be achieved Individuals who are skilled at negotiation are destined to be among an organizations most valued professionals