Chapter 2.3 Flashcards
Analyse criteria that can be used in a commercial negotiation
Name 5 benefits of having a negotiation strategy
- Outcomes expected from the negotiation are clearly defined with targets
- Process to achieve desired outcomes is clearly articulated, for example MIL and tactics
- Negotiation boundaries are clearly defined, for example the BATNA
- Suppliers position and objectives are understood or estimated
- Concessions that can be traded in the negotiation are identified in advance
Name the 4 key activities involved in negotiation plans/strategies
- Developing and prioritising your objectives and limits
- Seeking to understand the other party’s objectives
- Developing concession plans
- Planning the resources and logistics required and agreeing team roles
What are two early considerations of setting objectives?
- Trust
- The importance of the relationship with the other party
What should you when developing specific negotiation strategies in areas where risk or spend is high?
Analyse a wide range of objectives and variables within the context of the organisations business requirements
Name the 5 ‘Getting to Yes’: Fisher and Ury’s preparation stages
- Set your overall objectives
- Try to establish their objectives
- Identify your tradeables/negotiation issues and set ‘must, intend, like’ (MIL) limits for each
- Determine your fallback/BATNA
- Develop scenarios around possible options
What 3 things are involved in step 1 of the negotiation strategy framework
- Identify the overarching objectives and the organisational objectives that have necessitated the negotiation process
- Develop specific objectives that will support the achievement of the overarching objectives
- Agree the roles of the team
Must/Intend/Like (MIL)
The strategic position of the negotiation team towards specific variables that are being considered
Least desirable outcome (LDO)
The lowest level of expectation for the buyer or seller
Most desirable outcome (MDO)
The optimal solution for the buyer or seller
Bargaining mix
All the issues in a project - each with different targets - that are up for negotiation
What 4 things are involved in step 2 of the negotiation strategy framework
- Define the position you would like to be in at the end of the negotiation process
- Consider a wide range of outcomes or options that you would like to achieve from the negotiation
- Identify the preferred outcomes and prioritise in order of importance - MIL
- Set objectives in terms of upper and lower limits and not just a fixed point
Name 8 things you should be aware of in terms of the supplier and the product/service in focus
- Cost factors and components that determine supplier prices
- The financial strength of the company
- The company’s reputation in the marketplace
- The company’s share of the market
- The share of a supplier’s turnover the buyer would represent
- The importance a supplier attaches to the business that they are doing with you
- The type of organisational culture evident
- Who will be on the negotiating team
What 4 things are involved in step 3 of the negotiation strategy framework
- Identify major negotiation issues (the bargaining mix) in achieving desired position and identify a plan for each issue separately
- The areas in which the parties’ current position differs from their desired position will form the negotiation
- Focus your planning on areas of common ground and not just on areas of potential conflict
- Be creative and thorough in preparing this list
What 6 things are involved in step 4 & 5 of the negotiation strategy framework
- Review existing research and insight on external influences, industry forces, macroeconomic issues and supplier positioning
- Understand current contract(s) and performance on them by engaging with business stakeholders if the supplier is incumbent or an ex-supplier
- Understand the suppliers capabilities to meet objectives and the level of investment/effort they need to accommodate objectives
- Understand the supplier’s representatives incentives (if any) and objectives
- By anticipating potential provider issues, effective counter-responses can be prepared to negate their concerns
- Ask yourself ‘What if the other party says/does/acts’ questions to create scenarios that will help you prepare as far as possible for any surprises or unexpected approaches or responses in the negotiation
What is one of the most common reasons for an unsuccessful negotiation?
Failing to understand the other party’s needs
What are the two levels of need?
The organisation and the individual
Name 8 benefits of preparing for an important commercial negotiation
- A robust and comprehensive plan allows you to be in control of the situation
- It prepares you for alternative negotiation outcomes
- It gives confidence in the meeting and provides a plan to achieve success
- It makes you think about all that you want to achieve from a negotiation rather than just one aspect
- By planning, it gives you time to think through your negotiation plan and the tactics you are going to employ
- It also provides a framework that brings together all aspects of negotiating in a planned and determined way
- It anticipates the strategies and tactics which the supplier(s) may employ
- It requires you and your stakeholders to create a contingency plan together
Best alternative to a negotiated agreement (BATNA)
The fallback or backstop position if the negotiation fails to result in an agreement/no deal is agreed
In a negotiation environment, what should target setting also include?
Establishing and locking down your walk away points for each variable - the minimum you can accept
What should you have established if you cannot achieve your objectives
A BATNA
Name 10 potential tradable in a negotiation
- Price
- Payment terms
- Length of contract
- Minimum quantities
- Lead time
- Contract terms and conditions
- Publicity and reference site permissions
- Exclusivity of supply
- Intellectual property rights
- Added value services
What must you bring for every objective and variable/tradeable
a MIL
Must achieve
Intend to achieve
Like to achieve
Name 3 steps to establish your BATNA
- List everything you could do if you do not reach an agreement
- Explore the best of your options and try to improve on them. the better you BATNA, the stronger you will be in negotiation
- Finally, choose your best option. This is your BATNA
Walk-away point
A position from which you cannot concede any more ground and must ‘walk away’/decline a deal
Zone of potential agreement (ZOPA)
The overlap between a buyer’s and seller’s MDO and LDO where a deal is feasible
What does the bargaining mix refer to
The mix of variables that can be traded in a commercial negotiation situation
What is a good trade
When you trade something (a variable) that is relatively inexpensive to you but valuable to the other party
What does having multiple variables allow you to do?
To package and repackage offers by mixing and changing variables
Name 14 examples of bargaining mix components for professional services
- Base price (day rate per staff grade)
- Volume discounts against base day rates
- Length of contract/termination notice
- Lead time to start project
- Dedicated named staff
- Flexibility of hours and response time
- Exclusivity of supply
- Seniority/experience level of staff
- Treatment of expenses incurred
- Willingness to act as a reference site
- Knowledge transfer to client
- Contract management and reporting
- Legal contract Ts & Cs
- Working location and hours
Name 7 variable around money that buyers may consider in negotiations
- Price per unit with discounts/rebates for volume
- Payment terms (time period) and currency
- Treatment of inflation/price changes over contract life
- ‘Learning curve’ savings as supplier gets to know your business
- Payment against achievement of objectives/results
- Charges for upgrades/maintenance/after sales; support services
- Free services included that are usually chargeable
What should you develop after establishing your list of tradeables
A concession plan
What does the concession plan help to identify?
What the variables that you can negotiate with are
Name 4 types of concessions
- The difficult concessions
- The easy concessions to win
- The easy concessions to give away
- The low-value concessions for both parties
What are difficult concessions
In the issues that have a high importance to both you and the other party
What are the easy concessions to win
These have a high value to you, but your research suggests that they have little importance to the other party
What are the easy concessions to give away
These are of little importance to you but your research suggests they are highly valued by the other party
What are the low value concessions for both parties
Issues that are of little importance to either party
Name the 4 concession planning steos
- Identify concessions that will be made during negotiations
- Plan a supporting statement for each concession to make a case to the other party that it is a sacrifice for you and of real value to them
- Build a hierarchy of concessions from lowest cost/easiest to trade to highest cost/most difficult to trade
- Plan to make concessions in small increments - a spreadsheet cost model/ready reckoner can be helpful
What 5 things should you aim to achieve at the beginning of the meeting
- Establish that both parties agree on the subject matter/purpose of the negotiation
- Confirm the agenda, attendies and timing
- Continue (or start) the conditioning process
- Attempt to ‘anchor’ some key ideas or concepts with the other party
- Get the issues on the table without necessarily revealing their importance to you
What can a clear agenda help with?
Avoiding surprises with the other party
