Föreläsning 9 Flashcards
What type of skill is negotiation?
Complex and dynamic process;
Important SOFT skill, “people skill”, of each member of the procurement department.
What is BATNA?
BATNA – Best Alternative To Negotiated Agreement – negotiator‘s bottom line or reservation point. Point in negotiation, where it is best to walk away from the table and develop the next-best option.
What should the final settlement be?
The final settlement must be judged in light of other alternatives, and should definitely not be worse than BATNA.
what is the procedure of BATNA?
BATNA is a „safety net“. The procedure:
1. what are my options in case the negotiation fails?
2. develop a few options in specific plans;
3. choose the best alternative.
What is the negotiation framework?
- Identify or anticipate the sourcing requirement
- Determine if negotiation or competitive bidding is required
- plan for negotiation
- conduct the negotiation
- execute and follow up on the agreement
When do we choose negotiation?
we use other criteria than just price;
the total contract value or volume is large (for example long-term contracts);
complex technical requirements (in some cases, the requirements could be evolving after the initial contract);
the purchase involves utilization of capital-intensive plant and equipment (for example, the supplier needs to build a new factory or new machines);
the agreement involves a special or collaborative relationship (such as joint development or joint venture);
the supplier will perform important or significant value-added activities (product development or testing, distribution, inventory management
How do you plan for negotiation?
Gather information, get to know the other side.
Basic types of negotiation approach:
Ad-hoc negotiation;
triangle talk;
principle-based negotiating;
implementation-based negotiating;
extreme negotiating.
Determine your position, BATNA, need, want, strategy and tactics and ideal outcome of negotiation.
Attempt to guess the same for your counterpart (or exchange the information).
Give some examples of negotiation tactics
low ball/high ball: offering an unusually low/high price to receive the business („getting one foot in the door“).
honesty and openness: we use the trust built before to create a mutually acceptable agreement.
questions: to reveal new information and to relief ourselves.
snow job: overwhelm the other party with information to create a diversion.
nibbling: asking for seemingly small concessions at the end of the negotiation.
good cop, bad cop: one team member makes extreme demands, while the other one appears more agreeable.
bogey: pretending that one small issue is extremely important. Then trading the concession for something much more important.
brinkmanship: pressing the other side to a situation where they either agree or walk away.
deadlines: „if we don‘t make the deal today, I can‘t give you this great price tomorrow“.
trial balloon: „What if I can persuade my manager to endorse this option. Would you agree?“
flinching: extreme overreactions to proposal such as the expression of shock or surprise.
What are the 6 principles of negotiation?
Reciprocity: if we receive something, we want to give back. Concession for concession. Beware of small concessions from the other side just to get an advantage. Too much concession might lead to BATNA.
Consistency: people want to be consistent in their behaviour, opinions, actions and statements. If we press someone into agreement they can‘t fulfil, we breach their consistency. „The consistency trap“: if someone agrees with us in one small thing, they will feel compelled to agree with bigger requirements.
The social proof: the correct behaviour is determined by our social environment.
Liking: we tend to agree with people who are similar to us, like us, and who cooperate to reach common goal.
Authority: formal positions can decide. People tend to listen to authoritative figures such as experts.
Scarcity: people want something they can‘t have.
What outcomes are there of negotiation?
Win-win – ideal situation. Fair distribution of the largest pie possible. Both sides feel like they won.
Win-lose – one of the sides tries to allocate bigger part of the pie.
Lose-win – one of the sides sabotages it‘s own position for the other side to win. Leads to problems.
Lose-lose – both sides lose the negotiation.
How do you separate people from the problem?
Don‘t let your and your partner‘s ego and emotions to stand in the way of the deal. Tackle the problem, not your counterpart. Attempt to see their perspective. Don‘t let them lose their face. Build relationships.
Direct question: Do we want to make a deal? Do we agree to do everything possible to make a deal?
Commentary: It looks as we are stuck. How can we get back on track?
Escape options: When we started the negotiation, neither of us knew all the facts. Perhaps we could take a break to come up with a new offer?
How do you focus on interests, not positions?
Explain your interests clearly and ask about the interests of the other party. Work towards the solution, don‘t focus on past events.
How do you invent options for mutual gain?
(stress and premature decisions are the enemy of creative and beneficial solutions. Try to make the pie larger. Try to make the deal flexible, if possible.)
Note:
If you‘re negotiating with someone who you won‘t see again, your options are limited. But you can still try.
How do you insist on using objective criteria?
(the key aspects of the deal must be based on objective criteria, independent of the will of either sides such as scientific findings, professional standards, or legal precedent. Never yield to pressure, threats, or bribes – only to principles. Keep an open mind).
Note:
Problem might be different subjective evaluation of the product characteristics.
