L4M5 Flashcards
In the private sector, the buyer may directly approach specific suppliers to negotiate without having to issue any tender documentation.
Furthermore, they tend to have much more freedom to decide what should or should not happen at the core sourcing/tendering stages 4,5,6,7 and 8 in the cycle.
Internal stakeholder support will be important not just at the initial negotiation of the contract, but potentially throughout the life of the contract right through to exit.
While you are researching TOP, they are researching you, so it is useful to be aware of how suppliers gather information on those that they will be negotiating with, i.e. you and your organisation.
In price negotiations it is always preferable and easier to target supplier’s costs, and not on their margin or profits.
But, if they cannot reduce their costs as they are fixed or otherwise not addressable, then the negotiation will be tougher and more creativity will be required.
Understanding a supplier’s cost breakdown, price build-up and pricing objectives will provide you with extremely useful insights.
This information on its own, however, may be enough to drive prices down, if, for example your supplier has more power than you and/or is facing high demand.
‘Proving’ a supplier can supply more cheaply is not necessarily a good negotiation tactic, especially if you have limited leverage
Microeconomics is the study of the behaviour of individuals and businesses within a market, the factors that affect their choices and the effect these choices have.
Macroeconomics studies larger, economy-wide things such as growth, inflation and unemployment.
Different writers may use alternative terms for the different phases of the negotiation, but most will agree that there are distinct phases and that there is a sequence or chronological order.
There is no point in negotiating if there is no ZOPA.
Courtesy, sunk costs, feelings of commitment and human nature mean that you feel as if you need to go through the motions in a negotiation meeting, but if it is established that TOP cannot meet a key minimum requirement, then you should seek to walk away, and not waste time.
It should go without saying that as a professional negotiator you should seek to do this without causing offence or putting at risk future or other contractual relationships.
If it is not possible to establish/confirm if there is a ZOPA during the opening phase, then it must be done during the testing phase.
Before you start making/accepting proposals, it may be worth taking five minutes out with your team to pause and take stock of the situation, to confirm whether your objectives and strategy are still relevant or whether tweaks/’plan Bs’ need to be invoked.
If your organisation’s plans change and you require a project to be started extremely quickly by a supplier, say the following week, it might be assumed that this demand may attract a premium payment.
If, on the other hand, the supplier is experiencing a quiet period and has spare capacity, not only will they likely want to start ASAP but they may even be willing to offer a price concession for a start date that is ‘brought forward.’
By allowing them to make the first proposal regarding start times (in this case), you might get your key negotiation objective achieved for free.
What might happen if you proposed first and stated the ‘red line’ requirement that you will need them to start the following week?
Good negotiators will always seek to get some free concessions if there is any possibility of it working and if there is nothing to lose.
Getting TOP to propose first is key here and is something buyers can normally do more easily than suppliers.
The word ‘if’ is very useful at this stage and allows you to test tentative proposals without committing yourself.
Skilled negotiators use language very carefully.
You should be able to give examples of how each of the six power bases could be used to persuade or influence TOP in a negotiation setting.
Legitimate, reward, expert and coercive power bases lend themselves to persuasive push techniques, while informational and referent power bases lend themselves more to influencing pull techniques.
You should be able to give examples of how each of the four negotiation styles can be used to persuade TOP to your point of view.
Tough and logical styles lend themselves to persuasion while warm and dealer styles lend themselves to influence.
In negotiations, tactical ploys or gambits have two main objectives.
- To strengthen your perceived position in TOP’s eyes
* To influence TOP’s view of their own position
Hearing is passive but listening is active.
