L4M5 CHAPTER 1 1.1 Analyse the application of commercial negotiations in the work of procurement and supply Flashcards
What is the definition of negotiation?
A process which involves a degree of co-operation between two or more parties, where the parties have some shared interests and some interests that are opposed or divergent and through discussion, something of value is exchanged and both/all parties will have their needs sufficiently satisfied so that they can arrive at a mutually agreeable settlement.
What does negotiation involve?
Two or more parties and a channel of communication
What is the objective of negotiation?
To reach an agreement or settlement of one or more issues where there is disagreement and/or divergent views
What distinguishes negotiation from other forms of dispute resolution?
Voluntary exchange
What are the sources of conflict in the content of negotiations?
Price, Quality, Payment terms, Risk Share, Volumes and commitment, Contract terms and conditions, Dispute resolution/contract governing law
What are the sources of conflict in the process of negotiations?
Agenda and governance, conflicting negotiation styles of participants, cultural differences, Timescales/location, Negotiation medium, Team size and make up, How negotiation will be closed out
What are the five basic options to resolve conflict - Thomas-Kilmann conflict resolution model??
Competing - objective to win - Assertive and Unco-operative. Buyer’s bargaining power is stronger than suppliers’, and the relationship is transactional.
Accommodating - objective to yield - unassertive and co-operative. Accommodating means conceding to the other party with little debate or fight, not challenging or strongly putting forward your own point of view and generally giving and yielding to the other party’s point of view.
Avoiding - objective to delay - unassertive and unco-operative
Compromising - objective to find middle ground - assertive and co-operative
Collaborating - objective to find a win-win solution for both parties - assertive and co-operative
Which are the common forms of collaborating approach in Thomas-Kilmann conflict resolution model?
Trying to find a creative solution to a current problem
Exploring a disagreement to learn from each other’s insights
Resolving some conditions that would otherwise have them competing for resources
What is the most important duty of procurement professionals at the first stage of the Procurement and Supply Cycle (Understand need and develop a high-level specification?
Demand Management
To negotiate/challenge internal stakeholders over the need/requirement/specification.
Negotiation with budget holder
Ensure budget/target price is realistic for the quality or performance requirements.
What are the three (3) types of stakeholders?
- Internal stakeholders - individuals directly connected with the organization e.g. Directors, Managers, Employees
Connected Stakeholders. 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. - Connected stakeholders - individuals who by contractual or commercial relationships, have a significant stake in organizational activity e.g. Company shareholders, Customers, Suppliers, Bank
- External stakeholders - individuals who can influence and be affected by an organization but who are not themselves directly connected to the organization e.g.
Governments, Interest and pressure groups, Media and news organizations
Local Communities
What are Ground rules?
Ground rules are the basic rules for doing something.
Procurement professional should seek to minimize conflict over process through agreeing to ‘ground rules’ and approach as far as possible with the other party in advance of any negotiation meetings.
There should be two sets of ground rules: 1) ground rules for the negotiations between the two parties and 2) ground rules for the negotiating team itself.
What is Supplier Conditioning?
The process of influencing a supplier or suppliers to behave in a certain way, or to accept certain circumstances.
Early supplier conditioning e.g. focus on cost, environmental standards etc. are messages to put in the supplier/s mind and the outcomes needed by the buying organisation.
When can the Accommodating approached be used?
- When others can resolve the conflict more effectively
- When the issue is much more important to the other person than to yourself - to satisfy the needs of others and to show you are reasonable
- To build up social credit for later issues which are important to you
- When continued competition would only damage your cause
- When preserving harmony and avoiding disruption are especially important
- To aid in the managerial development of subordinates by allowing them to experiment and learn from their own mistakes
