L4M5 CHAPTER 1 1.4 Identify the different types of relationships that affect commercial negotiations Flashcards
How can the vicious cycle of blame in commercial relationships be repaired?
Through negotiation and conflict management skills, adopting a collaborative and integrative approach
Both parties understanding each other’s goals
What is the definition of trust?
Trust is expectation that the other party will behave in a predictable and mutually acceptable way.
What are Dr. Mari Sako’s three (3) types of trust in commercial relationships?
Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.
Competence trust: Trust based on TOP’s professional qualifications or proven or certified technical capability or experience.
Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.
What are trust/partnership building behaviors?
- Joint-effort issue resolution
- Open sharing of information
- Open and honest discussion on root cause of failures
- Joint planning focusing on value for money and risk sharing
- Commercial transparency and co-proposition of cost reduction and service improvement programmes
- Joint recognition and celebration of successes
What are trust/partnership destroying behaviors?
- Hallway rumors’ of partnership breakdown
- Emotion-based assessments of performance
- Quick blaming of the other party for service or performance problems
- Constant shadowing and oversight, focus on controls
- Avoidance of accountability
- General mood: resentment, distrust
What is the relationship spectrum?
The relationship spectrum describes the range of commercial relationships between a buyer and supplier based on richness of communication, longevity and mutual dependence and the potential value that could be lost from lack of proactive supplier relationship management
What are the relationships on the relationship spectrum?
Distant (Transactional)
Spot Buying, Regular trading - trust on contract, Arm’s-length approach, Pricing is most important, Assessment of supplier’s performance is on non-compliance
Close (Transactional)
Framework agreement & Call-off contracts - trust on contract and supplier’s competence, Formal relationship meetings to monitor progress, Total cost of ownership, Use of vendor rating system
Close (Alliance & Strategic)
Partnering - trust on goodwill and co-operation, Continuous dialogue, Total cost of ownership, Relationship assessment measurement
