Lecture 7 - Negotiations Flashcards
(42 cards)
List examples where supplier negotiations have made firms profit.
Lloyds Bank saved £236m annually in procurement in 2012.
Birmingham City Council saved £36 million in 2009-2010.
What enables good contracting and negotiations?
- Confidence in contracting organisation
- Good staff/skill development
- Early buyer and early supplier initiative
- Understanding and working with your provider
- Ensure risk is managed effectively
Define negotiation
“The skilled use of the power parties have in a relationship to obtain what they perceive as the best possible outcome”
What stages are involved in planning complex supply negotiations?
UNDERSTAND THE MARKET
Porters 5 Forces
UNDERSTAND COSTS
UNDERSTAND STAKEHOLDERS
GENERATE AND VALUE THE VARIABLES
- Warranty, quantity, price, deliverables, exclusivity, payment methods, training/development, future contracts.
UNDERSTAND HOW THE OTHER SIDE SEE YOU
What factors determine the attractiveness of an organisation?
- Blue chip
- If they pay on time
- Financially stable
- Informed
- Good planning
- Transparent dealing
- Market leader
What does the size of impact on project and your attractiveness of organisation if you appear CORE to the other party?
High impact on project opportunity
High attractiveness of organisation
What does the size of impact on project and your attractiveness of organisation if you appear as a DEVELOPMENT OPPORTUNITY to the other party?
Low impact on project opportunity
High attractiveness of organisation
What does the size of impact on project and your attractiveness of organisation if you appear as a NUISANCE to the other party?
Low impact on project opportunity
Low attractiveness of organisation
What does the size of impact on project and your attractiveness of organisation if the other party want to EXPLOIT you?
High impact on project opportunity
Low attractiveness of organisation
What is ZOPA?
Zone of Potential Agreement - if we create a zopa we can see whether it is worth going into business with this party.
What is BATNA?
Best Alternative To Negotiated Agreement
Searching the market for an idea of price and specification before the negotiation to see where the next best alternative is, if the negotiation does not go your way.
What is WATNA?
Worst Alternative To A Negotiated Agreement
The cost of walking away if we do not reach a final agreement.
It does not happen often where you have no alternative but as a buyer you must be aware of what the best alternatives are beyond this party (BATNA)
What are the 5 main tactics for negotiation?
USE POWER - who has the power, big firms?
INTIMIDATION - Use on firm not a person
SALAMI TACTIC - negotiate in thin slices
RE-ESCALATE DEMANDS - close to negotiation and then restart, puts party on the backfoot.
SET DEADLINES - set a timeframe
What are the key elements of negotiation?
1) Testing understanding (9.7% s 4.1%)
2) Summarising (7.5% vs 4.2%)
3) Seeking information (21.3% vs 9.6%)
What are Sebenius’ 6 mistakes of negotiation?
1) Neglect the other sides issues
2) Price over other elements
3) Searching too hard for common ground
4) Neglecting BATNA
5) Failing to correct skewed vision/wrong assumptions
6) Neglecting the culture effect
What are the approaches to negotiation?
Emotion Bargaining Threat Logic Compromise
How can a negotiator use emotion?
- Be in control of emotion
- Use from a sincerely held belief
- Use sparingly
- Use to increase perceived value
- Use to counter logic (would you do that if you were me)
- Give a feelings commentary
How can a negotiator use bargaining?
- Don’t expose position too early
- Don’t put a marker down
- Don’t seem too eager
- Move in small steps
- Get a return for any concession you make
- Thank and bank (give and take)
- Summarise often and move on
How can a negotiator use logic?
- Get your own logic in first
- Keep to one powerful argument
- Be credible
- If other’s can’t see it, change track.
- Counter logic with emotion, start with logic then move to emotion if no better option.
How can a negotiator use threat?
- Be slow to threaten
- Threaten the business not the person
- Use a discreet and veiled threat
- Never threaten what you cannot execute
- Add “if” to threat if bargaining
How can a negotiator use compromise?
Last resort
- Remember it is not always a 50/50 option
- Let other party suggest as they probably move towards you
What kind of terms and variables can be negotiated?
- Specifications
- Price
- Quality criteria
- Delivery dates
- Acceptance criteria
- Service level
- Staffing (Training/development/pay)
- Functionality
- Support arrangements
- Guaranteed performance
- Work packages
What are the 5 styles of negotiation?
Accommodating Avoiding Collaborating Competing Compromising
What is the accommodating negotiation style?
Individuals enjoy solving other party’s problems and preserving personal relationships.
- Feel taken advantage of when other parties put little emphasis on relationship
- Sensitive to emotional states, body language and verbal signs.
