Negotiation
Topics <ul><li>Approaches to negotiation </li></ul><ul><li>Content of negotiation </li></ul><ul><li>Factors that influence...
<ul><li>Page 548 </li></ul>Definition Negotiation “ An occasion where one or more representatives of two or more parties i...
Approaches to negotiation <ul><li>Adversarial negotiation </li></ul><ul><ul><li>Win-lose negotiation </li></ul></ul><ul><u...
Content of negotiation <ul><li>Substance goals </li></ul><ul><ul><li>Price, Contractual, Delivery etc </li></ul></ul><ul><...
Negotiation Contractually Related Issues (Pg 551) Type of contract (1) Fixed price or lump sum (2) Cost reimbursable (3) U...
Factors in negotiation (Pg 552) <ul><li>Negotiators </li></ul><ul><ul><li>Personality </li></ul></ul><ul><ul><li>The degre...
Factors in negotiation <ul><li>Time </li></ul><ul><ul><li>“ Necessity never made a good buyer” </li></ul></ul><ul><ul><li>...
When there is little latitude in determining their position or posture When they are held accountable for their performanc...
The Buyer’s Negotiation Position will be Strong If: Negotiation Demand is not urgent Suppliers are keen for the business B...
Negotiation Who is to negotiate? The venue Intelligence gathering Negotiation objectives Strategy Tactics Conducting dummy...
Who is to negotiate <ul><li>The individual approach </li></ul><ul><li>The team approach </li></ul><ul><ul><li>Allocate rol...
The venue <ul><li>Should be in buyer office unless there are good reasons to do otherwise </li></ul><ul><ul><li>Inspect ve...
Gathering information <ul><li>Cost and price analysis </li></ul><ul><li>Situational analysis </li></ul><ul><li>Value analy...
Determining objectives <ul><li>Varying interests of participants in  negotiations </li></ul><ul><ul><li>Suppliers: profit,...
Model of bargaining Buyer Seller 5 8 9 10 13 Ideal  settlement Ideal  settlement Realistic  Settlement Realistic Settlemen...
Discuss <ul><li>Describe how Lily negotiated with suppliers to purchase within the budget of US$20 per piece for DimS, inc...
Strategy and tactics <ul><li>Strategy: overall plan that aims to achieve, as nearly as possible, the objectives of the neg...
Negotiation Introductions, agenda agreement and rules of procedure Ascertaining the negotiation range Agreement of common ...
Role play <ul><li>You will be divided into two groups </li></ul><ul><ul><li>IBM buying group </li></ul></ul><ul><ul><li>Ke...
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201negotiation

  1. 1. Negotiation
  2. 2. Topics <ul><li>Approaches to negotiation </li></ul><ul><li>Content of negotiation </li></ul><ul><li>Factors that influence negotiation </li></ul><ul><ul><li>Conditions that prevent spontaneous response </li></ul></ul><ul><ul><li>Factors that increase buyer’s position </li></ul></ul><ul><li>Preparing for negotiation </li></ul><ul><li>Stages of negotiation </li></ul>
  3. 3. <ul><li>Page 548 </li></ul>Definition Negotiation “ An occasion where one or more representatives of two or more parties interact in an explicit attempt to reach a jointly acceptable position on one or more divisive issues about which they would like to agree.”
  4. 4. Approaches to negotiation <ul><li>Adversarial negotiation </li></ul><ul><ul><li>Win-lose negotiation </li></ul></ul><ul><ul><li>Emphasize on competing to attain goals at the adversary’s expense </li></ul></ul><ul><li>Collaborative negotiation </li></ul><ul><ul><li>Win-win negotiation </li></ul></ul><ul><ul><li>Emphasize on ascertaining goals held in common with other party </li></ul></ul><ul><ul><li>(Page 549, the comparison) </li></ul></ul>
  5. 5. Content of negotiation <ul><li>Substance goals </li></ul><ul><ul><li>Price, Contractual, Delivery etc </li></ul></ul><ul><li>Relationship goals </li></ul><ul><ul><li>Outcomes relating to working relationship </li></ul></ul><ul><ul><li>Partnership sourcing </li></ul></ul><ul><ul><li>Preferred supplier status </li></ul></ul><ul><ul><li>Supplier involvement </li></ul></ul><ul><ul><li>Sharing of technology (Page 550) </li></ul></ul>
  6. 6. Negotiation Contractually Related Issues (Pg 551) Type of contract (1) Fixed price or lump sum (2) Cost reimbursable (3) Unit price Use of sub-contractors Liability of sub-contractors Ownership of jigs, tools, moulds, etc. Charges for use of patents need by supplier/purchaser Confidentiality and restraint of trade issues Payments in advance Sharings of savings due to improved design/production Changes to specifications and designs Milestone payments Disposal of surplus material Environmental issues Health and safety issues Inspection rights Conditions, warranties and guarantees Force majeure Dispute of resolution Non-compensatible delays Legal charges Cancellation rights Right of audit and openbook agreements Set of rights Some Contractually Related Negotiation Issues
  7. 7. Factors in negotiation (Pg 552) <ul><li>Negotiators </li></ul><ul><ul><li>Personality </li></ul></ul><ul><ul><li>The degree of authority of negotiators </li></ul></ul><ul><li>Negotiating situation </li></ul><ul><ul><li>Who is stronger in the negotiating position? </li></ul></ul>
  8. 8. Factors in negotiation <ul><li>Time </li></ul><ul><ul><li>“ Necessity never made a good buyer” </li></ul></ul><ul><ul><li>Past experience governs expectation and perception </li></ul></ul><ul><li>Influential factors (Pg 555) </li></ul><ul><ul><li>Environmental (E.g. Culture, social etc) </li></ul></ul><ul><ul><li>Situational (E.g. Objectives, motivation etc) </li></ul></ul><ul><ul><li>Behavioral predisposition (E.g. Sensitivity) </li></ul></ul><ul><ul><li>Influencing power (E.g. Presentation ) </li></ul></ul>
  9. 9. When there is little latitude in determining their position or posture When they are held accountable for their performance When they have sole responsibility When they are responsible to a constituency present in the negotiations When they are appointed rather than elected Conditions that Prevent Spontaneous Response Negotiation
  10. 10. The Buyer’s Negotiation Position will be Strong If: Negotiation Demand is not urgent Suppliers are keen for the business Buyer is in a monosponistic position Demand can be met by alternatives/substitutes Make and buy options are available Buyer has a reputation for fair dealing Buyer has excellent supply market intelligence
  11. 11. Negotiation Who is to negotiate? The venue Intelligence gathering Negotiation objectives Strategy Tactics Conducting dummy runs Pre-negotiation Considerations
  12. 12. Who is to negotiate <ul><li>The individual approach </li></ul><ul><li>The team approach </li></ul><ul><ul><li>Allocate roles </li></ul></ul><ul><ul><ul><li>Spokesperson </li></ul></ul></ul><ul><ul><ul><li>Recorder </li></ul></ul></ul><ul><ul><ul><li>Experts </li></ul></ul></ul><ul><ul><li>Avoid disagreement </li></ul></ul>
  13. 13. The venue <ul><li>Should be in buyer office unless there are good reasons to do otherwise </li></ul><ul><ul><li>Inspect vendor facilities </li></ul></ul><ul><li>Advantages to negotiate on home ground </li></ul>
  14. 14. Gathering information <ul><li>Cost and price analysis </li></ul><ul><li>Situational analysis </li></ul><ul><li>Value analysis </li></ul>
  15. 15. Determining objectives <ul><li>Varying interests of participants in negotiations </li></ul><ul><ul><li>Suppliers: profit, time, relationship, reputation etc </li></ul></ul><ul><ul><li>Users: Schedule, safety, value, environmental impact, quality </li></ul></ul>
  16. 16. Model of bargaining Buyer Seller 5 8 9 10 13 Ideal settlement Ideal settlement Realistic Settlement Realistic Settlement Fall-back position Fall-back position
  17. 17. Discuss <ul><li>Describe how Lily negotiated with suppliers to purchase within the budget of US$20 per piece for DimS, inclusive of the ‘freezing’ cost. </li></ul><ul><li>What are important things does Lily need to prepare for the negotiation? </li></ul><ul><li>Decide her approach </li></ul><ul><li>Determine objectives </li></ul><ul><li>What kind of bargaining model can Lily use for her negotiation to meet her objective? </li></ul>
  18. 18. Strategy and tactics <ul><li>Strategy: overall plan that aims to achieve, as nearly as possible, the objectives of the negotiation as seen from each participant </li></ul><ul><li>Tactics: The position or attitude to be taken during the process </li></ul>
  19. 19. Negotiation Introductions, agenda agreement and rules of procedure Ascertaining the negotiation range Agreement of common goals Identification and removal of barriers Agreement and closure Stages of a Negotiation
  20. 20. Role play <ul><li>You will be divided into two groups </li></ul><ul><ul><li>IBM buying group </li></ul></ul><ul><ul><li>Keytronic supply group </li></ul></ul><ul><li>Both IBM and Keytronic are to meet today to negotiate for the contract of DimS product. </li></ul><ul><li>IBM’s objective is to negotiate for the supply at budget of $20, inclusive of “freezing cost” </li></ul><ul><li>Task 1: Prepare your negotiation (15 min) </li></ul><ul><li>Task 2: Negotiate at the meeting (15 min) </li></ul>
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