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    201negotiation 201negotiation Presentation Transcript

    • Negotiation
    • Topics
      • Approaches to negotiation
      • Content of negotiation
      • Factors that influence negotiation
        • Conditions that prevent spontaneous response
        • Factors that increase buyer’s position
      • Preparing for negotiation
      • Stages of negotiation
      • Page 548
      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.”
    • Approaches to negotiation
      • Adversarial negotiation
        • Win-lose negotiation
        • Emphasize on competing to attain goals at the adversary’s expense
      • Collaborative negotiation
        • Win-win negotiation
        • Emphasize on ascertaining goals held in common with other party
        • (Page 549, the comparison)
    • Content of negotiation
      • Substance goals
        • Price, Contractual, Delivery etc
      • Relationship goals
        • Outcomes relating to working relationship
        • Partnership sourcing
        • Preferred supplier status
        • Supplier involvement
        • Sharing of technology (Page 550)
    • 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
    • Factors in negotiation (Pg 552)
      • Negotiators
        • Personality
        • The degree of authority of negotiators
      • Negotiating situation
        • Who is stronger in the negotiating position?
    • Factors in negotiation
      • Time
        • “ Necessity never made a good buyer”
        • Past experience governs expectation and perception
      • Influential factors (Pg 555)
        • Environmental (E.g. Culture, social etc)
        • Situational (E.g. Objectives, motivation etc)
        • Behavioral predisposition (E.g. Sensitivity)
        • Influencing power (E.g. Presentation )
    • 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
    • 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
    • Negotiation Who is to negotiate? The venue Intelligence gathering Negotiation objectives Strategy Tactics Conducting dummy runs Pre-negotiation Considerations
    • Who is to negotiate
      • The individual approach
      • The team approach
        • Allocate roles
          • Spokesperson
          • Recorder
          • Experts
        • Avoid disagreement
    • The venue
      • Should be in buyer office unless there are good reasons to do otherwise
        • Inspect vendor facilities
      • Advantages to negotiate on home ground
    • Gathering information
      • Cost and price analysis
      • Situational analysis
      • Value analysis
    • Determining objectives
      • Varying interests of participants in negotiations
        • Suppliers: profit, time, relationship, reputation etc
        • Users: Schedule, safety, value, environmental impact, quality
    • Model of bargaining Buyer Seller 5 8 9 10 13 Ideal settlement Ideal settlement Realistic Settlement Realistic Settlement Fall-back position Fall-back position
    • Discuss
      • Describe how Lily negotiated with suppliers to purchase within the budget of US$20 per piece for DimS, inclusive of the ‘freezing’ cost.
      • What are important things does Lily need to prepare for the negotiation?
      • Decide her approach
      • Determine objectives
      • What kind of bargaining model can Lily use for her negotiation to meet her objective?
    • Strategy and tactics
      • Strategy: overall plan that aims to achieve, as nearly as possible, the objectives of the negotiation as seen from each participant
      • Tactics: The position or attitude to be taken during the process
    • 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
    • Role play
      • You will be divided into two groups
        • IBM buying group
        • Keytronic supply group
      • Both IBM and Keytronic are to meet today to negotiate for the contract of DimS product.
      • IBM’s objective is to negotiate for the supply at budget of $20, inclusive of “freezing cost”
      • Task 1: Prepare your negotiation (15 min)
      • Task 2: Negotiate at the meeting (15 min)