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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)