Choosing the best negotiation model toward suppliers

1. Elham Amini
Negotiation Strategies
Instructor: Dr. Khalife Soltani
Dec. 2016
F a c u l t y o f S o c i a l S c i e n c e s & E c o n o m i c s
A l z a h r a U n i v e r s i t y
Developing Differentiated
Negotiation Strategies
(Negotiation Strategies toward suppliers Based on Portfolio Analysis)

2. What is a Negotiation Strategy?
Negotiation Styles
Kraljic matrix
Supplier Preference Table
Choose the Best Negotiation Style

3. What is a Negotiation Strategy?
A pre-determined approach or prepared plan of action to achieve a specific
goal or objective to potentially find and make an agreement or contract in
a negotiation with another party or parties
(how you plan on interacting with the supplier)

4. Negotiation Styles:
When developing negotiation strategies, a well-established tool is:
Low High
LowHigh
Dominating/Competing
(Win-Lose)
Problem Solving/Collaboration
(Win-Win)
Avoiding
(Lose-Lose)
Accommodating/Yielding
(Lose-Win)
Compromising
negotiation-behavior matrix

5. Strategic buyers use two analysis to choose the best negotiation strategy
toward suppliers:
• Kraljic Matrix
• Supplier Preferences table

6. Low High
LowHigh
Leverage Strategic
None Critical
Kraljic matrix
Two Dimensions
Importance of Purchasing
 size of spending/Total size of spending
 Profit
Complexity of Supply Market
 Scarcity and
 Constant New Technology
 Cost
- Difficult to produce
- Easy to Start
 Monopoly/Oligopoly

7. Low High
LowHigh
Leverage
None-Critical Bottleneck
Kraljic matrix
• Low value, Low risk
• Easy to Buy
• Supply exceeded demand
• Low business impact
• Standard Product
Purchasing Strategy
Efficiency

8. Low High
LowHigh
Leverage Strategic
None Critical Bottleneck
Kraljic matrix
• High impact, Low Risk
• Easy to Buy
• High Importance
• Standard Products
• Many Suppliers
Purchasing Strategy
“Low Price”

9. Low High
LowHigh
Leverage Strategic
None Critical Bottleneck
Kraljic matrix
• Difficult to Buy
• Low Impact
• Special Products
Purchasing Strategy
“Contract”

10. Low High
LowHigh
Leverage Strategic
None Critical Bottleneck
Kraljic matrix
• High impact, Low Risk
• Hard to source
• High Importance
• Special Products
Purchasing Strategy
“Form Partnership”

11. Low High
LowHigh
Leverage Strategic
None Critical Bottleneck
Kraljic matrix

12. Low High
LowHigh Supplier Preference Table
• Competitive Position relative to other suppliers
• Attractiveness

13. Low High
LowHigh
Exploitable Core
Nuisance Development
Supplier Preference Table
• Low Priority & Low Supplier Motivation
• No Development Potential
• Your Bargaining Position Will Be Back

14. Low High
LowHigh
Exploitable Core
Nuisance Development
Supplier Preference Table
• No Reason to Develop long-term
relationship
• No Priority
• Exploit you by raising prices

15. Low High
LowHigh
Exploitable Core
Nuisance Development
Supplier Preference Table
Your Business may be small
but supplies see a potential
or wish to associate with
your company
Willing to Invest time and
Effort in the relationship

16. Low High
LowHigh
Exploitable Core
Nuisance Development
Supplier Preference Table
• Provide superior service
and quality
• Keep customer at all cost

17. Low High
LowHigh
Exploitable Core
Nuisance Development
Supplier Preference Table

20. Marquez, A. C., & Blanchar, C. (2004). The procurement of strategic parts. Analysis of a
portfolio of contracts with suppliers using a system dynamics simulation model.
International Journal of Production Economics, 88(1), 29–49.
http://doi.org/10.1016/S0925-5273(03)00177-4
www.negotiations.com/definition/negotiation-strategy
https://www.mindtools.com/pages/article/newSTR_49.htm
http://slideplayer.com/slide/9344162/
https://www.youtube.com/watch?v=38Gyxy1eBec
References

21. Thank
You!