The document discusses negotiation in sourcing. It defines negotiation as the process where two or more parties decide what each will give and take in an exchange. There are two main approaches to negotiation - the adversarial/distributive approach which is competitive with one side winning and the other losing, and the collaborative/integrative approach which finds common goals and acceptable solutions for both parties. Substance goals in negotiation include price, contractual terms, and delivery details, while relationship goals relate to the ongoing relationship between parties such as partnership status or risk sharing.

1. KMB OM 04
(SOURCING MANAGEMENT )
Negotiation in Sourcing (Unit 4)
Part 1 of 4
Dr. PARUL AGARWAL, ABESEC,
AKTU,LUCKNOW
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2. Learning Objectives
On completion you will be able to:
• Define negotiation
• Explain what is involved in adversarial and collaborative approaches
and identify where they are appropriate
• Identify likely substance and relationship goals
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AKTU,LUCKNOW
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3. Negotiation Definitions
NEGOTIATION IS:
1. The process whereby two or more parties decide
what each will give and take in an exchange
between them
• Rubin and Brown (1975)
2. 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
• Gottschal (1973)
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AKTU,LUCKNOW
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4. Negotiation Definitions (Contd.)
Negotiation is:
3. Any form of verbal communication in which
the participants seek to exploit their relative
competitive advantages and needs to achieve
explicit or implicit objectives within the overall
purpose of seeking to resolve problems which
are barriers to agreement
• Lysons (1993)
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AKTU,LUCKNOW
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5. Approaches/ Types of Negotiation
There are 2 main Approaches to Negotiation:
1. Adversarial, Distributive or Win-Lose
2. Collaborative, Integrative or win-win
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AKTU,LUCKNOW
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6. Adversarial, Distributive or Win-Lose
Approach
Adversarial, Distributive or Win-Lose Negotiation is characterized
by:
 Competing goals
 Secrecy and hidden agendas
 Low trust
 One side winning and the other losing
 Head-to-head adversarial approach
 Competitive and inflexible negotiation
 Characterised by conflict, disagreement and mis-information
 Impasse may end in no deal or litigation
Dr. PARUL AGARWAL, ABESEC,
AKTU,LUCKNOW
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7. Collaborative, Integrative or win-win
Approach
Collaborative, Integrative or win-win Negotiation is characterized
by:
 Finding common goals
 Transparent agenda and issues
 Acceptable solutions for both parties
 Ethical
 Sharing risk and cost savings
 Mediation or arbitration process if necessary
 Friendly, non-aggressive approach
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AKTU,LUCKNOW
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8. Approaches to Negotiation- A
Comparison
Adversarial, Distributive or
Win-Lose Negotiation
1. Appropriate where
1. no ongoing relationship
2. quick, simple solution to
disagreement needed
2. Strategy based on secrecy
3. True goals unclear
4. Unpredictable behaviour,
negotiating ploys, threats,
bluffs, fixed positions
5. ‘Us against them’
6. ‘We win, you lose’
Collaborative, Integrative or
Win-Win Negotiation
1. Appropriate where
1. long-term relationship
2. Creative solution to mutual
problem required
2. Strategy based on openness
3. Goals disclosed
4. Predictable behaviour,
negotiating ploys avoided, flexible
5. ‘We’re in this together’
6. ‘How can respective goals of each
party be achieved so that both
win?’
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AKTU,LUCKNOW
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9. Content of Negotiation
A) Substance goals – content issues of negotiation
How important is the outcome to them
1. Price
2. Contractual
3. Delivery
B) Relationship goals – outcomes relating to working together
What is the basis of the relationship between the parties
– Partnership
– Preferred supplier status
– Supplier involvement in design, development and value
analysis
– Sharing of technology, risk
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AKTU,LUCKNOW
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10. A. Substance Goals
1. Price Content of Negotiation
Lysons & Farrington Purchasing and Supply Chain Management, Pearson, 2006, p.551
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AKTU,LUCKNOW
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11. A. Substance Goals
2. Contractual Content of Negotiation
Lysons & Farrington Purchasing and Supply Chain Management, Pearson, 2006, p.551
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AKTU,LUCKNOW
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12. A. Substance Goals
3. Delivery Content of Negotiation
Lysons & Farrington Purchasing and Supply Chain Management, Pearson, 2006, p.552
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AKTU,LUCKNOW
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