UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
6. Contract negotiations
UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
Negotiators as representatives
Conditions that Prevent Spontaneous Response
When there is little latitude in determining their position or posture
Negotiation team
When they are held accountable for their performance
When they have sole responsibility
Purchasing items units
When they are responsible to a constituency present in the
negotiations
When they are appointed rather than elected
The Buyer’s Negotiation Position will be Strong
If:
Demand is not urgent
Suppliers are keen for the business
Buyer is in a monopolistic or semi position
Demand can be met by alternatives/substitutes
Make and buy options are available
Buyer has a reputation for fair dealing
Strong supplier position:
Demand is urgent
Suppliers are indifferent
accepting business
Monopolistic or semimonopolistic
Strong reputation of quality,
reliability
Supplier owns necessary
tools or specialised
machinery
Buyer has excellent supply market intelligence
Supplier is well informed
about buyer position
UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
Stages of a Negotiation
List of topics + timing
Introductions, agenda agreement and rules of procedure
Ascertaining the negotiation range
Agreement of common goals
Identification and removal of barriers
Agreement and closure
Openness saves time
(collaborative
approach)
Problem solving
Considerations of
solutions....
Determination of
concessions.....
Some ‘personnel’ factors in negotiation
UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC
7. Capital investment purchases
Definition
One of the subclasses of the fixed asset category and includes industrial and
office machinery and tools, transportation equipment, furniture and fixtures
and others. As such, these items are properly chargeable to a capital
account rather than to expense.
Categories of Capital Equipment
Buildings
Installation equipment
Accessory equipment
Operating equipment
Tools and instruments
Furnishings and fittings
How Capital Equipment Procurement Differs from
that on Materials and Components
Cost per item is usually greater
The equipment facilitates production
Financed with long-term capital
Tax considerations play a big part in the decision
Government financial assistance may be available
The purchase may be postponable
Decision to purchase, results in consequences for sale, output and labour
Factors to Consider When Buying Capital Equipment
Purpose
Flexibility
Spares
Standardisation
Compatibility and existing equipment
Life
Reliability
Durability
Product quality
Cost of operation
Cost of installation
Cost of maintenance
Miscellaneous, e.g., space requirements
Leasing – Advantages and Disadvantages
Advantages
Disadvantages
• Costs are known in advance
• Fixed obligation to pay
• Does not provide the prestige or
flexibility of ownership
• Large organisations may obtain
capital or equal terms with lessors
• Flexibility to dispose of obsolete
equipment before end of lease
may be reduced
• Reduced need to tie up capital
in fixed assets
• Concerned only with rentals
• Hedge against risk of obsolescence
Capital Investment Purchases – The Buyer’s Contribution
Provide a gateway for commercial considerations
Influence the specification to avoid single source quotations
Emphasise life-cycle costs
Prepare comprehensive invitations to tender
Provide commercial, contractual and negotiating expertise
Research alternatives to the purchase of new machines
Identify government grants that may be available
Research international market
Assist with disposal of displaced asset