Negotiation Strategies
How to deal with co-workers, clients, and suppliers
Richard G. Weissman, C.P.M.
Northeast Supply Chain Conference and Exhibition
September 2004
Richard G. Weissman, C.P.M.
Director, Center for Leadership
Assistant Professor
Endicott College
376 Hale Street
Beverly, MA 01915
978-232-2269
rweissma@endicott.edu
Objectives
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Recognize the elements and process of
negotiation.
Concentrate on negotiation tools and
techniques.
Negotiate with internal and external clients.
Focus on process improvement.
Highlight communication and the human
approach to negotiation.
Understand the benefits of successful
negotiations.
Negotiation
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An exploratory and a bargaining process
(planning, reviewing, analyzing,
compromising) involving a buyer and seller,
each with their own viewpoints and
objectives, seeking to reach a mutually
satisfactory agreement on all phases of a
procurement transaction including price,
service, specifications, technical and quality
requirements, payment terms, and elements.
NAPM Glossary of Key Purchasing Terms
WHEN DO YOU
NEGOTIATE?
Key Point!
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Most negotiations occur over and over again.
We tend to deal with the same customers, coworkers, suppliers, clients, directors, and
managers for a long time. It is important to
recognize and give proper weight to the
context in which a negotiation is taking place.
If it is within an on-going relationship, the
significance of that relationship must be
considered.
The 5 Ps of Negotiating
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Preparation
Poise
Persuasiveness
Persistence
Patience
Right Associates
Reasons for Negotiation
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Lack of competition
• Price, quality,
delivery, and service
needs
• Buying production or
service capabilities
• High buyer or seller
uncertainty
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Urgency
Long lead times
Necessity for flexible
contracts
Lack of firm product
specifications
Single source
strategies
Problems in Negotiation
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Lack of formal negotiation training
Lack of preparation
Failure to establish realistic objectives
Unsound tactics
Cultural misunderstanding
Brainstorming Exercise
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What are the traits of a good negotiator?
How to be a “Sophisticated Customer”
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Understand YOUR business
Understand THEIR business
Follow-up and follow through
Anticipate
Question
Communicate
Phases of Negotiation
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Presentation phase
Clarification phase
Exploration phase
Proposal phase
Hard bargaining phase
Planning for Negotiation
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Strategic planning
• Administrative planning
• Tactical planning
Planning the Negotiation Process
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Basic groundwork
Develop objectives
Gain support
Assemble the team
Action!
Verbal agreement
Written agreement
Making it work
Information Quilt
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Public domain, such as the Internet,
magazines, newspapers, D&B reports.
Third parties, such as business
associates, friends, or those who are
aware of your opponent.
Your opponent, such as contacts within
their organization.
Elements of a Written Negotiation Plan
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Brief overview statement
Objectives
Positions of strength for both parties
Internal support requirements
Development of negotiating team
Negotiation plan & tactics
Documentation of Negotiation
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Subject
Introductory summary
Particulars
Procurement situation
Negotiation summary
Sources of Power
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Competition
Legitimacy
Commitment
Knowledge
Risk-taking
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Time
Effort or work
Money
Negotiation skills
Friendly
associations
Negotiating Power
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Negotiating power is relative between the parties.
Negotiating power changes over time.
Negotiating power is always limited.
Negotiating power can be either real or apparent.
The exercise of negotiation power has both benefits and
costs.
Negotiating power relates to the ability to punish or benefit.
Negotiating power is enhanced by legal support, personal
knowledge, skill, resources and hard work.
Negotiating power is increased by the ability to endure
uncertainty and by commitment.
Negotiating power is enhanced by a good negotiating
relationship.
Negotiating power depends on the perceived BATNA.
Negotiating power exists to the extent that it is accepted.
Negotiation Theory and Skills by James C. Melamed, J.D.
Authority
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Escalating authority
Limited authority
No authority
Full authority
Escape from authority
Major Modes of Negotiation
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Cooperative (win--win)
• Competitive (win--lose)
• Counterproductive (lose--lose)
Getting to Yes
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Fisher, Vry & Patton of the Harvard
Negotiation Project.
Separate the people from the problem.
Focus on interests, not positions.
Invent options for mutual gain.
Insist on using objective criteria.
Problems of Long-Term Relationships
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Loss of objectivity
Complacency
Loss of secrecy
Growing dependency
Cooperative forces lessen
Person factors influence decision making
Organizations “locked-in”
Easy!
Nibbles
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Cash terms
Extended warranty
Service / support
Spare parts
Training
Freight
Testing
Anchor
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An initial offer in a negotiation, often set from
external experiences.
• The sticker price of an automobile is an
example of an anchor.
• When anchors are used, creativity in a
negotiation suffers.
Concessions
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Small concessions give the impression that
the bottom line is not far off.
• Large concessions indicate that a lot more
can still be conceded before the bottom line is
reached.
• Rapid or large concessions undermine the
credibility of the initial offer.
• All concessions teach the lesson that more
concessions will be made.
batna.com
Signals
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True signals. People send signals instead of
saying things outright in order to convey
information while preserving some degree of
deniability.
• False signals. These signals are designed to
mislead you.
• Unintentional signals. Signals made in error
that may be valuable.
Schatzki, Negotiation: The Art of Getting What you Want
Framing
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How an object, event, or situation is
depicted or presented
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Emphasize the value of their concessions.
Provide a justification for the other party to make
concessions.
Offer a standard of fairness for dividing the value
created by negotiating.
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Limits
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Dollar limits
Term limits
Policy limits
Legal limits
Engineering limits
Committee limits
Miscellaneous limits
Agreement in Principle
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May be part of the final agreement.
• May be a way-station toward reaching an
agreement.
• May be used as a tactical approach to the
negotiation.
• May be a combination
Schatzki, Negotiation: The Art of Getting What You Want
BATNA
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Best Alternative to a Negotiated Agreement
• No agreement may be better than a poor
agreement.
• The better your BATNA, the higher your
leverage.
• Successful negotiations may not result in
agreements.
Some Negotiation Tactics
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Agenda
Deadline
Concessions
Missing person
Bogey
Take it or leave it
Good guy / bad guy
Best and final offer
Ethics
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Misrepresentation of position
Bluffing
Deception
Selective disclosure
Bribes
Spying
Theft
Humiliation
Sharp practice
Aspects of a Purchase & Sale
Agreement
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Quality
Support
Supply
Transportation
Price
Quality
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Specification compliance
Performance compliance
Test criteria
Rejection procedures
Liability
Reliability
Design changes
Customer Support
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Technical assistance
Product enhancements
Research & development
Warranty
Spare parts
Training
Tooling
Packaging
End user support
Supply
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Lead times
Delivery schedule
Inventory programs
Consigned inventory
Stocking programs
Cancellation / reschedule options
Transportation
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FOB terms
Carrier
Commodity classification
Freight allowance / costs
Multiple delivery points
Timing
Price
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Purchase order price
Discounts
Foreign exchange
Escalation / de-escalation
Duties / taxes
Cost analysis / material / labor / overhead /
profit
8 Keys to High Performance Negotiation
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Motivate
Facilitate
Cooperate
Educate
Investigate
Anticipate
Communicate
Administrate
WHEN DO YOU
NEGOTIATE?