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What is Negotiation?
Negotiation Framework
Negotiation Planning
Power in Negotiation
Win-Win Negotiation
International Negotiation
The Impact of the Internet on Negotiations
• Understand when and why a buyer enters into a
sourcing negotiation
• Recognize the importance of planning within the
negotiation process
• Appreciate the different sources of power that
are present during negotiations
• Negotiation is a skill that is essential to all purchasing
and supply managers
• Negotiation is a vital part of every sourcing process
• Negotiation is an ideal way to convey the buyer’s
specific sourcing requirements and specifications to its
supply base
“is an interactive communication process that may take
place whenever we want something from someone else
or another person wants something from us”
OR
“is the process of communicating back and forth for the
purpose of reaching joint agreement about differing
needs or ideas”
OR
“is a decision-making process by which two or more
people agree how to allocate scarce resources”
Identify or anticipate a purchase requirement
Determine if negotiation is required
Plan for the negotiation
Conduct the negotiation
Execute the agreement
1.
2.
3.
4.
5.
6.
7.
Develop specific objectives
Analyze each party’s strengths and weaknesses
Gather relevant information
Recognize your counterpart’s needs
Identify facts and issues
Establish a position on each issue
Develop the negotiation strategy and accompanying
tactics
8. Brief other personnel
9. Practice the negotiation
• Power is the ability to influence another person or
organization
• Sources of negotiation power:
a. Informational
b. Reward
c. Coercive
d. Legitimate
e. Expert
f. Referent
Win-lose negotiation
• Two or more parties are competing over a fixed value
with the winner taking the larger share
• Also known as a zero-sum or fixed-sum game (if one
party gains, it is only at the expense of the other party)
Win-win negotiation
• Seeks to expand the value or resources available to all
participants through collaborative negotiation
• Also know as integrative bargaining
Characteristics of Win-Lose and Win-Win Negotiation
• Negotiations with suppliers located literally anywhere
on the globe take on added complexity and challenge
when the parties have different languages, customs,
laws and cultures
• Important considerations in negotiating a global
sourcing agreement is culture shock
• Requires additional planning and preparation to be
successful
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2.
3.
4.
5.
6.
7.
Tend to equalize the interactions between the parties
because normal visual cues and sources of power are not as
evident
Engage in more risky behaviours and are more aggressive in
their demands
Active listening and effective feedback are more difficult to
conduct
Engage in behaviours that indicate that they are
communicating in real time even when they are not
Often feel less accountable for the outcomes because of
perceived disconnect with their counterparts in a different
locale
Tend to take on a more adversarial, “us-versus-them”
mentality
The negotiator at the other end of the electronic connection
is relatively anonymous
• Successful negotiators criteria:
– They should be rated as effective by both sides
– They should have a track record of significant success
– They should have a low incidence of implementation
failures.
Behavioral / Interactive Factors :
Image
Integrity
Status
Self-actualization
Corporate issues
&
Human issues
The resolution of conflicting interests through negotiation
is motivated by:
• Individual personality needs of negotiators
• Personality compatibility among negotiators representing
opposing parties
• Negotiators’ perceptions and expectations of the opponent
• Persuasive mechanisms employed to modify the bargaining
positions and values of the opponent to achieve a more
favorable convergence of interests
Negotiation Ploys
Methods of Dealing with Ploys
Nice guy / hard guy
Either match style or adopt contrast style
Add on
Carefully check what you are getting for your money before
agreement
Deadlines
Avoid revealing what time you have to finish. Agree to
meet another time
Russian front
Do not accept poor deals. What is your best alternative to a
negotiated agreement?
Empty larder
Ask for an explanation of any constraints in a deal. Offer
what you can within those constraints
Approval from a higher
authority
Establish opposite number’s full authority before
negotiation
Manipulative Techniques and Ploys
The Interpretation of Postures
Posture
Possible Meaning
Leaning forward when making a point
Interested; wants to emphasis a point
Avoiding eye contact
May be embarrassed; not telling the truth
Arms folded; body turned away from you
Defensive; no compromise. Not interested
Body turned towards you leaning forward
Interested; warning towards your comments
Looking away at watch or at a window
Wants to leave or avoid any further discussion
Hands supporting head and leaning back in
chair
Confidence
Stroking nose regularly with a finger – avoiding
eye contact
May be lying
Good eye contact; fingers stroking face
Interested in what you are saying
• Negotiation process involved 5 phases
• Negotiation may not always be the appropriate way to
reach an agreement – persuasion, complete acceptance,
coercion or problem solving may prove sound
alternatives
• Negotiation style depends on the objective to be
achieved
• Individuals who are skilled at negotiation are destined
to be among an organization’s most valued professionals