ISQA 454 Negotiation Planning
Dec 19, 2015
Abraham Lincoln “When I am getting ready to reason with
a man, I spend one-third of my time thinking about myself and what I am going to say, and two thirds thinking about him and what he is going to say.”
What is Fundamental Goal of This Transaction?
How Will This Transaction Create Competitive Advantage?
Assess Buying Position Assess Selling Position Assess Situational Issues Set Targets Plan Concessions
Negotiation Planning
Negotiation Success = Planning
Planning Must Be SystematicWhat Kind of Transaction?
One-Time Repetitive Requirements
Distributive Bargaining Integrative Bargaining
Distributive BargainingCompetitiveWin/LoseGoals in Direct ConflictConfrontational Information is GuardedUsually Focused on Price or Money
Issues
Distributive BargainingPositional Initial DemandContest of WillsLimited Resource SituationsTypically One-Time Transactions
Integrative BargainingFocus on Common Interests, Not
DifferencesAddress Needs, not PositionsAddress Needs of AllExchange Information and IdeasPursue Options for Mutual Gain ‘Abundance’ Mentality
Integrative BargainingAnswer “Why”Multiple Ways to Meet Needs of BothLook for Common InterestsStrives for Mutual GainTypically Longer Term RelationshipsHow Will This Agreement Look to the
Other Side’s Boss
Win-Win Goals Win-Win Does Not Mean Equal Gains The Other Side is NOT the Enemy Goal: Mutually Satisfactory Agreement Long Term Relationship Conflict Resolution Mechanism Mutual Dependence
Trust Collective Goals
LeverageLeverage is any Information Used to
Create a Perception in the Other Party’s Mind of Negotiation Strength on Your Part
Leverage is an Increased Means of Accomplishing a Purpose
Negotiation PlanningFrom Whom Do We Want Responses
Research All Suppliers in Last Three Years Use Trade Directories, Yellow Pages,
Internal Users, etc. to Explore Supply BaseWhat Form of Supplier Response
Sealed Bids With Non-Price Negotiation Two Step Bidding Negotiation
Other Planning Issues Don’t Assume Everyone Knows What Are Real Goals of Meeting
Contract? Action Plan? Information Exchange and Next Meeting Date? The Importance of the Agenda and Ground Rules
Operationalizing the Agreement Commitment: What are Next Steps
Elements of Negotiation Planning
Facts Both Sides Agree
Needs/Interests Internal and External What Are Our Differences? Why? What if on Other Side
Alternatives Win-Win or Win-Lose Options BATNA
Elements of Negotiation Planning
Legitimacy Why is Your Position Proper Be Careful of Standards, Benchmarks
Communication Three Basic Rules Reframe What You Say
Relationships Unconditionally Constructive Smile - It’s All in How You Start Good Way Even if Other Side Doesn’t Reciprocate
Negotiation Planning Use Internal Resources
What – Exactly - Do We Need Complete, Detailed Specifications Past Volumes Projected Volumes
Research Total Commodity Purchases for Last Three Years
Define Performance Requirements/Specifications
Set Priorities Develop Price or Cost Estimates
Negotiation Planning Availability Issues
Lead Time Commitments Supplier’s Inventories
Quality Issues Warranties SPC
Pricing Target Pricing (Why) Acceptable Range
Setting Targets Needs
Price Range Quality Requirements Delivery Requirements
Wants Payment Terms Extended Warranties AM Deliveries
Setting Targets Like-to’s
Brown Color Right of First Refusal of New Technology Weekly Donuts
The Opening Position Have High Aspirations Temper With Realism
Assess Supplier’s MotivationQuick Sale
Unload Inventory Quota Time
“Tide Over” BusinessLong Term RelationshipFoot-in DoorMarket Penetration
What Happens If We Don’t Agree?
Walk Away Point What Will It Cost to Change Suppliers? What Will It Cost If We Don’t Agree?
Immediate Cost Future Cost Future Interaction
Relationship Credibility
BATNA Best Alternative Contingency Plans?
Negotiation Planning: FrankWhat Do We Know About Other Party
What Do They Want What About The Individuals
What Information to PresentTo Whom Shall We Present InformationHow to Present the InformationGet Point Across in 30 Seconds
ConcessionsAnother Element of Planning
Issues to be Avoided “MUST HAVE” Issues Priorities of Other Issues Alternative Approaches Concession Ammunition Concession Timing
Completeness of the Agreement
Amendments Acceptance Tests Assignment Service Bulletins, Modifications Confidentiality Contract Renewal Option Delivery Emergency Support Installation, Set Up
Completeness of the Agreement
Insurance Liquidated Damages Maintenance Packaging Payment Terms Price Change Spare Parts Availability Service Support
Completeness of the Agreement
Taxes Technical Publications Technology Training Termination Value Analysis Warranties