2 Dec - Negotiation
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Transcript of 2 Dec - Negotiation
BA#244:#Supply#Chain#Management#
NEGOTIATION#
We#are#equals#in#the#negoAaAon#table!#
a# process# whereby# two$ (or$ more)$ par,es# come#together#to#confer,#in#a#situaAon#in#which#there#is#some#divergence#or#conflict$of$interest$between$them,#with#a#view# to# concluding# a# jointly$ acceptable$ agreement$(CIPS)#
NEGOTIATION$
PreMnegoAaAon#preparaAon#
Actual#NegoAaAon#/#InteracAon#
PostMnegoAaAon#follow#up#
IMPORTANT!$
STAGES$OF$NEGOTIATION$
What#to#prepare:#• InformaAon#on#the#Market#/#SituaAon#• InformaAon#on#your#counterparts#• Budget#/#Your#Limits#
RELATIONSHIP$SPECTRUM$
Suppliers#in#Private#Firms?#Suppliers#in#Government?#
Boss?#Colleagues?#
Street#Vendor?#What%kind%of%rela/onship%is%best?%
CompeAAve# CollaboraAve#
KRALJIC$MATRIX$
Leverage#items# Strategic#items#
NonMcriAcal#/#RouAne#items# BoVleneck#Items#
Impo
rtan
ce+of+the+Item
+/+Spend+
Low
##High#
Number+of+Suppliers+in+the+Market+High # # # #Low#
ORIENTATIONS$TO$NEGOTIATION$
Distribu,ve$Bargaining$ Integra,ve$Nego,a,on$
Dividing#up#a#fixed#pie;#CompeAAve#
Expanding#the#pie;#CollaboraAve#
ORIENTATIONS$TO$NEGOTIATION$
Yearly#order:#1,000,000#KG##Shoulder:#PHP#152#/#KG##Trimmings:#PHP#132#/#KG#
Best#outcome?#
RANGE$OF$NEGOTIATION$OUTCOMES$
WINRLOSE#
Maximized#profit;#Damaged#working#
relaAonship#
LOSERLOSE#
Compromise;#HalfMsaAsfied#needs#
WINRWIN#
Preserves#the#relaAonship#
WINRPERCEIVED$WIN$
Most#advantageous#to#you#
+#relaAonship#objecAves#
RANGE$OF$OBJECTIVES$
Next:#Set#your#limits!#
RANGE$OF$OBJECTIVES$
• Ideal#or#bestMcase#outcome#• Believable#
Most#Favoured#PosiAon#(MFP)#or##Most#Desired#
Outcome#(MDO)#
• BoVom#line#or#worstMcase#posiAon#• Walk#away#point#and#take#up#BATNA#(alternaAve)#
Least#Acceptable#Agreement#(LAA)#
Understanding#where#you#are#in#this#conAnuum#is#criAcal#######
##
Buyer#
Supplier#
Range#of#NegoAaAon#Zone#of#PotenAal#Agreement#
LAA#MFP#/MDO#
LAA# MFP#/MDO#
Price,#PHP#
Price,#PHP#
RANGE$OF$NEGOTIATION$
TARGET$OUTCOMES$
Limits#• Resistance#points,#walkaway#points,#boVom#line#• CriAcal#Must#Haves#
Target#Points#• Points#you#expect#to#achieve#• ‘Shopping#List’#–#needed#to#sweeten#the#deal#
AlternaAves#• Best#AlternaAve#To#a#NegoAated#Agreement#(BATNA)#• e.g.#alternaAve#suppliers,#alternaAve#offer#
Purchasing$a$Laptop?$
BEST$ALTERNATIVE$TO$A$NEGOTIATED$AGREEMENT$(BATNA)$
• When#you#walk#away,#you#need#a#backMup#plan#(BATNA)#• Provides#leverage#
####‘The#only#reason#we$nego,ate#is#to#produce#something#beUer#than#the#results$we$could$obtain$without$nego,a,on’#
• Ability#to#exercise#influence$over$others$• Ability+to+influence+
• vs.#Authority#–#amount#of#discreAon#given#to#a#person#to#make#decisions#by$virtue$of$the$posi,on$he$holds#in#the#organisaAon#
• Right+to+influence+
POWER$
#
WHAT$IS$LEVERAGE?$
$$$$$##
• To#put$pressure#on#the#other#party#to$agree#or#comply#with$the$more$powerful$party’s#wishes#or#demands#
• Increase#expert#and#informaAonal#power#– Gather#Market#Intelligence#and#Strong#Data#to#support#your#posiAon,#and#challenge#other#party’s#posiAon#
• Increasing#legiAmate#power#– Appealing#to#your#own#legiAmate#authority#or#a#higher#authority#respected#by#the#other#party#
– Appealing#to#‘fairness’#of#your#posiAon#• ManipulaAng#structural#factors#in#buyerMsupplier#
– AggregaAng#volume#– Emphasis#on#BATNA#
HOW$TO$IMPROVE$YOUR$LEVERAGE?$
#
VENUE$–$YOUR$PLACE$OR$MINE?$
Nego,a,on$is$a$HOME$advantage$
VENUE$–$YOUR$PLACE$OR$MINE?$
Away$
Seeking#concessions##
Inspect#the#faciliAes#
Treatment#reveals#how#they#view#you#
Home$
Comfort#Zone#
Accessibility#of#addiAonal#resources#
Immediate#presence#of#support#networks#
Neutral$Loca,on$
Signals#that#no#party#wishes#to#take#
advantage#over#the#other#
Signals#willingness#to#level#the#playing#field#
#
VENUE$–$YOUR$PLACE$OR$MINE?$
Which$venue$if$you$want$to$remove$a$supplier?$
TEAM$NEGOTIATION$
Roles:#• Lead#NegoAator#or#Spokesperson#• Support#or#informaAon#providers#• Technical#experts#and#advisers#(e.g.#Legal,#AccounAng,#Engineering,#other#stakeholders)#• Scribe#/#NoteMtaker#/#Secretary#
TEAM$NEGOTIATION$R$ADVANTAGES$
• ContribuAon# of# Technical#Knowledge#
• InformaAon#Sharing#
• Shared# responsibility# for#outcomes#–#less#pressure#
TEAM$NEGOTIATION$R$DISADVANTAGES$
• DecisionMmaking#takes#longer#– PreMalign#objecAves#
• Group#dynamics#can#draw#energy#away#from#the#task#– Clarify#team#roles#
• Riskier#decisions#– PreMalign#objecAves#
If#you#fail#to#plan,#you#are#planning#to#fail#–#Benjamin#Franklin#
PreMnegoAaAon#preparaAon#
Actual#NegoAaAon#/#InteracAon#
PostMnegoAaAon#follow#up#
STAGES$OF$NEGOTIATION$
WHAT$HAPPENS$DURING$A$NEGOTIATION?$
Opening##
TesAng#and#Proposing#
Agreement#and#Closure#
Rapport#–#developing#a#sense$of$rela,onship$or#connec,on#with#another#person##How#to#open?#
Trading#concessions#–#acknowledging#that#the#other# party# will# only# move# if# you# offer#something#in#return##
Tie#loose#ends#
• Verbal#communicaAon#– Open#vs.#Closed#quesAons#– Probing#QuesAons#– HypotheAcal#QuesAons#
COMMUNICATION$
• NonMverbal#communicaAon#– Eye#contact#– AdjusAng#body#posiAon#– NonMverbal#encouragement#or#discouragement#
Effec,ve$Communica,on$=$Effec,ve$Nego,a,on$
#Power#Distance#
LOW#• Viewed# as# an# equal# regardless# of#
posiAon#or#designaAon##HIGH#• All#decisions#will#have#to#be#finalized#
by#the#leader#• Slower#negoAaAon#process#
NONRVERBAL$COMMUNICATION$–$INFLUENCE$OF$CULTURE$
Uncertainty#Avoidance##How#much#members# of# the# society# are#threatened#by#uncertain#and#ambiguous#situaAons#(Risk)##HIGH#• Seek# stable# rules# and# procedures# for#the#negoAaAons#
NONRVERBAL$COMMUNICATION$–$INFLUENCE$OF$CULTURE$
IndividualismMCollecAvism##Tendency#to#take#care#of#oneself#vs.#to#work#together#for#the#collecAve#good##CollecAvist#• NegoAaAons#with#same#party#can#conAnue#
for#years#and#a#change#in#negoAator#means#a#change#in#relaAonship#
#Individualist#• NegoAators#are#considered#interchangeable#
NONRVERBAL$COMMUNICATION$–$INFLUENCE$OF$CULTURE$
NEGOTIATION$TACTICS$
Bogey$Tac,c$
NegoAator# blames# the#posiAon# on# a# standard# set#b y# a# t h i r d# p a r t y# o r#something# beyond# his#control#.##e.g.# Management# policy,#budget,#boss’#decision##How#to#Handle#
How#does#it#work?#
Policy#can#be#modified#Refuse# the# deal# if# they# cannot#meet#your#objecAves#
How#does#it#work?#One# of# the# negoAators# is#hardcore#in#his#approach.##When# he# steps# out# for# a#while,#the#good#guy#makes#a n# o ff e r # i n # a # l e s s#threatening#manner.##
How#to#Handle#
Good$Guy$/$Bad$Guy#
Focus#on#your#objecAves#
How#does#it#work?$Asking#for#concessions#one#at# a# Ame# to# make# them#more#palatable.#
How#to#Handle#
Salami$
Salami# back# by# aVaching# a#cost# to# every# concession#demanded#
Express ing# d isbel ief# to#encourage# a# counterpart# to#make#a#beVer#offer.##Pushing# a# counterpart# to#provide# his# best# offer# by#implying#that#the#offer#on#the#table#is#unsaAsfactory.#
How#to#Handle#
Yikes!$You’ve$got$to$be$kidding!$
How#does#it#work?$
You’ve$got$to$do$beUer$than$that$
Focus#on#your#objecAves#
Asking#counterpart#for#help###EmoAonal#blackmail#
How#to#Handle#
Appealing$to$Mother$Teresa$
How#does#it#work?$
Use#Bogey#tacAc#
Supplier#overwhelms#you#with#confusing#informaAon#
How#to#Handle#
Snow$Job$
How#does#it#work?$
Keep# asking# quesAons# unAl#you# get# an# answer# you# can#understand#
• You#are#either#from#Procurement,#Sales,#or##an#Observer#
• You#are#buying#or#selling#your#MacBook#Pro#
• You#will#be#given#a#budget#range.#Buyer#will#try#to#buy#at#the#lowest#price,#and#Seller#will#try#to#sell#at#the#highest#price#
• You#have#3#minutes#to#close#the#deal;#End#the#deal#by#shaking#hands#
• Amer#closing#the#deal,#Observer#will#compute#how#far#you#are#from#your#iniAal#offer;#“winner”#is#the#one#nearest#to#iniAal#offer#i.e.#one#with#least#concessions#
NEGOTIATION$EXERCISE$
ACTIVITY$1$
– Seller:#PHP#30,000#to#60,000#– Buyer:#PHP#60,000#to#65,000#
#####Learning#points?#
• Who#started#the#offer?#• How#did#you#handle#an#iniAal#offer#that#was#already#advantageous#to#you?#
• What#went#through#during#negoAaAons?#
OBSERVATIONS$
ACTIVITY#1#######
##
Buyer#
Supplier#
Range#of#NegoAaAon#Zone#of#PotenAal#Agreement#
LAA#MFP#/MDO#
LAA# MFP#/MDO#
Price,#PHP#
Price,#PHP#
RANGE$OF$NEGOTIATION$
ACTIVITY$2$
– Seller:#PHP#43,000#to#55,000#– Buyer:#PHP#35,000#to#40,000#
#####Learning#points?#
• What#went#through#during#negoAaAons?#• What#were#the#pressures?#• What#went#wrong?#
OBSERVATIONS$
ACTIVITY#2#######
##
Buyer#
Supplier#
LAA#MFP#/MDO#
LAA# MFP#/MDO#
Price,#PHP#
Price,#PHP#
RANGE$OF$NEGOTIATION$
DEADLOCK#
ACTIVITY$3$
– Seller:#PHP#35,000#to#55,000#– Buyer:#PHP#30,000#to#50,000#
#####Learning#points?#
• What#went#through#during#negoAaAons?#• What#were#the#pressures?#
OBSERVATIONS$
Steidlmeier, P. 1999. Gift Giving, Bribery, and Corruption: Ethical Management of Business Relationships in China. Journal of Business Ethics. 20: 121-132.#
Ar,cle$
END$$$#