201negotiation
-
date post
17-Oct-2014 -
Category
Documents
-
view
2.251 -
download
0
description
Transcript of 201negotiation
Slides created by Brian Farrington Ltd. Procurement and Business Solutions People
for use with Lysons and Farrington: Purchasing and Supply Chain Management 7th edition
Negotiation
Slide 15.2
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Topics Approaches to negotiation Content of negotiation Factors that influence negotiation
Conditions that prevent spontaneous response
Factors that increase buyer’s position Preparing for negotiation Stages of negotiation
Definition
Negotiation
“An occasion where one or more representatives of two or more parties interact in an explicit attempt to reach a jointly acceptable position on one or more divisive issues about which they would like to agree.”
Page 548
Slide 15.4
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Approaches to negotiation Adversarial negotiation
Win-lose negotiation Emphasize on competing to attain goals at the
adversary’s expense Collaborative negotiation
Win-win negotiation Emphasize on ascertaining goals held in
common with other party
(Page 549, the comparison)
Slide 15.5
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Content of negotiation Substance goals
Price, Contractual, Delivery etc Relationship goals
Outcomes relating to working relationship Partnership sourcing Preferred supplier status Supplier involvement Sharing of technology (Page 550)
Negotiation
Contractually Related Issues (Pg 551)
Type of contract (1) Fixed price or lump sum(2) Cost reimbursable
(3) Unit price
Use of sub-contractors
Liability of sub-contractors
Ownership of jigs, tools, moulds, etc.
Charges for use of patents need by supplier/purchaser
Confidentiality and restraint of trade issues
Payments in advance
Sharings of savings due to improved design/production
Changes to specifications and designs
Milestone payments
Disposal of surplus materialEnvironmental issuesHealth and
safety issues
Inspection rights
Conditions, warranties andguarantees
Force majeure
Dispute of resolution
Non-compensatible delays
Legal charges
Cancellation rights
Right of audit and openbook agreements
Set of rights Some Contractually Related Negotiation
Issues
Slide 15.7
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Factors in negotiation (Pg 552) Negotiators
Personality The degree of authority of negotiators
Negotiating situation Who is stronger in the negotiating position?
Slide 15.8
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Factors in negotiation Time
“Necessity never made a good buyer” Past experience governs expectation and
perception Influential factors (Pg 555)
Environmental (E.g. Culture, social etc) Situational (E.g. Objectives, motivation etc) Behavioral predisposition (E.g. Sensitivity) Influencing power (E.g. Presentation )
When there is little latitude in determining their position or posture
When they are held accountable for their performance
When they have sole responsibility
When they are responsible to a constituency present in thenegotiations
When they are appointed rather than elected
Conditions that Prevent Spontaneous Response
Negotiation
The Buyer’s Negotiation Position will be StrongIf:
Negotiation
Demand is not urgent
Suppliers are keen for the business
Buyer is in a monosponistic position
Demand can be met by alternatives/substitutes
Make and buy options are available
Buyer has a reputation for fair dealing
Buyer has excellent supply market intelligence
Negotiation
Who is to negotiate?Who is to negotiate?
The venueThe venue
Intelligence gatheringIntelligence gathering
Negotiation objectivesNegotiation objectives
StrategyStrategy
TacticsTactics
Conducting dummy runsConducting dummy runs
Pre-negotiation Considerations
Slide 15.12
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Who is to negotiate The individual approach The team approach
Allocate roles• Spokesperson• Recorder• Experts
Avoid disagreement
Slide 15.13
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
The venue Should be in buyer office unless there
are good reasons to do otherwise Inspect vendor facilities
Advantages to negotiate on home ground
Slide 15.14
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Gathering information Cost and price analysis Situational analysis Value analysis
Slide 15.15
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Determining objectives Varying interests of participants in
negotiations Suppliers: profit, time, relationship,
reputation etc Users: Schedule, safety, value,
environmental impact, quality
Slide 15.16
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Model of bargaining
Buyer Seller
5 8 9 10 13
Ideal settlement
Ideal settlement
Realistic Settlement
Realistic Settlement
Fall-back position
Fall-back position
Slide 15.17
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Discuss Describe how Lily negotiated with suppliers to
purchase within the budget of US$20 per piece for DimS, inclusive of the ‘freezing’ cost.
- What are important things does Lily need to prepare for the negotiation?- Decide her approach- Determine objectives- What kind of bargaining model can Lily use for her negotiation to meet
her objective?
Slide 15.18
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Strategy and tactics Strategy: overall plan that aims to
achieve, as nearly as possible, the objectives of the negotiation as seen from each participant
Tactics: The position or attitude to be taken during the process
Negotiation
Introductions, agenda agreement and rules of procedureIntroductions, agenda agreement and rules of procedure
Ascertaining the negotiation rangeAscertaining the negotiation range
Agreement of common goalsAgreement of common goals
Identification and removal of barriersIdentification and removal of barriers
Agreement and closureAgreement and closure
Stages of a Negotiation
Slide 15.20
Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005
Role play You will be divided into two groups
IBM buying group Keytronic supply group
Both IBM and Keytronic are to meet today to negotiate for the contract of DimS product.
IBM’s objective is to negotiate for the supply at budget of $20, inclusive of “freezing cost”
Task 1: Prepare your negotiation (15 min) Task 2: Negotiate at the meeting (15 min)