Strategic Negotiation (Training Material)

Strategic Negotiation
Krishan K. Batra
President & CEO
ISM-INDIA
1 Leading excellence in procurement and supply

Introducing the Presenter...
Krishan K. Batra has diverse & global experience of 4
decades in the field of Technology & SCM. He enjoys
engaging people in sustainable transformation and
inspiring business excellence. In his last assignment with
UN organization as Chairperson of the supply chain, he was
instrumental in re-engineering business processes and
implementing ERP worldwide.
He started his career with TATA Group after completing

M.Tech from IIT Delhi. Later he completed MBA from
Syracuse University in USA. Krishan has worked in
Switzerland, Denmark and USA in different capacity. He is
the founder of UNSPSC which is global standard for coding
goods and services. He has worked with many
organizations to optimize supply chain and build their
professional capacity. 2 Leading excellence in procurement and supply
Learning Objectives
• Understand How Negotiation Works
• Guidelines to Prepare for Negotiations
• Learn Negotiation Strategies and Tactics
• Negotiating Across Cultures & Body Language
• Making Negotiation a Success
Goal: This program will provide a step-by-step approach

to delivering winning negotiations and getting game-
changing results.

• Introductions
• Expectations
• Organization & Roles

Session 1
• Understand How Negotiation Works

• Training Objectives
• Negotiation vs Persuasion vs Haggling vs. Influence
• Types of Negotiation
• Negotiation Process

Negotiation: An Overview
Negotiation is a fact of life. Everyone negotiates something
every day. People can use negotiating skills to:
• Bargain on the price of a produce or a service
• Settle differences in a dispute situation
• Vary contracts, either formally or informally
• Agree on a goal or an outcome to aim for
• Arrive at comfortable terms to work together or to co-
operate
• Find a compromise of some sort
All of these negotiating situations have one thing in common. They require two or
more people to communicate with one another to reach a bargain or deal of some
sort (even though we sometimes fail to do this!). However, negotiation is a special
kind of communication because it uses a number of tactics and methods for
communicating that are not usually part of normal everyday conversation or
discussion.

Negotiating
“Negotiating is the art of

reaching an agreement by
resolving differences
through creativity”
Creative Negotiating, Stephen Kozicki, Adams Press, 1998

What is a Negotiation?
A process whereby two parties, with differing views

initially, attempt to reach an agreement on a common
objective by the selective use of different methods of
persuasion.
People are not born good negotiators…
…these skills can be developed!!
Good negotiation skills can mean the difference between

success & failure!

"Which metrics do you believe your
organization will use in the next 3 to 5 years to evaluate
personnel performance?"
The respondents Top 10 choices:
1. Business Judgment 6. Integrity/ethics

2. Decision making 7. Education
3. Problem-solving 8. Interpersonal Relations
4. Negotiation skills 9. Responsiveness
5. Customer service 10. Communications
.

Negotiation & Supply Chain
• Negotiation is most important tool of the Procurement &

SCM profession.
• Key objective is to get best possible long term or short
term agreement based on TCO.
• No one knows is exactly sure as to where commercial
negotiation began except that some form of negotiation
is associated with our early attempts at commercial
enterprises.
• Traditional Negotiation: More of a game where seller set
the agenda. Half the discussion was less than honest.
• Concepts such as JIT, Partnering, Supplier Consolidation,
Supplier Certification, Strategic Alliances demand a new
approach to negotiation

SOURCING PROCESS

The Procurement Process
Procurement consists of cycles of sourcing and buying transactions, which depend
on each other
Money on the Table

• Identify a need and negotiate
and manage contracts
Money in the Bank
• New or better contract creates
the opportunity to save money • Items are purchased based on
existing contracts

Negotiation: An Overview
• Being able to negotiate the best possible deals with your

suppliers can mean the difference between success and
failure.
• Well prepared negotiation can improve your chances of
success
• How to set Realistic and Achievable negotiation objectives
and how to develop negotiation strategy are very important.
• The art of questioning, active listening and tactics and
different persuasion techniques also need to be explored.
Unlike what many people think-good negotiation skills can be

developed and improved and are not something we are born
with.

What is negotiation?
When:
 you can vary the terms
 the resource is scarce
 agreement and conflict both exist
YOU ME &
ME ME YOU
YOU
No common ground – so nothing Negotiation In total agreement
to gain from negotiation – so why negotiate?

What is the difference between
persuasion and negotiation?
Persuasion = unilateral moves towards accepting your position
ME YOU
Capitulation = unilateral moves towards accepting their position
ME YOU

What is the difference between
persuasion and negotiation?
Negotiation = a bilateral process, you and they make moves
towards each others’ positions
ME
ME YOU
YOU

Negotiation – a complex skill set
POWER
Preparation &
Strategies & tactics
planning
Effective
Negotiation
Face-to-face
skills

Strategic Negotiation
This kind of negotiation addresses long-range issues
involving the direction and objectives of a strategic or
long-term supply chain relationship, things like:
• The nature of the collaboration,
• The sources of competitive advantage to be sought,
• The mutual strategic benefits of development and so
on.
• At this level, negotiation tends to be collaborative (or
‘integrative’) in style, because both parties are
seeking mutual commitment and aligned objectives.

Tactical Negotiation
This is your day to day negotiation. It addresses short-
range issues involving:
• Operations
• resource allocation
• performance and risk management ETC
• At this level, negotiation tends to be more adversarial
and competitive (or distributive) in style, because both
parties are seeking to maximize their own organization’s
share of the value gains and minimize their own
organisation’s share of the risks, within the relationship.
• Less attention may be paid to relationship development
where the relationship is purely tactical or transactional.
The focus may be on opportunistic, short-term gains (eg
forcing lower prices or favorable terms).

When Not to Negotiate
Negotiation should be avoided:
1. If you can achieve the objective without negotiating
2. If the objective is not worth the time and effort of
negotiating
3. If you have compelling alternatives to negotiating (eg
a very strong alternative to a negotiated agreement)
4. If you risk losing too much by negotiating
5. If the other party acts in bad faith or unethically
6. If waiting (basically doing nothing) may improve your
position for instance in cases where prices will drop

Characteristics of Negotiations
• Two or more parties are involved.

• There exists a perceived conflict of interest between those
parties.
• Parties chose to negotiate because they believe they can
influence each other to get a better deal than what they
would otherwise get if action was unilateral.
• For time being, parties prefer to work together for resolution
rather than fight or seek other non-negotiated remedies.
• Parties expect to experience “give and take” during their
negotiations as each side compromises positions.
• Parties expect that negotiations will allow them to manage
both the “tangibles” and the “intangibles” contained in their
issues.

Negotiation & SCM
• Bargaining or haggling is a type of negotiation in which the

buyer and seller of a good or service dispute the price which
will be paid and the exact nature of the transaction that will
take place, and eventually come to an agreement. Bargaining
is an alternative pricing strategy to fixed prices
• Bargaining is a small subset of negotiation.
• Negotiation is synonymous with navigation. We say the most
dangerous negotiation is the one you don’t know you’re in.
• Persuasion is about telling. It involves explaining, influencing,
selling, convincing, challenging, debating, urging.
• Persuasion is only likely to work effectively when the other
party isn't in full possession of the facts.

Negotiation & SCM
• Influence is the broadest activity. We are influencing

people around us all the time, from a firm handshake
to actions that create an impression.
• Skilled negotiators, for example, know how to
separate out negotiation issues (points of conflict)
and concentrate negotiations on those differences
while using persuasion skills in other areas. "You
have to be able to move between these three modes
if you want to be successful.”
• Influence and persuasion are less about arguing a
case than removing obstacles or barriers.

Why is the difference important?
Persuasion is successful when the other party says:
“I would like to do a deal with you if ...”
Average persuaders give things away to achieve this position
– skilled persuaders don’t
Effective negotiation involves movement by both parties, a
creative agreement and a perception of Win-Win
The golden rule of negotiation

Persuade first and only negotiate later...
... if you have to

Types of negotiation
• Distributive (win-lose)
• Integrative (win-win)

Types of Negotiations
Distributive negotiations involve a fixed pie. There is only so
much to go around and each party wants as big a slice as
possible. An example of a distributive negotiation is haggling
over the price of a car with a car salesman. Distributive
relationships involve:
• Keeping information confidential. For example, you don’t
want a car salesman to know how badly you need a new
car or how much you are willing to pay.
• Trying to extract information from the other party. In a
negotiation, knowledge truly is power. The more you
know about the other party’s situation, the stronger your
bargaining position is.
• Letting the other party make the first offer. It might be
just what you were planning to offer yourself!

Types of Negotiations
Cooperative negotiations are based on cooperation. Both
parties believe they can walk away with something they want
without giving up something important. Cooperative
negotiations involve:
• Multiple issues. This allows each party to make
concessions on less important issues in return for
concessions from the other party on more important
issues.
• Information sharing. This is an essential part of problem
solving.
• Bridge building. The success of integrative negotiations
depends on a spirit of trust and cooperation

Planning & Preparation Stage
Some of the activities that will be undertaken in
the planning stage include
1. Defining the issues to be undertaken
2. Come up with you bargain mix- that is the issues that you
want to bring up on negotiation
3. Define your walk away position or BATNA – this will give
you the limits under which you walk away
4. Research and understand the other party
5. Analyse the relative bargaining strength of the other
party
6. Select a strategy In conclusion you will need to make
sure you plan includes; General aspects such as, objectives,
assumptions etc ; Financial terms; Quality and delivery
;Contractual terms

Phases of Negotiations
The three phases of a negotiation are:
• Phase One: Exchanging Information
• Phase Two: Bargaining
• Phase Three: Closing
These phases describe the negotiation process itself. Before
the process begins, both parties need to prepare for the
negotiation.
This involves establishing their bargaining position by
defining their BATNA, WATNA, and WAP . It also involves
gathering information about the issues to be addressed in
the negotiation. After the negotiation, both parties should
work to restore relationships that may have been frayed by
the negotiation process.

Determining the negotiable zone
Comparing targets: e.g. Unit Price

$10 $15
Buyer
Negotiable
Zone
Seller
$11 $17

Bargaining
Define your range

Start
Target
Walkaway
BATNA: your alternatives

BATNA
Best Alternative to a Negotiated Agreement

Advantages:
• Forces negotiators to realistically evaluate their

negotiating strength
• Prevents blind negotiations
• Protects from accepting terms that are too unfavorable
“The least damaging outcome anticipated if no agreement

is reach”

WATNA
Worst Alternative to a
Negotiated Agreement
Advantages
• Forces negotiators to realistically evaluate their options
• Prevents power negotiations
• Protects from rejecting terms that are in your interest
to accept
“The most damaging outcome to anticipate if no

agreement is reached”.

Action Point 3.4-1
Comparing buyer and supplier targets

Look at the following hypothetical representations of targets that a
buyer and a supplier might have separately defined, before starting a
negotiation. Mark where you thing the Negotiable Zone is.
Comment on the possible reasons for the perceptions of both sides and
indicate what you think will be the effect on the discussions when the
two sides actually meet.
1. Variable = Price
Buyer
Seller
Action Point 3.4-1 (Cont’d)
2. Variable = No. of defective units per 1000
Buyer
Seller

3. Variable = Delivery period
Buyer
Seller

4. Variable = Supplier technical support/SLA
Buyer
Seller

Skills for Successful Negotiating
These are some of the skills needed for successful
negotiating. Key skills include:
• Effective speaking
• Effective listening
• A sense of humor
• A positive attitude
• Respect
• Self-confidence
• Emotional intelligence
• Persistence
• Patience
Without the above factors, negotiations will be difficult if

not impossible.
POLL 1

Session 2
Guidelines to Prepare for Negotiations

• Preparing for Negotiation
• Negotiation Framework
• Know your Negotiation Style

Preparing, conducting & following-up on a
Negotiation - This will help YOU to:
Listen actively &

ask the right
Increase your questions
chances of
success by being
well prepared
Set realistic & Use tactics &

achievable targets different methods
of persuasion

Negotiation Process

Negotiation Process
Preparation: Identify your key commitments Opening
Position:
• Outline Your Opening Position
• Decide whether this will be High Ball or Low Ball
• Ensure that this position is realistic in light of the
facts available to both sides
• Allow for movement within whatever opening
position you adopt
• Confirm all agreements reached and positions
offered

Negotiation Process
Bargaining :
• Question for Information
• Challenge other side for justifications of their position
• Examine and Test their commitment
• Present Your Key Commitments
• Explore Key Commitments
• Summarize Arguments and Seek Acceptance
• Look for Signals of Possible Movement
• Identify and Highlight Common Ground
Movement
• Be Prepared to Concede
• Begin with those of Low Priority and seek High Priority Items
• Never Concede on More than possible by your Brief
• Use your Concessions Wisely
• Don’t just give these away expect and receive something in return
• Use Conditional Argument
• All Movement Should be realistic and contained within your brief
• It Should be always towards the other sides position and not away from it
• Be prepared for larger movements at first as it can build trust within the
negotiation
• Continue with smaller movements

Negotiation Process
Closing
• Emphasize the benefits to both parties
• Carefully introduce the consequences of not reaching
agreement to both parties and losing what has been agreed
so far
• Timing is Essential
• Take Care when making a Final Offer. Be sure that it is
consistent with your brief.
• A Small Traded Offer is often better . A small move by them in
return for a extra movement by you.
• Ensure that all agreements are understood and accepted
before finalization
• This should be well documented and signed at the close of
the negotiations
• These should be then forwarded to both parties post
negotiations

Aim of Negotiation
• To reach a desired and durable result by including
the interests of both parties
• To reach agreement efficiently and fairly using

talents of all participants to solve problems
• To develop a shared sense of satisfaction from

working together successfully

Ten steps for effective negotiation
1. Persuade 1st and only negotiate later…if you have to
2. Logic is not persuasive!
3. Beware argument dilution
4. Effective persuasion leads to ‘I’d like to deal with
you if…’
5. Average persuaders give things away to achieve this
6. Identify and use your levers
7. You may need to instigate the negotiating
8. Trade concessions, don’t give them away
9. Remember Win-Win is not 50:50
10.Never, ever forget that ‘no deal’ is better than a
bad deal

Barriers to Successful Negotiations
• Parties may not be open about their desired

outcomes.
• Parties may not be clear in their own minds about
what they actually want to accomplish with their
proposals.
• Parties may not reveal all of the truth regarding their
positions to each other.
• Parties may not be willing to believe all that they
hear from each other.
• Parties may not have the right negotiators.
• Parties may not be ready to settle.

Traditional Negotiation Relationship
• Assumptions
– For me to win, you must lose: therefore,
we must compete
– To help you is a sign of my weakness and
it will hurt me: therefore, little real
communication
– My power comes from opposing,
criticizing and beating you: therefore,
parties are more rigid

Understanding the people involved
It is people who make the deals, not

organisations...

Action Point
Warm
20
AA A
15
A
10
20
15 Tough
Deal- 10 5
maker 20
5 15
10
5
5
5
10
10
15
15 Logical
20
Creative 52 Leading20
excellence in procurement and supply
A person who is friendly, and easily relates to
other people
Tough
An adversarial negotiator who may be hard on
the problem and on the people involved
A person who resorts to rational arguments,

facts and figures
Creative
A person who is inventive and imaginative,
who looks at the total picture
but leaves details to others
AA A
A person who enjoys the bargaining involved in A
a negotiation, and looks for quick solutions

Warm
Suggestions on how to deal
Strengths Weaknesses
with them
 Friendly and  Too accommodating  Build trust

accessible  
Can lose sight of the Use logic that
 Good listener essentials shows understanding
 Shows  Finds it difficult to deal  Emphasise the
concern and with conflict and importance of the deal
empathy pressure to them as individuals
 Looks for  Discloses information  Summarise frequently
mutual gain easily and keep the discussion
 
focused
Patient May focus too much on
personal issues  Emphasise the long-term
 Trusting

relationship

Finds it difficult to deal
Values 
with people who do not Ask open questions to
personal
value personal determine their needs
relationships
relationships and concerns

Tough
with them
 Natural leader  Adopts rigid positions  Do not give a concession

without obtaining
 Strong desire  Tends not to build on
something in return
to achieve the ideas of others
 Be warm but firm (not
 Persistent  A selective listener
tough)
 Assumes  Impulsive and can be  Recess frequently to
leading role in impatient
relieve the pressure
meetings
 Insensitive to personal  Use your organisation’s
 Decisive and relationships
power, if applicable
keeps things
 May create resentment
moving  Use only compelling
arguments, and do not
 Deals well
dilute the discussion
with pressure
 Assertive
Logical

with them
 Focuses on  Tries to “force” logic on  Do not allow yourself to

the issues others get caught into their logic
stranglehold
 Grasps  Unimaginative - relies
details too much on facts and  Get their list of
figures requirements at the start
 Precise
 Tends to ignore the  Listen, and evaluate their
 Methodical
people involved facts carefully
 Well-prepared  Gets too absorbed in  Recess often to analyse
 Backs up the details the issues
statements  
Cannot readily change Show respect for their
with facts,
persuasion styles expertise
figures and
reasoning  May not see the global  Back up your own
picture arguments with facts and
 Keeps good
figures
records  Reaches deadlock
easily  Use emotion as a
56 counter-persuasion
Leading excellence in procurement and supply
Creative
with them
 Inventive,  May propose unrealistic  Listen attentively, and ask

good at solutions many questions
imagining  
Disregards the short- Take advantages of their
solutions
term / medium term creative thinking skills to
 Visionary, solve joint problems
 May neglect detail
intuitive
 Try to demonstrate
 Can be insensitive to
 Sees the commonality of interests
interests of others
global picture  Keep the discussion
 Impatient with those
 Interrelates focused and down to earth
who do not have a
issues easily
global approach  Build on their ideas
 Persuasive  Overlooks immediate  Summarise frequently
 Strong drive problems and obstacles
to reach goal too easily
 Builds co-  Underestimates the
operative importance of facts
approach
AA A
Deal-Maker A

with them
 Sees  Tends to neglect long-  Try to understand their

opportunities term goals underlying interests
 Makes quick  May neglect details  Summarise and test their
decisions understanding frequently
 Shifts positions quickly
 Builds and easily  Trade concessions
relationships
 Tends to be superficial  Do not move too easily
easily
in personal
 Separate facts from
 Strong desire relationships
assumptions
to achieve
 May try to manipulate
 Make sure you understand
 Dynamic people and situations
all the implications of the
 Flexible  Can propose risky deal before agreeing
solutions, which may
 Enjoys
be difficult to implement
bargaining

Action Point 2.5-3
Understanding negotiating styles

Try to think of a situation where you have been negotiating with a person
who was a good example of one of the above styles.
Dominant style:
What effect did this particular style have on the negotiation?
How did you deal with the person concerned?
What could you have done better, in hindsight?

POLL 2

Session 3
Learn Negotiation Strategies & Tactics
• Negotiation Strategies and their Usage
• Practical Tactics
• Supplier Perception & 2X2 Matrix (Peter Kraljic
Model)

Strategy vs. Tactics

NEGOTIATION STRATEGIES
 Strategy is the overall approach for conducting

the negotiation.
 Tactics are particular actions used to implement a
strategy.

Strategies & Tactics
• Strategies are the pre-formulated

game plans, objectives, and
approaches that guide negotiators in
reaching their goals;
• Tactics are the specific ways
bargainers implement these
strategies.
Strategy

MAIN NEGOTIATION STRATEGIES
• AVOIDANCE STRATEGY (Lose-Lose)
• COMPETITIVE STRATEGY (Win-Lose)
• COLLABORATIVE STRATEGY (Win-Win)
• ACCOMMODATIVE STRATEGY (Lose to Win)
• COMPROMISING (Split the Difference)

MAIN NEGOTIATION STRATEGIES
THE DUAL CONCERNS MODEL
 How much concern does the actor have for

achieving the substantive outcomes at stake in
this negotiation?
(substantive goals)
 How much concern does the negotiator have for
the current and future quality of the relationship
with the other party?
(relationship goals)

COMPETITIVE STRATEGY
 Distributive Bargaining
 Win-Lose Bargaining (I win, you lose)
Zero-sum game: whatever extent one party wins

something, the other party losses

COLLABORATIVE STRATEGY
 Integrative Bargaining
 Win-Win Bargaining (I win, you win)
Positive-sum situations are those where

each party gains without a corresponding loss
for the other party.

Integrative Bargaining
The law of win/win says “Let’s not do it your way

or my way; let’s do it the best way”
Greg Anderson
The 22 Non-negotiable
Ways of Wellness
Integrative Bargaining is about searching for common

solutions to problems that are not exclusively of interest to
only one of the negotiators.

ACCOMMODATIVE STRATEGY
 Win-lose strategy (I lose, you win)
 The negotiator wants to let the other win, keep the
other happy, or not to endanger the relationship by
pushing hard to
achieve some goal on the
substantive issues

Strategies for Negotiations
• Don’t buy the belief that negotiators are born and not made.
You can be one of the best wherever you begin. But purchasing
professionals are often held back by their own practices
and behaviors. Here are the top five things you need to do
differently to negotiate like the pros and take your results and
career to the next level.
– 1. Don’t leave Ts and Cs until last
– 2. Ask for the supplier’s proposal before negotiations
– 3. Assess the supplier’s need level
– 4. Always include data-based negotiation tactics
– 5. Focus on the Win for the Supplier
Negotiating is both an art and a science. Rookie negotiators use

win/lose pressure tactics to ‘get the upper hand’ or they use
their authority to achieve their negotiation objectives. Savvy
negotiators look to use their ability to influence
and recognize that true win/win is only achieved when both
parties feel good about the deal.

What is negotiation?
Negotiation takes place when two or more people, with

differing views, come together to attempt to reach
agreement on an issue. It is persuasive communication or
bargaining.
“Negotiation is about getting the best possible deal in the

best possible way.”

Planning to negotiate
• Establish your objectives

• Establish other party’s objectives
• Frame negotiation as a joint search for a solution
• Identify areas of agreement
• Trouble shoot disagreements: bargain & seek
alternative solutions, introduce trade offs
• Agreement and close: summarise and ensure
acceptance

How to influence others
• The three ‘Ps’:

–Position (power?)
–Perspective (empathy)
–Problems (solutions)

Tips
• Aim high to begin with – easier to lose ground than gain

• Give concessions ‘reluctantly’
• Break down complex deals
• Language:
– Make proposals with open questions such as:
• “what would happen if we…?”
• “suppose we were to…”
• “what would be the result of?”
– Dealing with stone-walls: “what would need to happen for you to be
willing to negotiate over this?”
• Always get agreement in writing

Influence:
– the capacity or power of persons or things to be a compelling

force on or produce effects on the actions, behaviour,
opinions, etc., of others.

7 Behavioural Styles:
• Assertive
• Autocratic
• Democratic
• Emotional
• Logical
• Negotiating
• Persuasive

Passive people:
• do not express their views, feelings and beliefs
• make it easy for others to disregard their views
• put themselves down to accommodate others
• avoid confrontation at all costs
• place themselves only in easy situations
• let others make decisions
• expect others to know what they want or mean

Aggressive people:
• set out to win at the expense of other people

• put others down or override their wishes, feelings or views
• believe their needs are more important
• express themselves in unsuitable, inappropriate ways
• are verbally or physically abusive
• frequently use authoritarian words such as should or must

Passive-aggressive people:
• respond indirectly and control others by manipulation
• make others feel guilty, awkward or inadequate, to get what they
want
• use insincere flattery, sarcasm, barbed humour or telling body
language
• appear to think highly of others but disapprove underneath
• use silence as an intimidation strategy

Assertiveness:
– communicating needs, wants or opinions in a clear, direct,
honest manner AND maintaining respect and sensitivity to the
needs of the other party

Supply Portfolio Matrix 2X2**
High
Leverage Suppliers Strategic Suppliers
 Large expenditure  Large expenditure
 Many existing alternates or sources  Strategic to profitability and operations
 Readily available  Complex specifications with few
 Standard specs or commodity qualified suppliers
Value of Spend
 Substitution is possible  Continuous availability is essential

 Competitive market  Non-Standard specs or technology
 Hard to substitute
Routine Suppliers (Automate) Bottleneck Suppliers

 Low value small transactions  Small expenditure
 Many existing competitive suppliers  Complex specifications with few
 Generic items for everyday use alternate products
 Standard specs commodity  Few qualified suppliers
 Substitutes readily available  New technology or process
 Low demand or variable demand
 Hard to substitute
Low
Market Complexity and Risk High
**Adapted from ISM’s CPSM® “Effective Supply Management Performance” Portfolio Matrix

Supplier Views of Customer Segmentation
Supplier
Matrix
• How you see the
supplier
Customer
Segmentation
• How the Supplier
sees you

Preparing for WIN-WIN
• Goals: what do you want to get out of the negotiation? What do you think the other person
wants?
• Trades: What do you and the other person have that you can trade? What do you each have
that the other wants? What are you each comfortable giving away?
• Alternatives: if you don't reach agreement with the other person, what alternatives do you
have? Are these good or bad? How much does it matter if you do not reach agreement?
Does failure to reach an agreement cut you out of future opportunities? And what
alternatives might the other person have?
• Relationships: what is the history of the relationship? Could or should this history impact the
negotiation? Will there be any hidden issues that may influence the negotiation? How will
you handle these?
• Expected outcomes: what outcome will people be expecting from this negotiation? What
has the outcome been in the past, and what precedents have been set?
• The consequences: what are the consequences for you of winning or losing this negotiation?
What are the consequences for the other person?
• Power: who has what power in the relationship? Who controls resources? Who stands to
lose the most if agreement isn't reached? What power does the other person have to deliver
what you hope for?
• Possible solutions: based on all of the considerations, what possible compromises might
there be?

Steps in Negotiation
In any successful negotiation you are concerned with

three key elements:
• Your own objectives
• Other person's objectives
• Basis for negotiation

Thinking Creatively
• Thinking laterally, the solution that was generated was

that instead of selling an airline tyres in the usual way,
which represented quite a substantial cash outlay for the
customer, they would give them the tyres and then
charge them every time a plane took off and landed. This
had benefits for both parties; the cost of tyres was
spread over a longer period of time for the airline and
the tyre manufacturer had a guaranteed and regular
income. By thinking creatively, they found a different
way to look at things. Rather than meeting with an
airline that constantly tried to negotiate down the price
of tyres, they took along a whole new approach to the
negotiating process.

Negotiation Techniques
• Negotiation is referred to as the style of discussing things among individuals in an effort
to come to a conclusion satisfying all the parties involved. Discussions should be on an
open forum for every one to not only participate but also express their views and reach
to an alternative acceptable to all.
• It is important how we negotiate with each other. One must know the difference
between negotiating and begging. Do not stoop too low to get a deal closed.
Negotiation must be in a dignified way.
– Take good care of your posture as well as your body movements
– Be very focused.
– Never keep things to yourself and crib later
– Be a patient listener
– Be realistic
– Don’t be in a hurry to close the deal.
– Know where to compromise
– Communication is also important in negotiation
– For a third party it’s always better to sign a contract or have something in black
and white so that no body backs out later

WIN-WIN RELATIONSHIPS
HAVE THE “RIGHT MENTALITY”

HIGH
LOSE / WIN WIN / WIN
CONSIDERATION •I am a loser - step on me •Believe in Mutual Benefit

•I am a peacemaker •Long term relationship
•Win/Lose people love! •Cooperative - Not combative
As Supply Chain
Professionals,
We are evolving
LOSE / LOSE WIN / LOSE to here
• Where bad relationships go
• MY WAY OR HIGHWAY
• Where 2 Win/lose people go to
• Sacrifices Long Term
• Adversarial conflict relationships
• War!! • Squelches Creativity
LOW
LOW HIGH
COURAGE
The 7 Habits of Highly Effective People-Steven Covey
A better negotiation
performance can lead to:
Lower overall cost of supply
Better quality, durability & performance
Shorter lead-times
Contracts that are implemented more effectively & on schedule
Improved supplier reliability and service
Fewer disputes with suppliers

Cost structure of a typical
manufacturing enterprise:
Purchased Purchased
Materials Profit 10% Profit16%
Materials
60% Overheads 54% Overheads
Labour 15% Labour 15%
15%
15%
Before the savings achieved After the savings achieved

through better negotiations
through better negotiations

You would negotiate with
suppliers when:
When the value is high
When long-term supply is required
When the purchase is complex
When there are one or few suppliers
Where you have no reference point

N
E
G
O
T
I
A
T
Pre-Contract D
E Post-Contract
Stage Stage
A
Negotiations G Negotiations
R
E
E
M
E
N
T

The phases of negotiation
1.
Preparing
3. 2.
Follow-up Meeting

Negotiation Phases and Activities
Planning
Relationship
Preparation building Information
Information Using
• Decide what is
gathering
• Conditioning • Conditioning
important • Getting to know • Learning about
issues • Presenting a case for
• Thinking ahead the supplier the desired outcome
about how to work • Commitment to • Determining the
together supplier’s needs • Sell your preferences
building an
agreement • Feasibility of
possible outcomes
Execution
Bidding Closing the deal
• The process of • Build commitment
Implementing the agreement
presenting the to the agreement
opening offer and • Both you and the • Determine next steps
moving to the actual supplier must be • Contracting
agreement able to live with the
agreement
Closing

Getting & understanding the facts
Being prepared is essential for success!!!
Being prepared means:

Understanding your needs & requirements
Knowing the supply market conditions
Knowing your purchasing strategy
Knowing your desired supplier relationship
Being aware of prices & costs
Understanding the supplier company
Understanding the people involved
Assessing the balance of power
Carrying out a SWOT analysis

Understanding the purchasing context
The required quality

The quantity needed
The required delivery schedule
?
The desired delivery location
The required level of service
Your available budget

The supply market conditions
Overall supply conditions
Technological developments & substitutes
Price trends
Major cost elements
Market structure & degree of competition
Different supply market segments
Government policies & regulations… Supply Market

The Supply Positioning Model: 4
H
M
Impact/ Critical Strategic
supply
opportunity/
risk rating Routine Leverage
L
N
80% of items = 20% of value 20% of items = 80% of value
Expenditure
Analysing the supplier’s
price
The supplier offers A. Quantity (Q): 100 500 1,000
three quantity price
breaks: B. Price (P): $10 $9 $7.50
The total amount to

be paid for each C. Q x P: $ 1,000 $ 4,500 $ 7,500
purchase would be:
The differences from D. Differences in Q x P (C): - $ 3,500 $ 3,000

one quantity break E. Differences in Quantity - 400 500
to another: (A):
The estimated
F. Estimated variable cost $ 8.75 $6
variable cost per
per unit (D/E):
unit:
Analysing the supplier’s price
(Cont’d))
The lowest total G. Lowest variable cost per $6 $6 $6
variable cost for unit:
each production H. Total variable cost for each $ 600 $ 3,000 $ 6,000
run: production run (A x G):
The supplier’s I. Fixed cost: $ 400 $ 400 $ 400

lowest likely cost
per run: J. Total cost (H + I): $ 1,000 $ 3,400 $ 6,400
Estimated potential for negotiating savings through price reduction:
Potential savings (C – J): - $ 1,100 $ 1,100

Percentage of original - 24% 15%
amount:
Building a cost model
Supplier A Supplier B
7% 18% 15%
10%
15%
50% 25%
60%
Labour Overheads Materials Profit

Obtaining market information
on prices & costs
Quotations
Reference prices
Prices of raw materials
Trend analysis
Independent estimates by experts
Business contacts

Understanding the supplier
organisation
Reviewing the supplier’s capabilities and strategy:
Technical capabilities
Financial situation
Market-related capacities
Management capabilities
A supplier’s
Management culture
competitive
Industrial relations advantage reflects
The supplier’s main competitive its particular
strengths & its
advantage (cost leadership,
approach to
differentiation, reliability…) achieving success

The Supplier Perception Model
-how suppliers see your company as a potential client
High
Develop Core
Level of
attractiveness
Marginal Exploit
Low
High
Value of
business

Positions & interests
Positions Interests
Things you say you want Underlying motivations
Demands Needs and concerns
Things you say you will, or won’t, do Fears and aspirations
Discover underlying interests by:

 putting yourself in their shoes
 asking why / why not?

POSITIONS

The Balance of Power
1. Organisation power
Market power
Relative value power
Financial power
Reputation power
Time power
Reward power
The power of choice

2. Personal power
Type of Gained through… Relevance to the negotiation
personal power
 Position power  Level of authority  Make sure you are negotiating with
in organisation the decision-maker and that he/she
has the necessary authority to
negotiate and reach a decision.
 Expert power  Expertise, in-depth  Supports arguments and helps to
knowledge about introduce new options. Make sure that
subject/ product/ issue your team has the required expertise.
 Information  Detailed information  Supports arguments. Be sure to have
power relating to the issue to all the information needed before the
be negotiated negotiation.
 Disruptive  Possibility to stop  Use as a “threat”, but only if needed
power or disrupt a negotiation and if you are prepared to carry out
the action. If used by the other side,
 Leadership skills do not let it intimidate you by
 Charismatic having a good backup option.
power
and communication  Influences the emotions of others
 Connection  Contacts networking  May influence/impress the other party
power
Some common mistakes
Under-estimating your own power
Over-estimating your own power
Assuming that the other party knows (or doesn’t

know) your weaknesses, problems, deadlines…
Assuming that the other party is automatically in a

stronger position

SWOT Analysis - an example
Ours: • We are their first client in a
new market Ours:
• Small but growing business
• Relatively small purchase volume
Theirs: • Leader in their home market • Lack of negotiation skills
• Deal in both raw materials & • Lack of experience in our market
finished products
Theirs:
• Better access to market
information • Excess capacity
• Good technical support • No product differentiation
capacity SW
OT
• They may force us into sole source
contract that restricts sourcing elsewhere
• Long term contract
- guaranteed supply
• They may sell to our competitors too
• They provide training to our
product design staff • They may withdraw from our market
if not successful
• Possibility to buy back some
of our production • They may increase prices at the end
114 ofLeading
the first contract
excellence in procurement and supply
The various levels of objectives
Corporate Objectives
Objectives of the
Purchasing Function
Negotiation
Objectives
• Goals to be
achieved
• Problems to
be resolved

Objectives & variables
Objectives of the
Purchasing Function
Variables:
Negotiation Price
Objectives Quality
• Goals to be Delivery terms
achieved Service...
• Problems to
be resolved
Negotiation variables are interrelated & should be linked to your objective

Set targets for your preferred option(s):
Objectives of the
Best & Worst
Purchasing Function
Acceptable
Targets
Negotiation
Objectives
• Goals to be
achieved
• Problems to Options
be resolved
Variables
Never start a negotiation before having set targets for each of your
negotiation variables

Targets should be:
Relevant
Ambitious but achievable
Specific
Measurable
Impartial TARGETS
Compatible
Best target
Worst acceptable
target

Setting targets - an example
Best target Worst acceptable
Variable
target
 Specification as  Accept deviations from
given in our defined tolerances: no
Quality enquiry more than +/- 2.0 cm
 Any rejects to be  Rejects to be replaced

replaced within 24 hours within 3 days
Delivery  Within 5 days  No more than 10 days
Price  As low as $4.50 per unit  No more than $4.70 per

unit
 Open account  Letter of credit
Payment
Terms  Supplier credit  Payment in 30
(3 months) days

Developing the negotiation
strategy
Your own The positions
negotiation & possible
objectives & interests of the
targets other side
Your
negotiation
strategy
The relative
strengths &
weaknesses
of both sides

Setting Objectives:
Your negotiation strategy is about HOW to best achieve
your objectives & targets
Developing a strategy means deciding:

Whether to adopt a “win-win” or a “win-lose” approach
What your starting position will be
Whether or not to reveal your position
The order of the issues to be negotiated
Which persuasion techniques to use
Which negotiation tactics to use
Who should be on the negotiating team
Where to hold the negotiation
Timing & duration
Contingency plans

Win-Win versus Win-Lose
The approach... Win-Win Win-Lose
Emphasises:  Collaboration  Competition

Is based on:  Mutual interest and  Adversarial attitudes
common goals and confrontation
Presumes:  Flexibility  Inflexibility
Leads to:  Joint problem solving  A greater possibility of
conflicts
Results in:  Both parties  One side ‘beating’ the
achieving an other
agreement which
meets their objectives
Is appropriate  Long-term contracts  One off, short-term
for:  Repetitive deals deals
 Co-operative  Adversarial suppliers
suppliers
Starting position & the order of the
issues
Deciding on your starting position for each variable
What you say you want

What you say you will or won’t do
At what point would you be willing to move on your position
What would be the advantage of revealing or not revealing

your starting position? When would you do one or the other?
What would be the best order of discussing the issues?

Have your internal agenda (points in reserve, milestones, agreed signals...) but
remain flexible

Persuasion techniques:
Emotion
Logic
Bargaining
Compromise
Threat

Emotion:
Making the other party understand your
feelings on an issue
Emotion can counter logic
Emotion can be used to increase the value of something
Exaggerated emotion can have

the opposite effect!

Logic:
Using a rational argument based on facts
& figures
Try to keep the argument simple
Bargaining:
The trading of variables: if… then...
AA A
A
Try to give away things that are less valuable to you than
what you get in return

Compromise
Agreeing to meet somewhere in between
50/50 is not the only compromise
Compromise tends to favour the one who takes the most extreme
position
Threats:
Suggesting the consequences of not
complying with your demands
•Use “if”
•Use indirect rather than direct threats
•Threaten only at business level

Be prepared to vary persuasion
techniques
Remember that persuasion is not an

objective in itself!
Remain creative & flexible

Negotiation tactics
The building block technique
Silence
Repeat, repeat...
Recess
Divide & rule
Empathy
Re-escalation of demand
“One more thing”
Deadlines
Slicing

Your negotiation team:
Who should be there?
Decide on roles:
Team leader
Specialised support
Summariser
Observer

Organising & preparing your team:
Make sure they:
Are fully involved in the
preparation
Understand the negotiation

objectives
Feel ownership of their tasks
Are aware of each other’s tasks & goals
Communicate well & openly with each other
Try to resolve any disagreement
Recognise each other’s contributions

Where to hold the negotiation?
Access to staff, information etc.
Benefits of visiting the supplier’s premises
Costs (travel, …)
Rehearse in advance
Timing & duration?

Make sure you have enough time to conclude the deal
Watch out for bad timings (holidays, special events…)
Contingency plans
What to do if things don’t go as planned

The stages of the negotiation
meeting
A
G
Open Test Propose Bargain R
E
E
Opening stage
Testing stage
Proposal stage
Bargaining stage
Agreement stage
The opening stage
Do... Don’t...
If you are hosting, be Be demanding
welcoming and show
respect and interest Put down any conditions
Ensure refreshments are Refer to contracts with other

at hand suppliers or to other
negotiations you have
Make purposeful small talk undertaken
and find out about them as
people Make the other side feel
uneasy
Check their authority to
negotiate Start substantive discussions
before agreeing on the agenda
Be warm as a person, but
be firm on the issues
Agree on the agenda,
expected outcomes and
timescales 134 Leading excellence in procurement and supply
The testing stage
Check your assumptions & their perceptions

Get missing information
Explore topics of common ground
Explore their underlying needs & interests
Ask “what”, “why”, and “how” questions
Clarify perceptions
Listen attentively
Show concern for their needs & interests
Don’t make any firm proposals yet!

The proposal stage
Try to get them to propose first
Use hypothetical questions: “what if…”
Don’t jump to conclusions
Listen actively & clarify
Summarise often
Link variables & build on ideas
Take notes
Recess if needed
Don’t reject a proposal instantly
Don’t immediately make a counter-proposal
Don’t use irritating phrases

The bargaining stage
Try to attach conditions to concessions
Give away variables which are worth more to them than to you
Link variables
Make numerous small concessions rather than a major one
Don’t get caught by new issues
Don’t make unplanned concessions
Don’t lose sight of your objectives!!

The agreement stage
Do... Don’t...
Watch for closing signals Force the agreement by making
Make sure that all the issues have “final offers”
been resolved Fall for the “quick deal” tactic of
Watch that the other side doesn’t “splitting the difference”
reopen a negotiation issue
Give, or ask for, additional
Make a joint closing summary to concessions
finalise the agreement
Tell them what a good deal they
Get an agreement in principle if could have had if only they had
they don’t have the final authority done something differently
Use visual aids to summarise The agreement

is the
Specify responsibilities for any
follow-up to the meeting
beginning not
the end...
Offer to prepare the agreement
document 138 Leading excellence in procurement and supply
The art of asking questions
Open questions
Closed questions
Probing questions
Multiple questions
Leading questions
Reflective questions
Hypothetical questions

The art of Active Listening
Stop talking
Concentrate on what they are saying
Don’t interrupt or answer back
Try to understand their underlying concern
Don’t jump to conclusions
The art of active listening

helps you to fully understand
the other side’s perspective.

Strategic Approaches

POLL 3

Session 4
Negotiating Across Cultures

• Understanding People
• Body Language
• Cultural Differences

Body Language

Body language
What How we How we

we say say it appear

Body Language

Action Point 4.4-1
Interpreting body language:

Doubt
Hand over mouth
Stroking beard or chin
Scratching head
Pen in mouth

Interpreting body language: Confidence
Hands behind head
Relaxed look
Hands joined by fingertips (to form a triangle)

Interpreting body language: Defensiveness
Arms crossed
Palms hidden
Leaning away

Interpreting body language: Nervousness
Swallowing frequently
Clearing throat
Fidgeting and perspiring
Not looking the other person in the eyes (except in cultures where this is a sign of
respect)

Interpreting body language: Willingness
Leaning forward
Open palms, arms uncrossed
Nodding gestures
Increased eye contact

Interpreting body language: Boredom
Stifled yawns
Heavy eyes
Eye contact decreases
Leans back, moves away

Interpreting body language: Frustration
Clenching & unclenching of fists
Touching desk, table, chair, documents...
Tight mouth

Interpreting body language: Deception
Evasive eye contact
Body turned away
Changes in voice pitch and speed
Increase in body shifts

Body Language
Body Language What it could mean
Avoiding eye contact Lack of confidence in bargaining position
Making excessive eye contact Trying to bully or intimidate
Fiddling with objects such as hair, Lack of confidence in bargaining position

pencils, or papers
Crossing and uncrossing the legs Impatient – wants to cut a deal quickly
Keeping legs and arms crossed Not receptive to your bargaining position

The Pervasive Impact of Culture on Negotiation
Behavior
Companies and countries do not negotiate—people do
• Cultural differences in negotiation

styles can cause problems in
international at the levels of:
(1) Language
(2) Nonverbal behaviors
(3) Values
(4) Thinking and decision-making
processes

Negotiating with people from other
countries:
Generalising cultural patterns
can be dangerous!
Don’t expect a certain behaviour (you may be

mistaken!)
The same behaviour may mean different

things in different cultures
Your interpretation of people’s behaviour is automatic, instantaneous and

subconscious, so be careful !

Examples of areas where cultural differences
may cause misunderstanding...
The importance of personal trust
The importance of status & background
The individual versus the group
Attitude to age, race & gender
The attitude to familiarity/formality
The importance of hospitality & entertainment
The attitude to time & punctuality
The accepted physical distance & physical contact

12
9 3

More examples...
The importance of detailed information
Attitude to very explicit versus indirect messages
The ability to deal with/accept conflict & confrontation
The attitude to showing/facing strong emotion
Attitude to silence in a discussion

And more...
Attitude to risk taking
The role of bargaining
The importance tradition/continuity vs. innovation/change
Attitude to long-term commitment vs. short-term gains
The importance of written agreements
Attitude to changes of plans…

What to do?...
Avoid falling into the trap of “stereotypes”

Acknowledge different perceptions
Don’t judge
Speak clearly & slowly and check understanding
Be careful with expressions, signs & gestures
Observe & learn

Using foreign languages:
Speak slowly, clearly, pause & repeat
Summarise & check understanding
Use visuals, diagrams, samples…
Don’t assume that they are fluent in your language
Ask for/ encourage clarification
Check key vocabulary in advance
Translate key documents

Inter-cultural Issues in Negotiation
• Goals (contract or relationship)
• Attitudes towards negotiation process (win-win, win-
lose)
• Personal styles (formal vs. informal)
• Styles of communication (direct/indirect)
• Time sensitivity (high or low)
• Emotionalism (high or low)
• Agreement form (specific or general)
• Agreement building process (bottom up or top down)
• Negotiating team organization (unilateral or consensus)
• Risk Taking (higher or lower)

Using interpreters
Words can be translated but cultural patterns can’t…
Opportunities for misunderstandings multiply so prepare well
Get an interpreter who has participated in similar negotiations before
If possible, choose your own interpreter
Go over issues & terminology with the interpreter in advance

France
• Less team oriented – negotiate individual
• Debate is stimulating
• Well prepared
• Parties can make decisions
• Strategies include logical proposals,
arguments and counter proposals
• Preference for discussing philosophy
• Important meetings treated very formally

Germany
• Well prepared, serious, organized
• Tough positional stances
• Least affected by interpersonal issues/relations
• Negotiations are formal and will follow agenda
• Relationships should not intrude on tasks
• Low risk takers
• Conflict viewed as inadequate preparation
• Emotional outbursts and frequent interruptions not
appreciated
• Decision making takes time

British
• Value bottom line and short term results
• Open about opinion but indirect in its
expression, emphasizing courtesy and tact
and formality.
• Don’t show true emotions – often reserved
and understated
• Risk averse and cautious, favoring security and
status quo

Italy
• Personal relationships important

• Need to feel they can get along with counterparts
• Confident, shrewd and competent
• Initial negotiations can include lots of casual talks
and positioning tactics
• Takes a long time to get to point
• Multiple conversations at once and interruptions
common
• Presentation must be organized, clear and polished
with dramatic effect for audience

Negotiating by telephone
Make a note of the key issues to be discussed in advance
Have a pen & paper ready (and use it)
Make sure the person at the other end is free to discuss
Be aware of any time differences
Speak slowly & clearly
Don’t interrupt
Suggest an agenda for the discussion & follow it
Summarise at the end
Keep a written record
Follow up in writing (if appropriate)

Formalising the Agreement
Build in targets for monitoring the agreement
Have it checked by a legal expert if needed
Get it signed without delay
Take any action needed to start implementing
Don’t add anything at this stage
Don’t use confusing terminology or language

§ §§

Monitoring & managing
Keep track of the supplier’s performance
Call a meeting to discuss important issues or deviations
Use agreed meetings to enhance/develop the relationship
Use any informal occasions to do the same
Take notes & keep records
Expedite

POLL 4

Session 5
Making Negotiation a Success
• Practical Tips
• Negotiation via E-Mail/ Telephone/E-Negotiation
• Skills Required to become a Successful Negotiator
• How to Break an Impasse

Successful negotiators:
Spend more time planning & preparing
Consider many options & possible outcomes
Focus more on areas of common ground
Distinguish facts from assumptions
Set clear objectives
Use open-ended questions
Listen & observe well
Use more long-term comments
Deal well with pressure

Successful negotiators (cont’d):
Focus on developing trust
Seek more information
Share knowledge easily
Test understanding, summarise & clarify
Keep the discussion focused
Good negotiators also learn
from their mistakes
They don’t:
Give many reasons to explain a position
Get defensive or attack
Use “irritators”
Make immediate counter proposals
Reviewing your
negotiation
Were your objectives achieved? (why/why not?)
Discuss the outcome with your supervisor, colleagues and

team-members...
Identify “lessons learnt”
Think of what went wrong … as what went particularly well
Make notes and keep them for the next time

Your negotiation team:
Who should be there?
Decide on roles:
Team leader
Specialised support
Summariser
Observer

Organising & preparing your team:
Make sure they:
Are fully involved in the
preparation
Understand the negotiation

objectives
Feel ownership of their tasks
Are aware of each other’s tasks & goals
Communicate well & openly with each other
Try to resolve any disagreement
Recognise each other’s contributions

Where to hold the negotiation?
Access to staff, information etc.

Benefits of visiting the supplier’s premises
Costs (travel, …)
Rehearse in advance
Timing & duration?

Make sure you have enough time to conclude the deal
Watch out for bad timings (holidays, special events…)
Contingency plans
What to do if things don’t go as planned

Preparation Cycle
Content & Boundaries of Negotiation

Establish Objectives
Negotiate Test Assumptions
Rehearse Options Research
Develop Strategy Define Issues
Re-consider Needs Identify Positions

Management of Negotiations
Seven Factors to Consider
• Preparation
• Planning
• Administrative
• Communications
• Techniques
• Expectations
• Closure

Opening Position
Outline Your
Opening
Position
Decide on Decide on
Low Ball High Ball

Opening Position
This Position is
Realistic
Confirm all Perception of

Agreements Power

Preparation
• Identify your interests
• Anticipate other party’s interest
• Find objective standards
• Generate possible options

Planning
• Set goals for initial contact
• Collect and analyze facts
• Design a strategy
• Negotiating Team Representation

Planning
• Negotiators with high aspirations consistently

outperform those with low aspirations.
• By adopting a high aspiration base, negotiators
create sufficient room to make and request the
necessary concessions.
• High aspirations generate positive psychological
energy and prevent a negotiator from being rigid and
defensive.

Building Trust
• Listen
• Display a concern for interests
• Demonstrate empathy
• Keep confidences
• Fulfill promises
• Be respectful

Destroying Trust in Negotiations
• Act inattentive
• Ignore interests
• Breach a confidence
• Break a promise
• Embarrass the other party
• Spring a surprise

Problem-Solving Techniques
• Brainstorming
• Consensus-Building
• Action Planning

Brainstorming
• A technique used to generate as many original ideas

as possible for solving a problem or an impasse
without judging them. It is based on the theory that
the more people working on the problem the more
ideas that will be generated.

Consensus Building
• Generate option
• Discuss option
• Explain consensus
• Describe reasons for not acceptable
• Consider means to make acceptable
• Seek to build consensus

Expectations
• Reality Checking
• Objective Standards
• BATNA/WATNA

Reality Checking
• What is my real interest in the outcome
• Do I need to maintain this relationship
• Are there external interests here
• What are the consequences of not reaching an

agreement

Objective Standards
Tangible factors for comparing and evaluating

options. These may include laws, court
decisions, regulations, industry guides, trade
practice, past performance, expert
evaluations, or similar transactions.

Diving into a negotiation
• Intuitive approach to a negotiation is to make
proposals
• Our proposals
– To us are self evidently fair and reasonable
– We make the proposal, and sit back and expect the “I agree” response
“How can they

• We are then taken aback when the “I agree” possibly
disagree with
response doesn’t come this ?”
• We expect proposals to be made in a negotiation

• Making proposals is what a negotiation is all about
• Instead of diving in – establish rapport

• What is rapport?
• A feeling of being “in sync” or “on the same wave length”
• Rapport, or the absence of rapport is a main determinant of whether
people develop a trusting relationship
– Trust one another to share or not share information
– Trust one another to be frank and open or less frank and open in a
discussion
– Trust one another in what the other says, or whether they feel that it
may be bluff
• People who have done deals together before, who have
– established rapport
– established some trust and confidence in each other
do a better and faster deal than otherwise

• Establish rapport
– Liking
• People like those who like them
• If we are liked by someone, they will
– listen to us
– register what we say
– want to explore ways to help us achieve our needs and
interests
– be receptive to accommodating our needs and interests
– Antipathy – the opposite of liking
• Results in the opposite behaviour
• Other person will not
– listen to us
– register what we say
– want to explore ways to help us achieve our needs and
interests
– be receptive to accommodating our needs and interests

Information sharing and gathering
• Information is said to be the currency of a
negotiation
• Without information
– That we might gather about the other party
– That we might choose to share with the other
party about ourselves
we risk our proposals being aimless, possibly
landing anywhere
• With information
– That we might gather about the other party
– That we might choose to share with the other
party about ourselves
we have an increased likelihood our proposals
will hit the bulls eye

Negotiation Strategy
• This is the planning and direction of negotiation.
• This depends on negotiation philosophies.
• Three practical strategies are to reveal no position, to reveal the
optimistic position and to reveal optimistic position and then
immediately offer target position.
• First approach is used when supplier is eager to reach agreement.
Revealing optimistic position is relevant when buyer has the
supplier proposal. This establishes the range.
• Third strategy of offering the target price can be risky if supplier
refuses the offer. In this case buyer may have to agree for
pessimistic position.

Negotiation Tactics:
• Tactics are processes and maneuvers that supply manager uses to put strategy
plan into action.
• Tactics will vary depending on philosophy, culture. Basic negotiation tactics are
as follows:
– Sequence or prioritize the issues for discussion. (Cover major issues first)
– Use questions wisely to seek information.
– Listen effectively; Use Solid Data; Use Silence- this makes the other party
nervous which may result in concessions; Avoid emotions reactions;
– Make use of caucuses (Recesses): This is an excellent way to rethink your
position.
– Don’t be afraid to say “No”.; Beware of deadline
– Be aware of body language (Hands, legs and facial expressions may convey
person’s position.)

Negotiations Tactics:
• Keep an open mind: Preconceived ideas block the creativity for
positive outcome.
• Get it in Writing
• Use the “ Missing Person” the deliberate absence of person with
authority.
• Use the take it or leave it tactic. Think carefully before using this
bluff.
• Use the bogey tactic i.e. we like the product but the price we can
pay is X.
• Never negotiate beyond your physical & mental endurance.
• Make appropriate concessions.

Typical Win-Lose Tactics
• At that price, we are not making any money.

• That is the best I can do. Take it or leave it….
• You are our favorite customer….
• I am sorry, my hands are tied…
• Moral appeals. If I don’t close this sale, we will to
have to lay off people…
• Emotional Appeals. Crying
• Authority Variation: I am only authorized to offer..

Hard Negotiation
• Hard negotiation involves the negotiation of positions, rather
than interests.
• It is highly competitive, seeing victory as the number one goal.
• Hard bargainers, see the participants as adversaries. They
distrust the other side and play sneaky games to try to gain the
negotiating advantage.
• Hard bargainers refuse to make concessions and demand one-
sided gains as the price of an agreement.
• When confronted with a softer opponent, hard bargainers
almost always will win. When confronted with another hard
bargainer, however, it can result in no agreement, both losing.

Soft Negotiation
• Soft negotiation also involves the negotiation of
positions, rather than interests. However, it treats the
participants as friends, seeking agreement at almost any
cost, and offering concessions easily in the interests of
preserving (or creating) a good relationship with the
other side.
• Soft bargainers trust the other side, and are open and
honest about their bottom line.
• This leaves them vulnerable to hard bargainers who act
competitively–offering few, if any concessions.

Principled Negotiation
• Principled negotiation is the interest-based approach

to negotiation.
• Fundamental principles of principled negotiation are:
1. it separates the people from the problem;

2. focuses on interests, not positions;
3. insists on objective criteria of the solution.

Win – Lose Style
• The win-lose is the most common style of
distributive negotiation wherein a person pursues
his or her own wishes at the expense of other party.
• Under this style negotiation is viewed as a game to
be won. Losing may be taken as failure, weakness,
and a loss of status.
• When engaged in this style, the parties may use
different tactics to win like: persuasion, argument,
power, or even threat.

Avoiding Style
• Avoiding the conflict in certain situations – need of no
negotiation at all – is also a negotiation.
• People may physically withdraw by simply leaving the
scene of conflict or they can refuse to get involved by
using silence, or changing the topic of conversation.
• Psychologically, avoiders can also deny the existence of
conflict.
• During formal negotiation, avoiding style is exercised by
paying deaf ear and / or blind eye to the conflicting
stimulus.

Checklist of Buyer – Contract
Negotiation Best Practices
(The Buyer Should: )
 Know what you want – lowest price or best value
 State your requirements in performance terms and evaluate accordingly
 Conduct market research about potential sources before selection
 Evaluate potential sources promptly and dispassionately
 Follow the evaluation criteria stated in the solicitation: management, technical, and price
 Develop organizational policies to guide and facilitate the source selection process
 Use a weighting system to determine which evaluation criteria are most important
 Use a screening system to prequalify sources
 Obtain independent estimates from consultants or outside experts to assist in source selection
 Use past performance as a key aspect of source selection, and verify data accuracy
 Conduct price realism analysis
 Use oral presentations or proposals by sellers to improve and expedite the source selection process
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 85.

Checklist of Contract Negotiation
Best Practices
(The Buyer and Seller Should: )
 Understand that contract negotiation is a process, usually involving a team effort
 Select and train highly skilled negotiators to lead the contract negotiation process
 Know market and industry practices
 Prepare yourself and your team
 Know the other party
 Know the big picture
 Identify and prioritize objectives
 Create options – be flexible in your planning
 Examine alternatives
 Select your negotiation strategy, tactics, and countertactics
 Develop a solid and approved team negotiation plan
 Determine who has the authority to negotiate
 Prepare the negotiation facility at your location or at a neutral site
 Use an agenda during contract negotiation

Checklist of Contract Negotiation
Best Practices
(The Buyer and Seller Should: )
 Set the right tone at the start of the negotiation
 Maintain your focus on your objectives
 Use interim summaries to keep on track
 Do not be too predictable in your tactics
 Document your agreement throughout the process
 Know when to walk away
 Prepare a negotiation results summary
 Obtain required reviews and approvals
 Provide copies of the contract to all affected parties
 Document negotiation lessons learned and best practices
 Prepare a transition plan for contract administration
 Understand that everything affects price
 Understand the Ts and Cs have cost, risk, and value
 Know what is negotiable and what is not

Contract Negotiations – A Complex
Human Activity
Successful contract negotiator must:
• Master the art and science, or soft and hard skills, required to become
a master negotiator
• Possess the intellectual ability to comprehend factors shaping and
characterizing the negotiation.
• Be able to adapt strategies, tactics, and countertactics in a dynamic
environment
• Understand their own personalities and personal ethics and values
• Know their products and services, desired terms and conditions, and
pricing strategy
• Be able to lead a diverse multi-functional team to achieve a successful
outcome
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pgs. 53-54.

Conclusion: The Negotiator is
a chess player
"You have to have the ability to look at the big
picture and set concrete goals. Then from those
goals devise not only the strategy, but also the
tactics for achieving the goals. It's the rare ability to
combine the big things with the small, to see the
forest and the trees"
Avi Gil, Oslo Process negotiator
« The negotiator’s dilemma »
getting big slice of a small pie or reasonable slice of
a much larger pie?

Ten Practical Tips
The ability to negotiate successfully is crucial for survival in today’s changing business
world. Negotiation is fun if you know what you’re doing. So for all you busy execs,
here are Ten Tips for Successful Negotiating:
1. Develop “negotiation consciousness.” Successful negotiators are assertive and
challenge everything. They know that everything is negotiable.
2. Become a good listener. Negotiators are detectives. They ask probing questions
and then shut up. The other negotiator will tell you everything you need to know – all
you have to do is listen. (70/30 Rule)
3. Be prepared. The Boy (and Girl) Scouts were right. Gather as much pertinent
information prior to the negotiation. What are their needs? What pressures do they
feel? What options do they have? Doing your homework is vital to successful
negotiation.
4. Aim high. People who aim higher do better. If you expect more, you’ll get more.
Successful negotiators are optimists. A proven strategy for achieving higher results is
opening with an extreme position. Sellers should ask for more than they expect to
receive, and buyers should offer less than they are prepared to pay.

Ten Tips for Negotiation
5. Be patient. Whoever is more flexible about time has the advantage. Your patience
can be devastating to the other negotiator if they are in a hurry.
6. Focus on satisfaction. Help the other negotiator feel satisfied. Satisfaction means
that their basic interests have been fulfilled. Don’t confuse basic interests with
positions: Their position is what they say they want; their basic interest is what they
really need to get.
7. Don’t make the first move. The best way to find out if the other negotiator’s
aspirations are low is to induce them to open first. They may ask for less than you
think. If you open first, you may give away more than is necessary.
8. Don’t accept the first offer. If you do, the other negotiator will think they could
have done better. (It was too easy.) They will be more satisfied if you reject the first
offer — because when you eventually say “yes,” they will conclude that they have
pushed you to your limit.
9. Don’t make unilateral concessions. Whenever you give something away, get
something in return. Always tie a string: “I’ll do this if you do that.” Otherwise you are
inviting the other negotiator to ask you for more.
10. Always be willing to walk away! Never negotiate without options.
If you depend too much on the positive outcome of a negotiation, you lose your
ability to say “no.” Clients often ask, “If you could give one piece of advice about
negotiating, what would it be?” My answer, without hesitation, is: “Always be willing
to walk away.”

Negotiating via Email
Email can be an effective method of communication, but is has some
inherent limitations.
• In general, it is appropriate to use email in a negotiation:
• When the topic is clearly defined.
• When the topic does not require extensive discussion
• When the expected response is relatively simple
• When there is little possibility of misunderstanding
• It is not appropriate to use email:
• When the topic is complex
• When the topic requires extensive discussion
• When the topic has great personal significance for the parties
involved
• When the topic is likely to stir up strong emotions
E-mail has become a very popular way of keeping discussions simple
and straightforward both in business and personal communications

POLL 5

THANK YOU!
For More Information visit

www.ism-india.org
or
contact me :
Krishan.batra@ism-india.org
Tel: +91 9650745582


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Strategic Negotiation

1 Leading excellence in procurement and supply

He started his career with TATA Group after completing

Goal: This program will provide a step-by-step approach

3 Leading excellence in procurement and supply

4 Leading excellence in procurement and supply

• Understand How Negotiation Works

5 Leading excellence in procurement and supply

6 Leading excellence in procurement and supply

“Negotiating is the art of

Creative Negotiating, Stephen Kozicki, Adams Press, 1998

7 Leading excellence in procurement and supply

A process whereby two parties, with differing views

People are not born good negotiators…

…these skills can be developed!!

Good negotiation skills can mean the difference between

8 Leading excellence in procurement and supply

1. Business Judgment 6. Integrity/ethics

9 Leading excellence in procurement and supply

• Negotiation is most important tool of the Procurement &

10 Leading excellence in procurement and supply

11 Leading excellence in procurement and supply

Money on the Table

12 Leading excellence in procurement and supply

• Being able to negotiate the best possible deals with your

Unlike what many people think-good negotiation skills can be

13 Leading excellence in procurement and supply

14 Leading excellence in procurement and supply

Capitulation = unilateral moves towards accepting their position

15 Leading excellence in procurement and supply

16 Leading excellence in procurement and supply

17 Leading excellence in procurement and supply

18 Leading excellence in procurement and supply

19 Leading excellence in procurement and supply

20 Leading excellence in procurement and supply

• Two or more parties are involved.

21 Leading excellence in procurement and supply

• Bargaining or haggling is a type of negotiation in which the

22 Leading excellence in procurement and supply

• Influence is the broadest activity. We are influencing

23 Leading excellence in procurement and supply

The golden rule of negotiation

24 Leading excellence in procurement and supply

25 Leading excellence in procurement and supply

26 Leading excellence in procurement and supply

27 Leading excellence in procurement and supply

28 Leading excellence in procurement and supply

29 Leading excellence in procurement and supply

Comparing targets: e.g. Unit Price

30 Leading excellence in procurement and supply

Define your range

32 Leading excellence in procurement and supply

Best Alternative to a Negotiated Agreement

• Forces negotiators to realistically evaluate their

“The least damaging outcome anticipated if no agreement

33 Leading excellence in procurement and supply

“The most damaging outcome to anticipate if no

34 Leading excellence in procurement and supply

Comparing buyer and supplier targets

Comparing buyer and supplier targets

2. Variable = No. of defective units per 1000

36 Leading excellence in procurement and supply

Comparing buyer and supplier targets

3. Variable = Delivery period