Lecture7: Negotiation

Introduction of negotiation
1. What is negotiation?
 Nature
 Execution
 effect
2. Why do we negotiate in purchasing?
3. Two types of negotiations
 Integrative(win-win)
 Distributive(win-lose)
4. Terminology for negotiation
 Best alternative to a negotiated agreement (BATNA)
 Zone of possible or mutual agreement (ZOPA/ZPMA)
 Most desirable outcome (MOD)
 Least desirable outcome (LOD)
 Position vs. Interest
 Negotiation framing
 Expanding the pie
5. Recap: Under what scenario, Integrative & Distributive negotiation would be a better
choice?

Negotiation in strategic procurement

1. Negotiation progress:
Step 1: Determine bargaining power
 SWOT analysis (From buyer’s perspective)
 Relationship positioning (from suppliers’ perspective)
Step 2: Define the negotiation strategy
 Different strategies for “Needs” and “want”
 Integrate BATNA into the negotiation strategy(key takeaway)
Step 3: Prepare for negotiations
 Functional role, negotiation role, messages
Step 4: Run negotiation
Step 5: Follow up and feedback
 Communicate next steps
 Repeat (if necessary)
 Adjust strategy
 Update stakeholders

Negotiation tactics
1. Negotiation strategic in procurement
2. Basic negotiation principles
 Time is money
 Information is power
 Good negotiation practices
3. Negotiation tactics
 Santa Claus
 Easy start
 Hypothetically speaking
 Full reveal
 Smoke out their LDO
 Lines in the sand
 Split the difference
 Cherry picking
 Instant replay
 For a deal today
 Big picture
 Facts and data
4. Non-verbal communication
5. Key success factors
 Be well-prepared
 Creates an advantage
 Leads you to success
 A good negotiator will do during
 pre-negotiation phase
 face to face meeting
6. Negotiation game