Buyer-Supplier Relationship

Management (Negotiations)

DR ANTHONY FLYNN

E : F LY N N A 2 @ C A R D I F F. A C . U K
R O O M : C 4 4 ( 2 N D F LO O R ) , B U S I N E S S S C H O O L

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Awarding Contracts

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Negotiation
Definitions
Negotiation is a process of formal communication, either
face-to-face or electronically, where two or more people come
together to seek mutual agreement about an issue

Negotiation is a interactive communication process that may

take place whenever we want something from someone else
or another person wants something from us

Negotiation is the process of communicating back and forth

for the purpose of reaching a joint agreement about differing
needs or ideas

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Negotiation
NEGOTIATION IS ABOUT NEGOTIATION INVOLVES

Needs/Wants
The management of time, information and power
Positions between individuals and organisations

Agreement Communication

BATNA Compromise, as each party wants something that

the other party has
More than just price
Input from internal stakeholders
https://www.youtube.com/watch?v=vvanfVGApXQ

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Negotiation Framework

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 Determine if Negotiation is Required
Not all purchases require negotiation
Competitive bidding is often sufficient

Negotiation with suppliers is needed when

Total value of contract is large
The purchase involves complex technical requirements e.g.
product and process specifications that have yet to be finalised
The purchase involves expensive plant and equipment e.g.
suppliers customising capital purchases to meet a buyers needs
Special/collaborative agreements are needed e.g. joint
development of a new technology
The supplier will perform important value-added activity e.g.
product testing

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Plan for the Negotiation
Preparation is key in negotiations

Fail to prepare, prepare to fail!

Preparation should be proportionate to the complexity

of the contract

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Plan for Negotiations
Develop SMART objectives
Distinguish between Needs (essential) and Wants
(desirable)
Devise Opening Bid
Establish a position on each issue
Price range minimum and maximum
Decide on your Best Alternative To Negotiated
Agreement (BATNA)
Prepare responses to issues that may be raised and
reactions pre-empting

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Best Alternative to a Negotiated Agreement
(BATNA)
An alternative course of action if negotiations fail Plan
B
If negotiations are not achieving the minimum expected,
it is best for the party to quit the negotiation and
implement their BATNA
BATNA is like an insurance policy
A strong BATNA is empowering can be used as
leverage in a negotiation
The BATNA should never be revealed to the opposite
party becomes a target for them

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Planning for
Negotiations
Defining protocols
When and where the negotiation will occur, who is present, agenda, how
long the talks will last
Knowledge of the other party
Personality, experience, negotiating style
Recognise the other partys needs
e.g. a suppliers production schedule may mean that it can only produce a
buyers products late in the day and can only deliver during the evening
Brief other personnel in your organisation
Encourages internal stakeholder support for the negotiation and ensures
that the outcomes will be subsequently accepted
Practise/simulate the negotiation
https://
Know how to read body language www.youtube.com/watch?v=LrmVgKzc2-E

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 Preparatory Steps

Source: Min & Galle (1993). International Negotiating Strategies of U.S.

Purchasing Professionals.

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Areas Up for
Negotiation
Price
Payment terms
Delivery schedules Warranties

Performance measures/non-performance penalties

Product quality/service Technology support

standards Contract length

After-sales service Progress reports

Confidentiality

Packaging
Liabilities for claims

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Negotiation Toolbox
The Big A negotiator starts the negotiation with a number
Pot of issues, some of them more important than
others. The issues are raised during the negotiation
and the less important ones are used as
concessions.
Do The buyer consistently states, you can do better
Better than this.
Concessi Have a plan for the use of concessions. If you
ons concede on an issue, get something in return.
Padding Make unimportant issues must haves and then
slowly concede in order to gain approval for other
needs.
Time Out Request a break in order to review issues and
evaluate how far you are from your goals.
Funny Use relative measures e.g. % instead of absolute
Money
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Conducting Negotiations

x10 Rules of Negotiationhttps://www.youtube.com/watch?v=oy0MD2nsZVs

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Win-Lose versus Win-
Win

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Win-Lose versus Win-
Win
CHARACTERISTICS OF WIN- CHARACTERISTICS OF WIN-
LOSE NEGOTIATION WIN NEGOTIATION

Understand each others needs and wants

Assume rigid negotiating positions
Compete over a fixed amount of value
Practise strict use of power by one party over another
Pursue adversarial relationships
Focus on common rather than personal interests
Conduct joint efforts to solve problems and
develop creative solutions that provide additional
value
Engage in open sharing of information

https://www.youtube.com/watch?v=w1EhS9BmQRw https://www.youtube.com/watch?v=1FeM6kp9Q80

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 Win-Lose Approach

https://
www.youtube.com/watch?v=7mETgb-fPR
o

Source: Ertel, D. (1999). Turning negotiation into a

corporate capability.

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Supermarkets Versus
Farmers

https://
www.theguardian.com/uk-news/video/2015/aug/10/protesting-farmers-take-cows-into
-asda-supermarket-video

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 Win-Win Approach

Source: Ertel, D. (1999). Turning negotiation into a

corporate capability.

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 Fisher & Ury (1981)

Getting
to Yes
Negotiating philosophy

1. Focus on interests,
not positions

2. Create multiple
options

3. Separate people
from the problem

4. Know your BATNA

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Guidelines on
Concessions
Leave room to manoeuvre
for concessions
Get other party to reveal
their needs first Make the other party work hard for every concession

Be the first to concede on Use trade-offs to obtain something for every concession

a minor issue, but not a Keep a record of concessions

major issue Occasionally say no to the other party

Portray minor concessions

as more important than
they are

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Traits of Successful
Negotiators
Willing to compromise and Summarise points of
revise their goals agreements throughout
View each issue independently negotiations
Establish upper and lower Give fewer reasons to
ranges for each issue rather
than a single rigid position
support their position
Explore more options Make fewer counter-
Develop common ground proposals
rather than focusing on Make fewer irritating
differences comments about the
other party

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 Traits of Successful
Negotiators

Source: Min & Galle (1993). International Negotiating Strategies of U.S.

Purchasing Professionals.

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Power in Negotiations

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 Negotiation as a
Capability
Create a Negotiation Infrastructure Deal versus Relationship

To improve the
Standardizing and codifying negotiating
processes rather than taking an ad
relationship you have to be
hoc/situational approach each time willing to make sacrifices
Imposing management control and in the deal wrong
oversight
Setting up categorization and
Deals and relationships
prioritization schemes to guide move in tandem reality
negotiators in selecting their strategies
Walking Away
Training and information for negotiators
Conducting regular evaluations using Negotiators should be able
standard criteria to walk away from any
Broadening the Measures of deal that is inferior to their
Success BATNA
Move beyond cost considerations
TCO approach Actively exploring
Take account of process and outcomes alternatives
Source: Ertel, D. (1999). Turning negotiation into a
corporate capability.

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Part II Negotiation
Exercise

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Reed-YPEC Negotiation

https://www.youtube.com/watch?v=U2ms95HX0l4

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Instructions
1. Answer the price expectations
questions in your Confidential Info
sheet one per team

2. List your items for negotiation

3. List what you think the other side

wants to achieve from the negotiation

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Timeline

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Performance Evaluation
1. What were the most difficult issues
in the negotiation?

2. What tactics worked best for your

team?

3. What makes for a good negotiator?

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