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ISQA 454

ISQA 454. Negotiation Planning. Abraham Lincoln. “When I am getting ready to reason with a man, I spend one-third of my time thinking about myself and what I am going to say, and two thirds thinking about him and what he is going to say.”. Negotiation Planning.

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ISQA 454

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  1. ISQA 454 Negotiation Planning

  2. Abraham Lincoln • “When I am getting ready to reason with a man, I spend one-third of my time thinking about myself and what I am going to say, and two thirds thinking about him and what he is going to say.”

  3. Negotiation Planning • What is Fundamental Goal of This Transaction? • How Will This Transaction Create Competitive Advantage? • Assess Buying Position • Assess Selling Position • Assess Situational Issues • Set Targets • Plan Concessions

  4. Negotiation Success = Planning • Planning Must Be Systematic • What Kind of Transaction? • One-Time • Repetitive Requirements • Distributive Bargaining • Integrative Bargaining

  5. Distributive Bargaining • Competitive • Win/Lose • Goals in Direct Conflict • Confrontational • Information is Guarded • Usually Focused on Price or Money Issues

  6. Distributive Bargaining • Positional • Initial Demand • Contest of Wills • Limited Resource Situations • Typically One-Time Transactions

  7. Integrative Bargaining • Focus on Common Interests, Not Differences • Address Needs, not Positions • Address Needs of All • Exchange Information and Ideas • Pursue Options for Mutual Gain • ‘Abundance’ Mentality

  8. Integrative Bargaining • Answer “Why” • Multiple Ways to Meet Needs of Both • Look for Common Interests • Strives for Mutual Gain • Typically Longer Term Relationships • How Will This Agreement Look to the Other Side’s Boss

  9. Win-Win Goals • Win-Win Does Not Mean Equal Gains • The Other Side is NOT the Enemy • Goal: Mutually Satisfactory Agreement • Long Term Relationship • Conflict Resolution Mechanism • Mutual Dependence • Trust • Collective Goals

  10. Leverage • Leverage is any Information Used to Create a Perception in the Other Party’s Mind of Negotiation Strength on Your Part • Leverage is an Increased Means of Accomplishing a Purpose

  11. Types of Transactions • Industry Standard • Custom • Straight Rebuy • Modified Rebuy • New Purchase

  12. Negotiation Planning • From Whom Do We Want Responses • Research All Suppliers in Last Three Years • Use Trade Directories, Yellow Pages, Internal Users, etc. to Explore Supply Base • What Form of Supplier Response • Sealed Bids With Non-Price Negotiation • Two Step Bidding • Negotiation

  13. Other Planning Issues • Don’t Assume Everyone Knows • What Are Real Goals of Meeting • Contract? • Action Plan? • Information Exchange and Next Meeting Date? • The Importance of the Agenda and Ground Rules • Operationalizing the Agreement • Commitment: What are Next Steps

  14. Elements of Negotiation Planning • Facts • Both Sides Agree • Needs/Interests • Internal and External • What Are Our Differences? Why? • What if on Other Side • Alternatives • Win-Win or Win-Lose • Options • BATNA

  15. Elements of Negotiation Planning • Legitimacy • Why is Your Position Proper • Be Careful of Standards, Benchmarks • Communication • Three Basic Rules • Reframe What You Say • Relationships • Unconditionally Constructive • Smile - It’s All in How You Start • Good Way Even if Other Side Doesn’t Reciprocate

  16. Negotiation Planning • Use Internal Resources • What – Exactly - Do We Need • Complete, Detailed Specifications • Past Volumes • Projected Volumes • Research Total Commodity Purchases for Last Three Years • Define Performance Requirements/Specifications • Set Priorities • Develop Price or Cost Estimates

  17. Negotiation Planning • Availability Issues • Lead Time Commitments • Supplier’s Inventories • Quality Issues • Warranties • SPC • Pricing • Target Pricing (Why) • Acceptable Range

  18. Setting Targets • Needs • Price Range • Quality Requirements • Delivery Requirements • Wants • Payment Terms • Extended Warranties • AM Deliveries

  19. Setting Targets • Like-to’s • Brown Color • Right of First Refusal of New Technology • Weekly Donuts • The Opening Position • Have High Aspirations • Temper With Realism

  20. Assess Supplier’s Motivation • Quick Sale • Unload Inventory • Quota Time • “Tide Over” Business • Long Term Relationship • Foot-in Door • Market Penetration

  21. What Happens If We Don’t Agree? • Walk Away Point • What Will It Cost to Change Suppliers? • What Will It Cost If We Don’t Agree? • Immediate Cost • Future Cost • Future Interaction • Relationship • Credibility • BATNA • Best Alternative • Contingency Plans?

  22. Negotiation Planning: Frank • What Do We Know About Other Party • What Do They Want • What About The Individuals • What Information to Present • To Whom Shall We Present Information • How to Present the Information • Get Point Across in 30 Seconds

  23. Concessions • Another Element of Planning • Issues to be Avoided • “MUST HAVE” Issues • Priorities of Other Issues • Alternative Approaches • Concession Ammunition • Concession Timing

  24. Completeness of the Agreement • Amendments • Acceptance Tests • Assignment • Service Bulletins, Modifications • Confidentiality • Contract Renewal Option • Delivery • Emergency Support • Installation, Set Up

  25. Completeness of the Agreement • Insurance • Liquidated Damages • Maintenance • Packaging • Payment Terms • Price Change • Spare Parts Availability • Service Support

  26. Completeness of the Agreement • Taxes • Technical Publications • Technology • Training • Termination • Value Analysis • Warranties

  27. The Negotiating Team • Composition • Rank • Numbers • Duties • Conduct • Observation • Scribe • Social Activities

  28. Negotiation Planning Exercise

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