Eskom Procurement Book 2015

NEGOTIATION

aspirations and circumstances. Preparation should provide information about your counterpart, which you can validate during the negotiation. Keep in mind that ‘fastball’ negotiations rarely work. Excessive pressure on one or other of the parties will lead to an unsatisfactory result. It is therefore wise to allow enough time for all eventualities and to expect more protracted negotiations.

The agenda in preparation should be objectives, information, strategy, and roles.

7.4.1 OBJECTIVES

Prior to negotiations, all potential issues for discussion during the negotiation should be itemised. These are called variables and are particularly important during the preparation phase of the negotiation process. For each of these issues (or package of issues) the parameters should be determined, i.e., the highest or most favoured position; and the lowest or limit beyond which there will be no settlement. These must be fixed for each variable: • What the organisation would LIKE to achieve (L), i.e., the most favoured position. • What the company INTENDS to achieve (I), i.e., the realistic settlement point. • What MUST be achieved (M), i.e., no concession beyond this point. The most favoured position and lowest limit of the counterpart should also be assessed. The overlap between the organisation’s most favoured position and lowest limit, and those of the counterpart is the Bargaining Arena (BA). A settlement is only possible if a BA exists. Consider the following scenario. Company A has an ongoing requirement for large quantities of packaging tape and has established that the market price varies between R2.72 and R5.91, excluding VAT, per roll, depending on supplier, brand and quantity ordered. Quality is not a major factor as the company’s positioning is that of the cheapest in the marketplace. Supplier B is aware of all of the above and consequently goes into an unprepared negotiation with A, hoping to win the order. To appear competitive, B offers an opening gambit of R3.01 excluding VAT. Good negotiators will automatically halve any opening offer made, without regard for the consequences. Yet B is surprised whenAmakes a counter-offer of R1.50. The result is panic and eventually B is negotiated down to a unit price of R2.27, far below the normally accepted lowest market price. The consequence is that A is delighted while B is left with a commitment to supply large quantities of tape at an almost zero margin. Furthermore, news of the deal is leaked into the market by A and every supplier feels pressure over the coming months.

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