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NEGOTIATION
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CHAPTER 7
7.3 NEGOTIATION STRATEGY
Crafting a negotiating strategy is a critical part of the negotiating process. This
is the area that most typically results in the success or failure of a negotiation.
It requires some definition: success, in procurement, does not mean simply
getting the lowest price or the greatest amount of value-add from a supplier. It
means achieving a mutually beneficial agreement with the best possible supplier,
based on the short- and long-term goals of the organisation.
By way of example: an organisation is a major supplier of various forms of tape
to resellers throughout South Africa. Its mission statement is ‘To be the best
supplier of quality tapes to retailers in SA.’ Typically, companies negotiate with
their suppliers on price to enable them to maximise their margin while maintaining
some leeway to price themselves competitively. This can result in the adoption
of a ‘win-lose’ strategy in negotiation, i.e., the company goes into supplier
negotiations aggressively, demanding the lowest possible landed cost and
possibly resorting to threats of finding another supplier if demands are not met.
In this case, however, other factors may outweigh price in importance to the
company. If the company purports to be the best supplier of quality tapes, it must
be able to back up that claim with consistency of product quality and service
levels that beat all competitors. The best supplier is therefore not necessarily the
cheapest, but rather the one that offers the best guarantee of quality control in
manufacturing and is prepared to share the burden of servicing its marketplace,
while offering an acceptable price. A ‘win-lose’ approach to the negotiations
would probably cause bad blood: at best, the supplier would probably accept
the imposed pricing, but make up its margin erosion by scaling back service or
providing lower-quality product.
Negotiation strategy, then, must be linked to what the company stands for and
what it wants to achieve. The negotiation strategy should be written down and
agreed upon by all those directly involved on the negotiator’s side. Some of the
important considerations when setting the strategy include:
• What are our overall strategic objectives, both short and long term?
• What decision do we want the other party to make?
• What are the disadvantages in the decision for the other party, and how can
we overcome them?
Negotiation characteristics
Characteristics of win-lose
negotiation
Characteristics of win-win negotiation
• Strict use of power by one
party over another.
• Primary use of power is to focus on
common rather than personal interests.
• Adversarial competition played
out at the negotiating table.
• Likely to engage in open sharing of
information.